[Federal Register Volume 88, Number 162 (Wednesday, August 23, 2023)]
[Rules and Regulations]
[Pages 57526-57747]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-17221]



[[Page 57525]]

Vol. 88

Wednesday,

No. 162

August 23, 2023

Part II





Department of Labor





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29 CFR Parts 1, 3, and 5





Updating the Davis-Bacon and Related Acts Regulations; Final Rule

  Federal Register / Vol. 88, No. 162 / Wednesday, August 23, 2023 / 
Rules and Regulations  

[[Page 57526]]


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DEPARTMENT OF LABOR

Office of the Secretary

29 CFR Parts 1, 3, and 5

RIN 1235-AA40


Updating the Davis-Bacon and Related Acts Regulations

AGENCY: Wage and Hour Division, Department of Labor.

ACTION: Final rule.

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SUMMARY: In this final rule, the Department of Labor (Department or 
DOL) updates regulations issued under the Davis-Bacon and Related Acts. 
As the first comprehensive regulatory review in nearly 40 years, 
revisions to these regulations will promote compliance, provide 
appropriate and updated guidance, and enhance their usefulness in the 
modern economy.

DATES: 
    Effective date: This final rule is effective on October 23, 2023.
    Applicability date: The provisions of this final rule regarding 
wage determination methodology and related part 1 provisions 
prescribing the content of wage determinations may be applied only to 
wage determination revisions completed by the Department on or after 
October 23, 2023. Except with regard to Sec.  1.6(c)(2)(iii), the 
provisions of this final rule are applicable only to contracts entered 
into after October 23, 2023. Contracting agencies must apply the terms 
of Sec.  1.6(c)(2)(iii) to existing contracts of the types addressed in 
that regulatory provision, without regard to the date a contract was 
entered into, if practicable and consistent with applicable law. For 
additional information, see the discussion of Applicability Date in 
section III.C. below.

FOR FURTHER INFORMATION CONTACT: Amy DeBisschop, Director, Division of 
Regulations, Legislation, and Interpretation, Wage and Hour Division, 
U.S. Department of Labor, Room S-3502, 200 Constitution Avenue NW, 
Washington, DC 20210; telephone: (202) 693-0406 (this is not a toll-
free number). Alternative formats are available upon request by calling 
1-866-487-9243. If you are deaf, hard of hearing, or have a speech 
disability, please dial 7-1-1 to access telecommunications relay 
services.
    Questions of interpretation or enforcement of the agency's existing 
regulations may be directed to the nearest WHD district office. Locate 
the nearest office by calling the WHD's toll-free help line at (866) 
4US-WAGE ((866) 487-9243) between 8 a.m. and 5 p.m. in your local time 
zone, or log onto WHD's website at https://www.dol.gov////offices for a 
nationwide listing of WHD district and area offices.

SUPPLEMENTARY INFORMATION: 

I. Executive Summary

    In order to provide greater clarity and enhance their usefulness in 
the modern economy, on March 18, 2022, the Department published a 
notice of proposed rulemaking (NPRM), 87 FR 15698, proposing to update 
and modernize the regulations at 29 CFR parts 1, 3, and 5, which 
implement the Davis-Bacon Act and the Davis-Bacon Related Acts 
(collectively, the DBRA). The Davis-Bacon Act (DBA or Act), enacted in 
1931, requires the payment of locally prevailing wages and fringe 
benefits on Federal contracts for construction. See 40 U.S.C. 3142. The 
DBA applies to workers on contracts entered into by Federal agencies 
and the District of Columbia that are in excess of $2,000 and for the 
construction, alteration, or repair of public buildings or public 
works. Congress subsequently incorporated DBA prevailing wage 
requirements into numerous statutes (referred to as ``Related Acts'') 
under which Federal agencies assist construction projects through 
grants, loans, loan guarantees, insurance, and other methods.
    The Supreme Court has described the DBA as ``a minimum wage law 
designed for the benefit of construction workers.'' United States v. 
Binghamton Constr. Co., 347 U.S. 171, 178 (1954). The Act's purpose is 
``to protect local wage standards by preventing contractors from basing 
their bids on wages lower than those prevailing in the area.'' Univs. 
Research Ass'n, Inc. v. Coutu, 450 U.S. 754, 773 (1981) (quoting H. 
Comm. on Educ. & Lab., Legislative History of the Davis-Bacon Act, 87th 
Cong., 2d Sess., 1 (Comm. Print 1962)). By requiring the payment of 
minimum prevailing wages, Congress sought to ``ensure that Government 
construction and federally assisted construction would not be conducted 
at the expense of depressing local wage standards.'' Determination of 
Wage Rates Under the Davis-Bacon & Serv. Cont. Acts, 5 Op. O.L.C. 174, 
176 (1981) (citation and internal quotation marks omitted).\1\
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    \1\ Available at: https://www.justice.gov/sites/default/files/olc/opinions/1981/06/31/op-olc-v005-p0174_0.pdf.
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    Congress has delegated authority to the Department to issue 
prevailing wage determinations and prescribe rules and regulations for 
contractors and subcontractors on DBA-covered construction projects.\2\ 
See 40 U.S.C. secs. 3142, 3145. It has also directed the Department, 
through Reorganization Plan No. 14 of 1950, to ``prescribe appropriate 
standards, regulations and procedures'' to be observed by Federal 
agencies responsible for the administration of the Davis-Bacon and 
Related Acts. 15 FR 3173, 3176 effective May 24, 1950, reprinted as 
amended in 5 U.S.C. app. 1 and in 64 Stat. 1267. These regulations, 
which have been updated and revised periodically over time, are 
primarily located in parts 1, 3, and 5 of title 29 of the Code of 
Federal Regulations.
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    \2\ The DBA and the Related Acts apply to both prime contracts 
and subcontracts of any tier thereunder. In this final rule, as in 
the regulations themselves, where the terms ``contracts'' or 
``contractors'' are used, they are intended to include reference to 
subcontracts and subcontractors of any tier.
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    The Department last engaged in a comprehensive revision of the 
regulations governing the DBA and the Related Acts in a 1981-1982 
rulemaking.\3\ Since that time, Congress has expanded the reach of the 
Davis-Bacon \4\ labor standards \5\ significantly, adding numerous 
Related Act statutes to which these regulations apply. The Davis-Bacon 
Act and now more than 70 active Related Acts \6\ collectively apply to 
an estimated $217 billion in Federal and federally assisted 
construction spending per year and provide minimum wage rates for an 
estimated 1.2 million U.S. construction workers.\7\ The Department 
expects these numbers to continue to grow as Federal and State 
governments seek to address the significant infrastructure needs of the 
country, including, in particular, the energy and transportation 
infrastructure necessary to mitigate climate change.\8\
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    \3\ See 46 FR 41444 (1981 NPRM); 47 FR 23644 (1982 final rule); 
48 FR 19532 (1983 revised final rule).
    \4\ The term ``Davis-Bacon'' is used in this final rule as a 
shorthand reference for the Davis-Bacon and Related Acts.
    \5\ In this final rule, the term ``Davis-Bacon labor standards'' 
means, as defined in Sec.  5.2 of the final rule, ``the requirements 
of the Davis-Bacon Act, the Contract Work Hours and Safety Standards 
Act (other than those relating to safety and health), the Copeland 
Act, and the prevailing wage provisions of the other statutes 
referenced in Sec.  5.1, and the regulations in parts 1 and 3 of 
this subtitle and this part.''
    \6\ The Department maintains a list of the Related Acts at 
https://www.dol.gov/agencies/whd/government-contracts/.
    \7\ These estimates are discussed below in section V (Executive 
Order 12866, Regulatory Planning and Review et al.).
    \8\ See Executive Order 14008, ``Tackling the Climate Crisis at 
Home and Abroad,'' section 206 (Jan. 27, 2021), available at: 
https://www.whitehouse.gov/briefing-room/presidential-actions/2021/01/27/executive-order-on-tackling-the-climate-crisis-at-home-and-abroad/.

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[[Page 57527]]

    In addition to the expansion of the prevailing wage rate 
requirements of the DBA and the Related Acts, the Federal contracting 
system itself has undergone significant changes since the 1981-1982 
rulemaking. Federal agencies have dramatically increased spending 
through interagency Federal schedules such as the Multiple Award 
Schedule (MAS). Contractors have increased their use of single-purpose 
entities, such as joint ventures and teaming agreements, in 
construction contracts with Federal, State and local governments. 
Federal procurement regulations have been overhauled and consolidated 
in the Federal Acquisition Regulation (FAR; 48 CFR chapter 1), which 
contains a subpart on the Davis-Bacon Act and related contract clauses. 
See 48 CFR 22.400 et seq. Court and agency administrative decisions 
have developed and clarified myriad aspects of the laws governing 
Federal procurement.
    During the past 40 years, the Department's DBRA program also has 
continued to evolve. Where the program initially was focused on 
individual project-specific wage determinations, contracting agencies 
now incorporate the Department's general wage determinations for the 
construction type in the locality in which the construction project is 
to occur. The program also now uniformly uses wage surveys to develop 
general wage determinations, eliminating an earlier practice of 
developing wage determinations based solely on other evidence about the 
general level of unionization in the targeted area. In a 2006 decision, 
the Department's Administrative Review Board (ARB) identified several 
survey-related wage determination procedures as inconsistent with the 
1982 final rule. See Mistick Constr., ARB No. 04-051, 2006 WL 861357, 
at *5-7 (Mar. 31, 2006).\9\ As a consequence of these developments, the 
use of averages of wage rates from survey responses has increasingly 
become the methodology used to issue new wage determinations--
notwithstanding the Department's long-held interpretation that the DBA 
allows the use of such averages only as a methodology of last resort.
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    \9\ Decisions of the ARB from 1996 to the present are available 
on the Department's website at https://www.dol.gov/agencies/arb/decisions.
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    The Department has also received significant feedback from 
stakeholders and others since the last comprehensive rulemaking. In a 
2011 report, the Government Accountability Office (GAO) reviewed the 
Department's wage survey and wage determination process and found that 
the Department was often behind schedule in completing wage surveys, 
leading to a backlog of wage determinations and the use of out-of-date 
wage determinations in some areas.\10\ The report also identified 
dissatisfaction among regulated parties regarding the rigidity of the 
Department's county-based system for identifying prevailing rates,\11\ 
and missing wage rates requiring an overuse of ``conformances'' for 
wage rates for specific job classifications.\12\ A 2019 report from the 
Department's Office of the Inspector General (OIG) made similar 
findings regarding out-of-date wage determinations.\13\
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    \10\ See Gov't Accountability Office, GAO-11-152, ``Davis-Bacon 
Act: Methodological Changes Needed to Improve Wage Survey'' (2011) 
(2011 GAO Report), at 12-19, available at: https://www.gao.gov/assets/gao-11-152.pdf.
    \11\ Id. at 23-24.
    \12\ Id. at 32-33.
    \13\ See Department of Labor, Office of the Inspector General, 
``Better Strategies Are Needed to Improve the Timeliness and 
Accuracy of Davis-Bacon Act Prevailing Wage Rates'' (2019) (2019 OIG 
Report), at 10, available at: https://www.oversight.gov/sites/
default/files/oig-reports/04-19-001_Davis%20Bacon.pdf.
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    Ensuring that construction workers are paid the wages required 
under the DBRA also requires effective enforcement in addition to an 
efficient wage determination process. In the last decade, enforcement 
efforts at the Department have resulted in the recovery of more than 
$229 million in back wages for over 76,000 workers.\14\ But the 
Department has also encountered significant enforcement challenges. 
Among the most critical of these is the omission of DBRA contract 
clauses from contracts that are clearly covered by the DBRA. In one 
recent case, a contracting agency agreed with the Department that a 
blanket purchase agreement (BPA) it had entered into with a contractor 
had mistakenly omitted the Davis-Bacon clauses and wage determination, 
but the omission still resulted in an 8-year delay before the workers 
were paid the wages they were owed.
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    \14\ The listed figures have been corrected from the NPRM. The 
updated figures reflect the sum of the annual enforcement statistics 
from 2010-2019 in Gov't Accountability Office, GAO-21-13, ``Fair 
Labor Standards Act: Tracking Additional Complaint Data Could 
Improve DOL's Enforcement'' (2020) (2020 GAO Report), at 39, 
available at: https://www.gao.gov/assets/gao-21-13.pdf.
_____________________________________-

    Through this rulemaking, the Department seeks to address a number 
of these outstanding challenges in the program while also providing 
greater clarity in the DBRA regulations and enhancing their usefulness 
in the modern economy. In the NPRM, the Department proposed to update 
and modernize the regulations implementing the DBRA at 29 CFR parts 1, 
3, and 5. In some of these proposed revisions, the Department had 
determined that changes it made in the 1981-1982 rulemaking were 
mistaken or ultimately resulted in outcomes that are increasingly in 
tension with the DBA statute itself. In others, the Department sought 
to expand further on procedures that were introduced in that last major 
revision, or to propose new procedures that will increase efficiency of 
administration of the DBRA and enhance protections for covered 
construction workers. The Department invited comments on these proposed 
updates and received 40,938 timely comments after a 60-day comment 
period.
    The comments were from a broad array of constituencies, including 
contractors, unions, employer and industry associations, worker 
advocacy groups, non-profit organizations, social scientists, law 
firms, think tanks, Members of Congress, a state attorney general, a 
state department of labor, and other interested members of the public. 
All timely received comments may be viewed on the regulations.gov 
website, docket ID WHD-2022-0001. Some of the comments the Department 
received were general statements of support or opposition, and the 
Department also received approximately 40,200 ``campaign'' comments 
sent in response to organized initiatives. Commenters expressed a wide 
variety of views on the merits of particular aspects of the 
Department's proposal; however, most commenters favored some, if not 
all, of the changes proposed in the NPRM. The Department has considered 
the timely submitted comments addressing the proposed changes.
    The Department also received a number of comments that are beyond 
the scope of this rulemaking. These included requests that would 
require Congress to amend statutory language in the DBRA. For example, 
many commenters suggested a change to the $2,000 threshold for DBA and 
certain Related Acts to apply. Others suggested eliminating or changing 
the weekly certified payroll requirement that is expressly required by 
40 U.S.C. sec 3145.
    Other comments beyond the scope of the rulemaking included those 
that suggested significant new regulatory provisions or changes that 
were not proposed in the NPRM. Among these, for example, the Iron 
Workers International Union suggested the codification of the 
requirement to thoroughly investigate ``area practice'' issues that 
arise during the wage survey

[[Page 57528]]

process. See Fry Bros. Corp., WAB No. 76-06, 1977 WL 24823, at *6 (June 
14, 1977), aff'd sub nom. Fry Bros. Corp. v. Dep't of Hous. & Urb. 
Dev., 614 F.2d 732, 732-33 (10th Cir. 1980). The Iron Workers also 
suggested creation of a new administrative process for issuing ``right 
to sue'' notices to workers to pursue rights of action authorized by 40 
U.S.C. sec 3144(a)(2). As noted in the comment, such an initiative 
would be better proposed in a separate and subsequent notice-and-
comment rulemaking.
    The Department reviewed the comments submitted in particular for 
assertions by interested parties of their reliance on the existing 
regulations in a way that would be adversely affected by the proposed 
rule. Although many comments stated that the current regulations had 
been in place for many years, few specified that parties had relied on 
the regulations so as to raise questions about the fairness or 
reasonableness of amending them in the current rulemaking. Nonetheless, 
the Department considered whether the rule as a whole, as well as its 
individual proposed provisions, could plausibly implicate significant 
and legitimate reliance interests, and the Department has concluded 
that the proposed amendments to the regulations do not raise reliance 
interests that would outweigh the agency objectives discussed 
throughout this preamble.
    The Department did not identify significant reliance interests 
among contractors or others in the existing part 1 regulations. The 
part 1 regulations involve the Department's methodology for determining 
the prevailing wage rates that are required on covered contracts. Some 
of the changes the Department proposed to this part may lead to higher 
required wage rates in places and lower wage rates in others, and the 
new periodic adjustments of certain non-collectively bargained wage 
rates will result in a smoother increase in such wage rates over time 
instead of longer periods of the same wage rates for an area followed 
by steeper increases after the publication of new survey rates. 
Similarly, the new language clarifying the procedure for incorporating 
prevailing wage rates into multiple award schedules and other similar 
contracts may result in more frequent updates to prevailing wage rates 
on such contracts when options are executed. These types of changes, 
however, should not be significantly different in their effect on 
contractors than the fluctuations in prevailing wage rates that already 
occur between wage surveys as a result of changes in local economies 
and shifts in regional labor markets. Even if the part 1 changes were 
to have significant effects on prevailing wage rates in certain local 
areas, any reliance interests of local contractors, governmental 
agencies, or workers on prior prevailing wage rates would be limited, 
given that the changes to the wage determination processes generally 
will not affect current contracts--which will continue to be governed 
by the wage determinations incorporated at the time of their award, 
with limited exceptions. Most of the revisions to part 1 will only 
apply to wage surveys that are finalized after the rule becomes 
effective, and thus they will generally apply only to contracts awarded 
after such new wage determinations are issued.\15\ Contractors will 
therefore be able to factor any new wage rates into their bids on 
future contracts.
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    \15\ As explained in Sec.  1.6(c), whenever a new wage 
determination is issued (either after the completion of a new wage 
survey or through the new periodic adjustment mechanism), that 
revision as a general matter does not and will not apply to 
contracts which have already been awarded, with three exceptions. 
These exceptions are explained in Sec.  1.6(c)(2)(iii), and they 
include where a contract or order is changed to include substantial 
covered work that was not within the original scope of work, where 
an option is exercised, and also certain ongoing contracts that are 
not for specific construction, for which new wage determinations 
must be incorporated on an annual basis under Sec.  
1.6(c)(2)(iii)(B) of the final rule. The final rule instructs 
contracting agencies to apply the terms of Sec.  1.6(c)(2)(iii) to 
all existing contracts, without regard to the date of contract 
award, if practicable and consistent with applicable law. The 
Department does not anticipate that the application of the amended 
wage determination methodologies in these situations will result in 
unfair harm to reliance interests in a manner sufficient to outweigh 
the benefits of the final rule implementation as planned. See also 
section III.C. (``Applicability Date'') below.
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    Many of the amendments to part 5 of the regulations are regulatory 
changes that codify the Department's current practices and 
interpretations of existing regulations. As a result, such changes do 
not, in practical terms, impose new obligations on contractors or 
contracting agencies. Other changes, such as the new anti-retaliation 
provision, provide new remedies to address conduct that already may 
subject contractors to potential debarment. Any reliance interest in 
the ability to carry out such conduct with lesser potential 
consequences is particularly weak. Regardless, these new amendments to 
part 5 will generally only apply to contracts that are awarded after 
the effective date of this final rule. Contractors entering into new 
contracts issued after the rule is published and becomes applicable 
will have notice of the regulatory changes and will be able to take the 
changes into consideration as they analyze internal controls and 
develop their bids or negotiate contract pricing.
    ABC argued that the Department's denial of requests to extend the 
public comment period beyond the 60 days provided was arbitrary and 
capricious, and other commenters expressed disappointment that the 
comment period had not been extended. As explained in the Department's 
public response to the extension requests in regulations.gov, the 
Department concluded that the 60-day period provided the public with a 
meaningful opportunity to comment on the proposed rule. The Davis-Bacon 
and Related Acts' applicability is limited to Federal and federally 
assisted construction projects, and therefore applies to a defined 
group of stakeholders. Additionally, various elements of the proposed 
and final rules codify or clarify longstanding policies, practices, and 
interpretations. As a result, stakeholders were familiar with many of 
the issues addressed in the NPRM. The public had additional time to 
review the NPRM, which was available on the Department's website on 
March 11, 2022, seven days in advance of its publication in the Federal 
Register. The comprehensive nature and substance of the comments 
received--both in favor of and opposing the proposed rule--support the 
Department's view that the 60-day period was appropriate and 
sufficient. Finally, the Department and the Office of Management and 
Budget have participated in several meetings pursuant to E.O. 12866 at 
which stakeholders have had opportunities to elaborate on their public 
comments.
    Finally, some commenters raised concerns about the administrative 
or paperwork burdens contractors might face while adjusting to, and 
under, the Department's final rule. The Department considered such 
concerns in its economic analyses and concluded that the paperwork 
burdens associated with the rule are limited and are outweighed by the 
benefits of the regulation.
    Having considered all of the comments, the Department has decided 
to adopt the NPRM's proposed changes with some modifications. 
Significant issues raised in the comments are discussed in more detail 
below in section III (``Final Regulatory Revisions''), along with the 
Department's responses to those comments.
    This final rule includes several elements targeted at increasing 
the amount of information available for wage determinations and 
speeding up the determination process. In particular, the final rule 
amends Sec.  1.3 of the

[[Page 57529]]

regulations by outlining a new methodology to expressly give the Wage 
and Hour Division (WHD) Administrator authority and discretion to adopt 
State or local wage determinations as the Davis-Bacon prevailing wage 
where certain specified criteria are satisfied. Such a change will help 
improve the currentness and accuracy of wage determinations, as many 
States and localities conduct surveys more frequently than the 
Department and have relationships with stakeholders that may facilitate 
the process and foster more widespread participation. This revision 
will also increase efficiency and reduce confusion for the regulated 
community where projects are covered by both DBRA and local or State 
prevailing wage laws and contractors are already familiar with 
complying with the local or State prevailing wage requirement.
    The Department also amends the definition of ``prevailing wage'' in 
Sec.  1.2, and in Sec.  1.7, the scope of data considered to identify 
the prevailing wage in a given area. To address the overuse of weighted 
average rates, the Department returns to the definition of ``prevailing 
wage'' in Sec.  1.2 that it used from 1935 to 1983.\16\ Currently, a 
wage rate may be identified as prevailing in the area only if it is 
paid to a majority of workers in a classification on the wage survey; 
otherwise, a weighted average is used. The Department returns instead 
to the ``three-step'' method that was in effect before 1983. Under that 
method (also known as the 30-percent rule), in the absence of a wage 
rate paid to a majority of workers in a particular classification, a 
wage rate will be considered prevailing if it is paid to at least 30 
percent of such workers. The Department also returns to a prior policy 
on another change made during the 1981-1982 rulemaking related to the 
delineation of wage survey data submitted for ``metropolitan'' or 
``rural'' counties in Sec.  1.7(b). Through this change, the Department 
will more accurately reflect modern labor force realities, allow more 
wage rates to be determined at smaller levels of geographical 
aggregation, and will increase the sufficiency of data at the statewide 
level.
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    \16\ The 1981-1982 rulemaking went into effect on Apr. 29, 1983. 
48 FR 19532.
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    Revisions to Sec. Sec.  1.3 and 5.5 are aimed at reducing the need 
for the use of ``conformances'' where the Department has received 
insufficient data to publish a prevailing wage for a classification of 
worker--a process that currently is burdensome on contracting agencies, 
contractors, and the Department. This final rule codifies a new 
procedure through which the Department may identify (and list on the 
wage determination) wage and fringe benefit rates for certain 
classifications for which WHD received insufficient data through its 
wage survey program. The procedure will reduce the need for 
conformances of classifications for which conformances are now often 
required.
    The Department also revises Sec.  1.6(c)(1) to provide a mechanism 
to regularly update certain non-collectively bargained prevailing wage 
rates based on the Employment Cost Index (ECI) published by the Bureau 
of Labor Statistics (BLS).\17\ The mechanism is intended to keep such 
rates more current between surveys so that they do not become out-of-
date and fall behind prevailing rates in the area.
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    \17\ Available at: https://www.bls.gov/news.release/eci.toc.htm.
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    The Department also strengthens enforcement in several critical 
ways. The Department addresses the challenges caused by the omission of 
contract clauses. In a manner similar to its rule under Executive Order 
11246 (Equal Employment Opportunity), the Department designates the 
DBRA contract clauses in Sec.  5.5(a) and (b), and applicable wage 
determinations, as effective by ``operation of law'' notwithstanding 
their mistaken omission from a contract. This is an extension of the 
retroactive modification procedures that were put into effect in Sec.  
1.6 by the 1981-1982 rulemaking, and it will expedite enforcement 
efforts to ensure the timely payment of prevailing wages to all workers 
who are owed such wages under the relevant statutes.
    In addition, the Department finalizes new anti-retaliation 
provisions in the Davis-Bacon contract clauses in new paragraphs at 
Sec.  5.5(a)(11) (DBRA) and (b)(5) (Contract Work Hours and Safety 
Standards Act (CWHSSA)), and in a new section of part 5 at Sec.  5.18. 
The language ensures that workers who raise concerns about payment 
practices or assist agencies or the Department in investigations are 
protected from termination or other adverse employment actions.
    Finally, to reinforce the remedies available when violations are 
discovered, the Department clarifies and strengthens the cross-
withholding procedure for recovering back wages by including new 
language in the withholding contract clauses at Sec.  5.5(a)(2) (DBRA) 
and (b)(3) (CWHSSA) to clarify that cross-withholding may be 
accomplished on contracts held by agencies other than the agency that 
awarded the contract. The Department also creates a mechanism through 
which contractors will be required to consent to cross-withholding for 
back wages owed on contracts held by different but related legal 
entities in appropriate circumstances--if, for example, those entities 
are controlled by the same controlling shareholder or are joint 
venturers or partners on a Federal contract. The revisions also include 
a harmonization of the DBA and Related Act debarment standards.

II. Background

A. Statutory and Regulatory History

    The Davis-Bacon Act, as enacted in 1931 and subsequently amended, 
requires the payment of minimum prevailing wages determined by the 
Department to laborers and mechanics working on Federal contracts in 
excess of $2,000 for the construction, alteration, or repair, including 
painting and decorating, of public buildings and public works. See 40 
U.S.C. 3141 et seq. Congress has also included the Davis-Bacon 
requirements in numerous other laws, known as the Davis-Bacon Related 
Acts (the Related Acts and, collectively with the Davis-Bacon Act, the 
DBRA), which provide Federal assistance for construction projects 
through grants, loans, loan guarantees, insurance, and other methods. 
Congress intended the Davis-Bacon Act to ``protect local wage standards 
by preventing contractors from basing their bids on wages lower than 
those prevailing in the area.'' Coutu, 450 U.S. at 773 (quoting H. 
Comm. on Educ. and Lab., Legis. History of the Davis-Bacon Act, 87th 
Cong., 2d Sess., 1 (Comm. Print 1962)).
    The Copeland Act, enacted in 1934, added the requirement that 
contractors working on Davis-Bacon projects must submit weekly 
certified payrolls for work performed on the contract. See 40 U.S.C. 
3145. The Copeland Act also prohibits contractors from inducing any 
worker to give up any portion of the wages due to them on such 
projects. See 18 U.S.C. 874. In 1962, Congress passed CWHSSA, which, as 
amended, requires an overtime payment of additional half-time for hours 
worked over 40 in the workweek by laborers and mechanics, including 
watchpersons and guards, on Federal contracts or federally assisted 
contracts containing Federal prevailing wage standards. See 40 U.S.C. 
3701 et seq.
    As initially enacted, the DBA did not take into consideration the 
provision of fringe benefits to workers. In 1964, Congress expanded the 
Act to require the Department to include an analysis of fringe benefits 
as part of the wage determination process. The amendment

[[Page 57530]]

requires contractors and subcontractors to provide fringe benefits 
(such as vacation pay, sick leave, health insurance, and retirement 
benefits), or the cash equivalent thereof, to their workers at the 
level prevailing for the labor classification on projects of a similar 
character in the locality. See Act of July 2, 1964, Public Law 88-349, 
78 Stat. 238.
    Congress has delegated broad rulemaking authority under the DBRA to 
the Department. The DBA, as amended, contemplates regulatory and 
administrative action by the Department to determine the prevailing 
wages that must be paid and to ``prescribe reasonable regulations'' for 
contractors and subcontractors. 40 U.S.C. 3142(b); 40 U.S.C. 3145. 
Congress also, through Reorganization Plan No. 14 of 1950, directed the 
Department to ``prescribe appropriate standards, regulations and 
procedures'' to be observed by Federal agencies responsible for the 
administration of the Davis-Bacon and Related Acts. 15 FR 3176; 5 
U.S.C. app. 1.
    The Department promulgated its initial regulations implementing the 
Act in 1935 and has since periodically revised them. See U.S. 
Department of Labor, Regulations No. 503 (Sept. 30, 1935). In 1938, 
these initial regulations, which set forth the procedures for the 
Department to follow in determining prevailing wages, were included in 
part 1 of Title 29 of the new Code of Federal Regulations. See 29 CFR 
1.1 et seq. (1938). The Department later added regulations to implement 
the payroll submission and anti-kickback provisions of the Copeland 
Act--first in part 2 and then relocated to part 3 of Title 29. See 6 FR 
1210 (Mar. 1, 1941); 7 FR 687 (Feb. 4, 1942); 29 CFR part 2 (1942); 29 
CFR part 3 (1943). After the Reorganization Plan No. 14 of 1950, the 
Department issued regulations setting forth procedures for the 
administration and enforcement of the Davis-Bacon and Related Acts in a 
new part 5. 16 FR 4430 (May 12, 1951); 29 CFR part 5. The Department 
made significant revisions to the regulations in 1964, and again in the 
1981-1982 rulemaking.\18\
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    \18\ See 29 FR 13462 (Sept. 30, 1964); 46 FR 41444-70 (NPRM 
parts 1 and 5) (Aug. 14, 1981); 47 FR 23644-79 (final rule parts 1, 
3, and 5) (May 28, 1982). The Department also proposed a significant 
revision of parts 1 and 5 of the regulations in 1979 and issued a 
final rule in 1981. See 44 FR 77026 (Dec. 28, 1979) (NPRM Part 1); 
44 FR 77080 (Dec. 28, 1979) (NPRM part 5); 46 FR 4306 (Jan. 16, 
1981) (final rule part 1); 46 FR 4380 (Jan. 16, 1981) (final rule 
part 5). The 1981 final rules, however, were delayed and 
subsequently replaced by the 1981-1982 rulemaking. The 1982 final 
rule was delayed by litigation and re-published with amendments in 
1983 and 1985. 48 FR 19532-53 (Apr. 29, 1983) (final rule parts 1 
and 5); 50 FR 4506 (Jan. 31, 1985) (final rule Sec. Sec.  1.3(d) and 
1.7(b)).
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    While the Department has made periodic revisions to the regulations 
in recent years, such as to better protect the personal privacy of 
workers, 73 FR 77511 (Dec. 19, 2008); to remove references to the 
``Employment Standards Administration,'' 82 FR 2225 (Jan. 9, 2017); and 
to adjust Federal civil money penalties, 81 FR 43450 (July 1, 2016), 83 
FR 12 (Jan. 2, 2018), 84 FR 218 (Jan. 23, 2019), 87 FR 2328 (Jan. 14, 
2022), 88 FR 2210 (Jan. 13, 2023), the Department has not engaged in a 
comprehensive review and revision since the 1981-1982 rulemaking.

B. Overview of the Davis-Bacon Program

    WHD, an agency within the U.S. Department of Labor, administers the 
Davis-Bacon program for the Department. WHD carries out its 
responsibilities in partnership with the Federal agencies that enter 
into direct DBA-covered contracts for construction and/or administer 
Federal assistance to State and local governments and other funding 
recipients that is covered by the Related Acts. The State and local 
governmental agencies and authorities that receive covered financial 
assistance also have important responsibilities in administering 
Related Act program rules, as they manage programs through which 
covered funding flows or the agencies themselves directly enter into 
covered contracts for construction.
    The DBRA program includes three basic components in which these 
government entities have responsibilities: (1) wage surveys and wage 
determinations; (2) contract formation and administration; and (3) 
enforcement and remedies.
1. Wage Surveys and Determinations
    The DBA delegates to the Secretary of Labor the responsibility to 
determine the wage rates that are ``prevailing'' for each 
classification of covered laborers and mechanics on similar projects 
``in the civil subdivision of the State in which the work is to be 
performed.'' 40 U.S.C. 3142(b). WHD carries out this responsibility for 
the Department through its wage survey program and derives the 
prevailing wage rates from survey information that responding 
contractors and other interested parties voluntarily provide. The 
program is carried out in accordance with the program regulations in 
part 1 of Title 29 of the Code of Federal Regulations, see 29 CFR 1.1 
through 1.7, and its procedures are described in guidance documents 
such as the ``Davis-Bacon Construction Wage Determinations Manual of 
Operations'' (1986) (Manual of Operations) and ``Prevailing Wage 
Resource Book'' (2015) (PWRB).\19\ Although part 1 of the regulations 
provides the authority for WHD to create project-specific wage 
determinations, such project wage determinations, once more common, now 
are rarely employed. Instead, nearly all wage determinations are 
general wage determinations issued for general types of construction 
(building, residential, highway, and heavy) and applicable to a 
specific geographic area. General wage determinations can be 
incorporated into the vast majority of contracts and create uniform 
application of the DBRA for that area.
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    \19\ The Manual of Operations is a 1986 guidance document that 
is still used internally for reference within WHD. The PWRB is a 
2015 document that is intended to provide practical information to 
contracting agencies and other interested parties, and is available 
at https://www.dol.gov/agencies/whd/government-contracts/prevailing-wage-resource-book.
---------------------------------------------------------------------------

2. Contract Formation and Administration
    The Federal agencies that enter into DBA-covered contracts or 
administer Related Act programs have the initial responsibility to 
determine whether a contract is covered by the DBA or one of the 
Related Acts and identify the contract clauses and the applicable wage 
determinations that must be included in the contract. See 29 CFR 
1.6(b). In addition to the Department's regulations, this process is 
also guided by parallel regulations in part 22 of the FAR for those 
contracts that are subject to the FAR. See 48 CFR part 22. Federal 
agencies also maintain their own regulations and guidance governing 
agency-specific aspects of the process. See, e.g., 48 CFR subpart 222.4 
(Defense); 48 CFR subpart 622.4 (State); U.S. Department of Housing and 
Urban Development (HUD), HUD Handbook 1344.1, Federal Labor Standards 
Requirements in Housing and Urban Development Programs (2013).\20\
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    \20\ Available at: https://www.hud.gov/sites/dfiles/OCHCO/documents/Work-Schedule-Request.pdf.
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    Where contracting agencies or interested parties have questions 
about such matters as coverage under the DBRA or the applicability of 
the appropriate wage determination to a specific contract, they are 
directed to submit those questions to the Administrator of WHD (the 
Administrator) for resolution. See 29 CFR 5.13. The Administrator 
responds to such questions and provides periodic guidance on other 
aspects of the DBRA program to contracting agencies and other 
interested parties, particularly through All Agency Memoranda

[[Page 57531]]

(AAMs) and ruling letters. In addition, the Department maintains a 
guidance document, the Field Operations Handbook (FOH), to provide 
guidance for the regulated community and for WHD investigators and 
staff on contract administration and enforcement policies.\21\
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    \21\ The FOH reflects policies established through changes in 
legislation, regulations, significant court decisions, and the 
decisions and opinions of the WHD Administrator. It is not used as a 
device for establishing interpretive policy. Chapter 15 of the FOH 
covers the DBRA, including CWHSSA, and is available at https://www.dol.gov/agencies/whd/field-operations-handbook/Chapter-15.
---------------------------------------------------------------------------

    During the administration of a DBRA-covered contract, contractors 
and subcontractors are required to provide certified payrolls to the 
contracting agency to demonstrate their compliance with the 
incorporated wage determinations on a weekly basis. See generally 29 
CFR part 3. Contracting agencies have the duty to ensure compliance by 
engaging in periodic audits or investigations of contracts, including 
examinations of payroll data and confidential interviews with workers. 
See 29 CFR 5.6. Prime contractors have the responsibility for the 
compliance of all the subcontractors on a covered prime contract. 29 
CFR 5.5(a)(6). WHD conducts investigations of covered contracts, which 
include determining if the DBRA contract clauses or appropriate wage 
determinations were mistakenly omitted from the contract. See 29 CFR 
1.6(f). If WHD determines that there was such an omission, it will 
request that the contracting agency either terminate and resolicit the 
contract or modify it to incorporate the required clauses or wage 
determinations retroactively. Id.
3. Enforcement and Remedies
    In addition to WHD, contracting agencies have enforcement authority 
under the DBRA. When a contracting agency's investigation reveals 
underpayments of wages of the DBA or one of the Related Acts, the 
Federal agency generally is required to provide a report of its 
investigation to WHD, and to seek to recover the underpayments from the 
contractor responsible. See 29 CFR 5.6(a), 5.7. If violations 
identified by the contracting agency or by WHD through its own 
investigation are not promptly remedied, contracting agencies are 
required to suspend payment on the contract until sufficient funds are 
withheld to compensate the workers for the underpayments. 29 CFR 5.9. 
The DBRA contract clauses also provide for ``cross-withholding'' if 
sufficient funds are no longer available on the contract under which 
the violations took place. Under this procedure, funds may be withheld 
from any other covered Federal contract or federally assisted contract 
held by the same prime contractor in order to remedy the underpayments 
on the contract at issue. See 29 CFR 5.5(a)(2), (b)(3). Contractors 
that violate the DBRA may also be subject to debarment from future 
Federal contracts and federally assisted contracts. See 29 CFR 5.12.
    Where WHD conducts an investigation and finds that violations have 
occurred, it will notify the affected prime contractor(s) and 
subcontractor(s) of the findings of the investigation--including any 
determination that workers are owed back wages and whether there is 
reasonable cause to believe the contractor may be subject to debarment. 
See 29 CFR 5.11(b). Contractors can request a hearing regarding these 
findings through the Department's Office of Administrative Law Judges 
(OALJ) and may appeal any ruling by the OALJ to the Department's ARB. 
Id.; see also 29 CFR parts 6 and 7 (OALJ and ARB rules of practice for 
Davis-Bacon proceedings). Decisions of the ARB are final agency actions 
that may be reviewable under the Administrative Procedure Act (APA) in 
Federal district court. See 5 U.S.C. 702, 704.\22\
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    \22\ In addition to reviewing liability determinations and 
debarment, the ARB, the Secretary (when exercising discretionary 
review), and the courts also have jurisdiction in certain 
circumstances to review general wage determinations. Judicial 
review, however, is strictly limited to any procedural 
irregularities, as there is no jurisdiction to review the 
substantive correctness of a wage determination under the DBA. See 
Binghamton Constr. Co., 347 U.S. at 177.
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III. Final Regulatory Revisions

A. Legal Authority

    The Davis-Bacon Act, as enacted in 1931 and subsequently amended, 
requires the payment of certain minimum ``prevailing'' wages determined 
by the Department to laborers and mechanics working on Federal 
contracts in excess of $2,000 for the construction, alteration, or 
repair, including painting and decorating, of public buildings and 
public works. See 40 U.S.C. 3141 et seq. The DBA authorizes the 
Secretary of Labor to develop a definition for the term ``prevailing'' 
wage and a methodology for setting it based on wages paid on similar 
projects in the civil subdivision of the State in which a covered 
project will occur. See 40 U.S.C. 3142(b); Bldg. & Constr. Trades' 
Dep't, AFL-CIO v. Donovan, 712 F.2d 611, 616 (D.C. Cir. 1983).
    The Secretary of Labor has the responsibility to ``prescribe 
reasonable regulations'' for contractors and subcontractors on covered 
projects. 40 U.S.C. 3145. The Secretary, through Reorganization Plan 
No. 14 of 1950, also has the responsibility 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 of the labor standards provisions'' of the 
DBRA. 15 FR 3176; 5 U.S.C. app. 1.
    The Secretary has delegated authority to promulgate these 
regulations to the Administrator and to the Deputy Administrator of the 
WHD if the Administrator position is vacant. See Secretary's Order No. 
01-2014, 79 FR 77527 (Dec. 24, 2014); Secretary's Order No. 01-2017, 82 
FR 6653 (Jan. 19, 2017).

B. Overview of the Final Rule

    The Department finalizes its proposals to update and modernize the 
regulations at 29 CFR parts 1, 3, and 5, which implement the DBRA. The 
sections below address these regulatory revisions as adopted in the 
final rule.
1. 29 CFR Part 1
    The procedures for determining the prevailing wage rates and fringe 
benefits applicable to laborers and mechanics engaged in construction 
activity covered by the Davis-Bacon and Related Acts are set forth in 
29 CFR part 1. The regulations in this part also set forth the 
procedures for the application of such prevailing wage determinations 
to covered construction projects.
i. Section 1.1 Purpose and Scope
    The Department proposed technical revisions to Sec.  1.1 to update 
the statutory reference to the Davis-Bacon Act, now recodified at 40 
U.S.C. 3141 et seq. The Department also proposed to eliminate outdated 
references to the Deputy Under Secretary of Labor for Employment 
Standards at the Employment Standards Administration. The Employment 
Standards Administration was eliminated as part of an agency 
reorganization in 2009, and its authorities and responsibilities were 
devolved into its constituent components, including the WHD. See 
Secretary's Order No. 09-2009 (Nov. 6, 2009), 74 FR 58836 (Nov. 13, 
2009), 82 FR 2221 (Jan. 9, 2017). The Department further proposed to 
revise Sec.  1.1 to reflect the removal of Appendix A of part 1, as 
discussed below. The Department also proposed to add new paragraph 
(a)(1) to reference the WHD website (https://

[[Page 57532]]

www.dol.gov/agencies/whd/government-contracts, or its successor 
website) on which a listing of laws requiring the payment of wages at 
rates predetermined by the Secretary of Labor under the Davis-Bacon Act 
is currently found.
    The Department received one comment in favor of this proposal. The 
United Association of Journeymen and Apprentices of the Plumbing and 
Pipe Fitting Industry of the United States & Canada (UA) commented in 
support of the proposal, noting that the current information was 
outdated. The final rule therefore adopts this change as proposed, with 
one technical edit to delete an unnecessary conjunction that is not 
intended to reflect a change in the substance of this section.
ii. Section 1.2 Definitions
(A) Prevailing Wage
    Section 1.2 contains the definition of the term ``prevailing 
wage.'' The DBA and the Related Acts require laborers and mechanics on 
covered projects to be paid a prevailing wage as set by the Secretary 
of Labor, but the statutes do not define the term ``prevailing.'' The 
Department's regulatory definition of the term ``prevailing wage'' in 
29 CFR 1.2 specifies the basic methodology with which the Department 
determines whether a certain wage rate is prevailing in a given 
geographic area. The Department uses this methodology to prepare wage 
determinations that are incorporated into DBRA-covered contracts to set 
minimum wage rates for each classification of covered workers on a 
project.
    In the NPRM, the Department proposed to redefine the term 
``prevailing wage'' in Sec.  1.2 to return to the original methodology 
for determining whether a wage rate is prevailing. This original 
methodology has been referred to as the ``three-step process.''
    Since 1935, the Secretary has interpreted the word ``prevailing'' 
in the Davis-Bacon Act to be consistent with the common understanding 
of the term as meaning ``predominant'' or ``most frequent.'' From 1935 
until the 1981-1982 rulemaking, the Department employed a three-step 
process to identify the most frequently used wage rate for each 
classification of workers in a locality. See Regulation 503 section 2 
(1935); 47 FR 23644.\23\ This process identified as prevailing: (1) any 
wage rate paid to a majority of workers; and, if there was none, then 
(2) the wage rate paid to the greatest number of workers, provided it 
was paid to at least 30 percent of workers, and, if there was none, 
then (3) the weighted average rate. The second step has been referred 
to as the ``30-percent rule.''
---------------------------------------------------------------------------

    \23\ Implemented Apr. 29, 1983. See 48 FR 19532.
---------------------------------------------------------------------------

    The three-step process relegated the average rate to a final, 
fallback method of determining the prevailing wage. In 1962 
congressional testimony, Solicitor of Labor Charles Donahue explained 
the reasoning for this sequence in the determination: An average rate 
``does not reflect a true rate which is actually being paid by any 
group of contractors in the community being surveyed.'' Instead, ``it 
represents an artificial rate which we create ourselves, and which does 
not reflect that which a predominant amount of workers are paid.'' \24\
---------------------------------------------------------------------------

    \24\ Administration of the Davis Bacon Act: Hearings before the 
Spec. Subcomm. of Lab. of the H. Comm. on Educ. & Lab., 87th Cong. 
811-12 (1962) (testimony of Charles Donahue, Solicitor of Labor).
---------------------------------------------------------------------------

    In 1982, the Department published a final rule that amended the 
definition of ``prevailing wage'' by eliminating the second step in the 
three-step process--the 30-percent threshold. See 47 FR 23644. The new 
process required only two steps: first identifying if there was a wage 
rate paid to more than 50 percent of workers, and then, if not, relying 
on a weighted average of all the wage rates paid. Id. at 23644-45.
    In eliminating the 30-percent threshold, however, the Department 
did not change its underlying interpretation of the word 
``prevailing''--that it means ``the most widely paid rate'' must be the 
``definition of first choice'' for the prevailing wage. 47 FR 23645. 
While the 1982 rule continued to allow the Department to use an average 
rate as a fallback, the Department rejected commenters' suggestions 
that the weighted average could be used in all cases. See 47 FR 23644-
45. As the Department explained, this was because the term 
``prevailing'' contemplates that wage determinations mirror, to the 
extent possible, those rates ``actually paid'' to workers. 47 FR 23645.
    This interpretation--that the definition of first choice for the 
term ``prevailing wage'' should be an actual wage rate that is most 
widely paid--has now been shared across administrations for over 85 
years. In the intervening decades, Congress has amended and expanded 
the reach of the Act's prevailing wage requirements dozens of times 
without altering the term ``prevailing'' or the grant of broad 
authority to the Secretary of Labor to define it.\25\ In addition, the 
question was also reviewed by the Office of Legal Counsel (OLC) at the 
Department of Justice, which independently reached the same 
conclusions: ``prevailing wage'' means the current and predominant 
actual rate paid, and an average rate should only be used as a last 
resort. See Determination of Wage Rates Under the Davis-Bacon & Serv. 
Cont. Acts, 5 Op. O.L.C. 174, 176-77 (1981).\26\
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    \25\ See, e.g., Act of Mar. 23, 1941, ch. 26, 55 Stat. 53 (1941) 
(applying the Act to alternative contract types); CWHSSA of 1962, 
Public Law 87-581, 76 Stat. 357 (1962) (requiring payment of 
overtime on contracts covered by the Act); Act of July 2, 1964, 
Public Law 88-349, 78 Stat. 238 (1964) (extending the Act to cover 
fringe benefits); 29 CFR 5.1 (referencing 57 Related Acts into which 
Congress incorporated Davis-Bacon Act requirements between 1935 and 
1978).
    \26\ Available at: https://www.justice.gov/sites/default/files/olc/opinions/1981/06/31/op-olc-v005-p0174_0.pdf.
---------------------------------------------------------------------------

    In the 1982 final rule, when the Department eliminated the 30-
percent threshold, it anticipated that this change would increase the 
use of artificial average rates. 47 FR 23648-49. Nonetheless, the 
Department believed a change was preferable because the 30-percent 
threshold could in some cases not account for up to 70 percent of the 
remaining workers. See 46 FR 41444. The Department also stated that it 
agreed with the concerns expressed by certain commenters that 
establishing a prevailing wage rate based on 30-percent of survey wage 
rates was ``inflationary'' and gave ``undue weight to collectively 
bargained rates.'' 47 FR 23644-45.
    After reviewing the development of the Davis-Bacon Act program 
since the 1981-1982 rulemaking, the Department has concluded that 
eliminating the 30-percent threshold has ultimately resulted in an 
overuse of average rates. On paper, the weighted average remains the 
fallback method to be used only when there is no majority rate. In 
practice, though, it has become a central mechanism to set the 
prevailing wage rates included in Davis-Bacon wage determinations and 
covered contracts.
    Prior to the 1982 rule change, the use of averages to set a 
prevailing wage rate was relatively rare. In a Ford Administration 
study of Davis-Bacon Act prevailing wage rates in commercial-type 
construction in 19 cities, none of the rates were based on averages 
because all of the wage rates were ``negotiated'' rates, i.e., based on 
collective bargaining agreements (CBAs) that represented a predominant 
wage rate in the locality.\27\ The Department

[[Page 57533]]

estimates that prior to the 1982 final rule, as low as 15 percent of 
classification rates across all wage determinations were based on 
averages. After the 1982 rule was implemented, the use of averages may 
have initially increased to approximately 26 percent of all wage 
determinations.\28\
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    \27\ See Robert S. Goldfarb & John F. Morrall, ``An Analysis of 
Certain Aspects of the Administration of the Davis-Bacon Act,'' 
Council on Wage and Price Stability (May 1976), reprinted in Bureau 
of Nat'l Affs., Construction Labor Report, No. 1079, D-1, D-2 
(1976).
    \28\ See Oversight Hearing on the Davis-Bacon Act, Before the 
Subcomm. on Lab. Standards of the H. Comm. on Educ. & Lab., 96th 
Cong. 58 (1979) (statement of Ray Marshall, Secretary of Labor) 
(discussing study of 1978 determinations showing only 24 percent of 
classification rates were based on the 30-percent rule); Jerome 
Staller, ``Communications to the Editor,'' Policy Analysis, Vol. 5, 
No. 3 (Summer 1979), pp. 397-98 (noting that 60 percent of 
determinations in the internal Department 1976 and 1978 studies were 
based on the 30-percent rule or the average-rate rule). The authors 
of the Council on Wage and Price Stability study, however, pointed 
out that the Department's figures were for rates that had been based 
on survey data, while 57 percent of rates in the mid-1970's were 
based solely on CBAs without the use of surveys (a practice that the 
Department no longer uses to determine new rates). See Robert S. 
Goldfarb & John F. Morrall II., ``The Davis-Bacon Act: An Appraisal 
of Recent Studies,'' 34 Indus. & Lab. Rel. Rev. 191, 199-200 & n.35 
(1981). Thus, the actual percentage of annual classification 
determinations that were based on average rule before 1982 may have 
been as low as 15 percent, and the percent based on the average rule 
after 1982 would have been expected to be around 26 percent.
---------------------------------------------------------------------------

    The Department's current use of weighted averages is now 
significantly higher than this 26 percent figure. To analyze the 
current use of weighted averages and the potential impacts of this 
rulemaking, the Department compiled data for select classifications for 
19 recent wage surveys--nearly all of the completed surveys that WHD 
began in 2015 or later. The data show that the Department's reliance on 
average rates has increased significantly, and now accounts for 63 
percent of the observed classification determinations in this recent 
time period.\29\
---------------------------------------------------------------------------

    \29\ See below section V (Executive Order 12866, Regulatory 
Planning and Review et al.).
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    Such an overuse of weighted averages is inconsistent with the 
Department's longstanding interpretation of Congress's use of the word 
``prevailing'' in the text of the Act--including the Department's 
statements in the preamble to the 1982 rule itself that the definition 
of first choice for the ``prevailing'' wage should be the most widely 
paid rate that is actually paid to workers in the relevant locality. If 
nearly two-thirds of rates that are now being published based on recent 
surveys are based on a weighted average, it is no longer fair to say 
that it is a fallback method of determining the prevailing wage.
    The use of averages as the dominant methodology for issuing wage 
determinations is also in tension with the recognized purpose of the 
Act ``to protect local wage standards by preventing contractors from 
basing their bids on wages lower than those prevailing in the area.'' 
Coutu, 450 U.S. at 773 (internal quotation marks and citation omitted). 
Using an average to determine the minimum wage rate on contracts allows 
a single low-wage contractor in the area to depress wage rates on 
Federal contracts below the higher rate that may be generally more 
prevalent in the community--by factoring into (and lowering) the 
calculation of the average that is used to set the minimum wage rates 
on local Federal contracts.\30\
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    \30\ For example, the 2001 wage determination for electricians 
in Eddy County, New Mexico, was an average rate based on responses 
that included lower-paid workers that had been brought in from Texas 
by a Texas electrical contractor to work on a single job. As the ARB 
noted in reviewing a challenge to the wage determination, the result 
was that ``contract labor from Texas, where wages reportedly are 
lower, effectively has determined the prevailing wage for 
electricians in this New Mexico county.'' New Mexico Nat'l Elec. 
Contractors Ass'n, ARB No. 03-020, 2004 WL 1261216, at *8 (May 28, 
2004).
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    To address the increasing tension between the current methodology 
and the purpose and definition of ``prevailing,'' the Department 
proposed in the NPRM to return to the original three-step process. The 
Department expects that re-introducing the 30-percent threshold will 
reduce the use of average rates roughly by half--from 63 percent to 31 
percent. The data from the regulatory impact analysis included in 
section V suggests that returning to the three-step process will 
continue to result in 37 percent of prevailing wage rates based on the 
majority rule, with the balance of 32 percent based on the 30-percent 
threshold, and 31 percent based on the weighted average.
    As part of its review of the wage determination definition and 
methodology, the Department also considered, but decided against, 
proposing to use the median wage rate as the ``prevailing'' rate. The 
median, like the average (mean), is a number that can be unrelated to 
the wage rate paid with the greatest frequency to employees working in 
the locality. Using either the median or the average as the primary 
method of determining the prevailing rate is not consistent with the 
Department's long-held interpretation of the meaning of the term 
``prevailing'' in the Davis-Bacon Act. See 47 FR 23645. The Department 
therefore proposed to return to the three-step process and the 30-
percent threshold, and did not propose as alternatives the use of 
either the median or mean as the primary or sole methods for making 
wage determinations.
(1) Comments on the Definition of ``Prevailing Wage''
    The Department received many comments regarding the definition of 
the term ``prevailing wage'' and the proposed return to the three-step 
process and the 30-percent threshold. These included comments in favor 
of the proposal, comments in favor of keeping the current definition, 
comments suggesting that the Department abandon the ``modal'' 
methodology entirely and use only an average, and comments suggesting 
the Department should use data from sources other than its wage surveys 
before applying any specific methodology. Having reviewed and 
considered all the comments, the Department has decided that the best 
course is to adopt the re-definition of ``prevailing wage'' as proposed 
and return to the three-step process that was in effect from 1935 to 
1983.
    The Department continues to believe, as it has consistently for 
over 85 years, that the best methodology for determining the 
``prevailing wage'' under the Davis-Bacon Act is one that uses a 
mathematical mode to determine ``the most widely paid rate'' as the 
``definition of first choice.'' 47 FR 23645. The modal definition of 
prevailing as ``the most widely paid rate'' is the methodology that is 
most consistent with Congress's use of the word ``prevailing'' in the 
statutory text. Commenters in support of the Department's proposal 
cited to various dictionary definitions of the word ``prevailing'' that 
support this conclusion. The Construction Employers of America (CEA), 
for example, noted the definition of ``prevailing'' as ``most 
frequent'' or ``generally current'' and descriptive of ``what is in 
general or wide circulation or use'' from Webster's Third New 
International Dictionary (1976). Accord 5 Op. O.L.C. at 175. The 
Department agrees that this and other similar dictionary definitions 
support the use of a modal methodology as the method of first choice.
    Although the legislative history of the Act does not suggest that 
Congress understood there to be only one possible way of determining 
the prevailing wage,\31\ there is no question that a modal methodology 
was within the common and ordinary public meaning of the term 
``prevailing'' at the time. One

[[Page 57534]]

contemporaneous exchange from 1932 is particularly instructive. During 
an early debate over potential amendments to the Act, the Associated 
General Contractors (AGC) explained that union representatives believed 
the prevailing rate should always be a collectively bargained union 
wage, while the contractors, many members of Congress, and Federal 
contracting agencies believed it should be ``the rate paid to the 
largest number in a particular locality at a given time''--in other 
words, the modal rate.\32\
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    \31\ See, e.g., 74 Cong. Rec. H6516 (daily ed. Feb 28, 1931) 
(statement of Rep. William Kopp) (noting that some might argue ``the 
term `prevailing rate' has a vague and indefinite meaning,'' but 
that this was not an obstacle because ``the power will be given . . 
. to the Secretary of Labor to determine what the prevailing rates 
are'').
    \32\ See Regulation of Wages Paid to Employees by Contractors 
Awarded Government Building Contracts: Hearings before the Committee 
on Labor, House of Representatives, 72nd Cong., 1st Sess., on S. 
3847 and H. R. 11865 (Apr. 28, 1932) at 34-35. The National 
Association of Manufacturers, similarly, argued that the prevailing 
wages should be ``considered as that being paid to the largest 
number in the particular locality at a particular time.'' Id. at 71-
72. See also 5 Op. O.L.C. at 175-76 (noting that this testimony 
leading up to the 1935 amendments ``indicates a common understanding 
by spokesmen for labor and management, as well as individual 
legislators, that the `prevailing' wage was the wage paid to the 
largest number of workers in the relevant classification and 
locality'').
---------------------------------------------------------------------------

    Several commenters on the Department's current proposal also argued 
that a modal methodology is generally more consistent with the purpose 
of Davis-Bacon Act. These commenters, including the National Black 
Worker Center, the International Union of Bricklayers and Allied 
Craftworkers, and others, argued that the use of a modal methodology 
results in a prevailing wage rate that is ``actually paid'' to workers 
in the area. These commenters said that average rates are less 
preferable because they are ``artificial'' and may not mirror any of 
the actual wage rates paid in the community. North America's Building 
Trade Union (NABTU), among others, asserted that ``average rates paid 
to no one are not `prevailing[.]' '' Many unions and contractor 
associations, including the Washington State Building and Construction 
Trades Council (WA BCTC) and NABTU, noted that the use of wage rates 
that are actually paid to workers in the community is more likely to 
protect local construction firms from being underbid by unscrupulous 
low-wage contractors, which is the purpose of the Act.\33\ Accordingly, 
commenters in favor of the proposal said averages should only be used 
as a fallback method when there is no clear rate prevailing in a given 
area.
---------------------------------------------------------------------------

    \33\ See also Staff of the H. Subcomm. on Lab., 88th Cong., 
Administration of the Davis-Bacon Act, Rep. of the Subcomm. on Lab. 
of the Comm. on Educ. & Lab. (Comm. Print 1963) (1963 House 
Subcommittee Report), at 7-8; 5 Op. O.L.C. at 177 (quoting the 1963 
House Subcommittee Report).
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    A wide range of commenters that supported the proposal agreed with 
the Department that the use of an average--rather than a ``modal'' 
number identifying the most prevalent wage rate--is less preferable 
because the use of an average allows outlier wage rates paid to very 
few workers to influence the prevailing wage. The Leadership Conference 
on Civil and Human Rights (LCCHR), the National Women's Law Center, 
Oxfam America, and several other civil rights and worker advocacy 
organizations similarly commented that ``reliance on weighted averages 
creates the potential for a single employer's rates that are 
exceptionally high or exceptionally low having outsize influence in 
determining the prevailing wage.'' Commenters noted that this feature 
of averages makes the overuse of averages less consistent with the 
Act's purposes of limiting the depressive effect of low-wage 
contractors on the wage rates in the local community.
    Commenters supportive of the Department's proposal also argued that 
this characteristic of average rates is particularly problematic for 
maintaining prevailing local construction standards where the use of an 
average results in a prevailing wage rate that is lower than a modal 
rate. As a Professor of Economics at the University of Utah commented, 
``[b]ecause the mean is sensitive to a long tail of lower wages 
compared to the mode, the mode is less likely to undercut local labor 
standards, including fringe benefits which underpin training and 
apprenticeship programs.'' Conversely, the commenter noted, ``the modal 
wage will deter market failures associated with short-run bidding 
practices that incentivize bidders to jettison all but the most 
necessary short-run costs of specific projects.''
    In addition to determining that a modal methodology continues to be 
preferable, the Department proposed to return to the lower 30-percent 
threshold for using the mode, before falling back to the use of an 
average rate. Several commenters, including think tanks such as 
Americans for Prosperity and Institute for the American Worker (AFP-
I4AW) and Competitive Enterprise Institute (CEI), opposed this proposal 
because they asserted that only a wage rate paid to a ``majority'' of 
workers fits the term ``prevailing.'' The National Federation of 
Independent Business (NFIB) asserted that 30 percent did not fall 
within the meaning of ``prevailing'' when Congress enacted the DBA in 
1931 and the Department's initial regulation was ``erroneous'' at the 
time. CEI cited to a definition of ``prevailing'' as meaning 
``accepted, used, or practiced by most people.'' \34\ CEI asserted that 
the term ``most people'' used in that context ``can only mean `a 
majority' '' and therefore that ``30 percent is not `prevailing' under 
any meaningful sense of the term.''
---------------------------------------------------------------------------

    \34\ The comment raising this language cited to an entry for 
``prevailing'' in the online version of Merriam-Webster's 
dictionary. The Department was not able to find that language at the 
cited location, but was able to find it in an online version of a 
thesaurus from the same publisher. See Prevailing, Merriam-Webster's 
Thesaurus, https://www.merriam-webster.com/thesaurus/prevailing.
---------------------------------------------------------------------------

    On the other hand, many commenters supported the Department's 
proposal and criticized the 1982 rule for seeming to conflate the 
dictionary definitions of ``prevailing'' with a ``majority.'' These 
commenters, including Mechanical Contractors Association of America 
(MCAA), National Electrical Contractors Association (NECA), and the UA, 
argued that the term ``prevailing'' is properly understood and defined 
as the most common or prevalent--which may be, but is not necessarily, 
a ``majority.'' If Congress had intended for the Department to 
determine only a ``majority'' wage, they argue, Congress would have 
explicitly stated as much in the statutory text. NECA and CEA noted 
that the interpretation of ``prevailing'' as not necessarily a majority 
was supported by the 1963 report of the House Subcommittee that 
examined the 30-percent threshold in depth before the passage of the 
1964 amendments to the Act.\35\ A joint comment from the Pennsylvania 
Attorney General and the Pennsylvania State Department of Labor and 
Industry (PAAG and PADLI) supported the reversion to the original 
definition, noting that it ``aligns with the underlying interpretation 
of the word `prevailing' as the `most widely paid rate.' ''
---------------------------------------------------------------------------

    \35\ 1963 House Subcommittee Report, at 8.
---------------------------------------------------------------------------

    The Department agrees with these commenters that the 30-percent 
threshold is consistent with the meaning of the word ``prevailing'' 
because ``prevailing'' is not coextensive with ``majority.'' A statute 
is normally interpreted with reference to the ordinary public meaning 
of its terms ``at the time of its enactment.'' Bostock v. Clayton 
Cnty., 140 S. Ct. 1731, 1738 (2020). Dictionaries from around the time 
of the 1935 amendments to the Act, when Congress revised the DBA to 
require the Secretary to predetermine prevailing wage rates, had 
definitions similar to the one cited in the 1981 OLC opinion. See, 
e.g., Prevailing, Merriam-Webster, Webster's Collegiate Dictionary (5th 
ed. 1936) (``Very generally current; most frequent; predominant'' with 
synonyms of common, widespread,

[[Page 57535]]

extensive, and prevalent); Prevailing, Oxford English Dictionary, Vol. 
VIII (1933) at 1334 (``2. Predominant in extent or amount; most widely 
occurring or accepted; generally current''); 5 Op. O.L.C. at 175. When 
there are only two kinds being compared, the ``most frequent'' or 
``most widely occurring'' of the two kinds will be a majority, and thus 
only a majority will be prevailing. But the same is not true when a 
variety of kinds are compared. In such circumstances, even if a 
majority will still necessarily be prevailing, it does not follow that 
anything less than a majority cannot be considered prevailing. Rather, 
as the 1963 House Subcommittee Report concluded, `` `prevailing' means 
only a greater number. It need not be a majority.'' \36\
---------------------------------------------------------------------------

    \36\ 1963 House Subcommittee Report, at 8.
---------------------------------------------------------------------------

    In opposing the proposal, AFP-I4AW noted that in the 1981-1982 
rulemaking the Department had agreed with commenters that stated ``a 
rate based on 30 percent does not comport with the definition of 
`prevailing[.]' '' \37\ The Department did not provide further 
explanation of this argument in the 1982 final rule, but had stated in 
the 1981 NPRM that the 30-percent rule ``ignores the rate paid to up to 
70 percent of the workers.'' See 46 FR 41444. Several commenters that 
opposed the return to the 30-percent rule, including AFP-I4AW, 
Associated Builders and Contractors (ABC), and Clark Pacific, stated 
that they still found this reasoning persuasive.\38\
---------------------------------------------------------------------------

    \37\ 47 FR 23644.
    \38\ Similarly, CEI opposed the use of the 30-percent rule 
because it stated that the fact that other workers may earn less 
than the wage determined to be the prevailing wage is ``highly 
significant,'' because it indicates that the labor market is ``more 
competitive in terms of wages.'' Under this reasoning, however, only 
an average rate would be sufficient, because any modal (or median) 
rate would not include all of the wage rates paid. Using only an 
average is not consistent with the Department's long-held 
understanding of the meaning of the term ``prevailing.'' See 47 at 
FR 23644-45. Neither the text nor the legislative history of the Act 
suggests that the term prevailing wage was intended to necessarily 
capture and reflect all of the wage rates that are paid in an area. 
Instead, the Department has understood the statute as better carried 
out with a methodology that seeks to determine which among those 
wage rates is prevailing.
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    The Department disagrees. As an initial matter, the 
characterization of the 30-percent threshold as ``ignoring'' rates is 
not unique to that specific threshold. Rather, it is a feature of any 
rule based on a mathematical ``mode,'' in which the only value that is 
ultimately used is the value of the number that appears most 
frequently. This is in contrast to using a mean (average), in which the 
values of all the numbers are averaged together, or a median, which 
uses only the midpoint value. Both the 30-percent threshold and the 
majority rule are modal rules in which the values of the non-prevailing 
wage rates do not factor into the final analysis. This feature of a 
modal analysis can be viewed as particularly helpful for avoiding an 
unwarranted downward or upward impact from outlier wage rates. As the 
International Association of Sheet Metal, Air, Rail and Transportation 
Workers and the Sheet Metal and Air Conditioning Contractors National 
Association (SMART and SMACNA) noted in a joint comment, ``[w]hen using 
the mean, unusually low or high values distort the data; the mode, by 
contrast, eliminates from the analysis data that grossly deviate from 
what workers are actually paid and, therefore, would depress labor 
standards if included.''
    Moreover, the characterization of the 30-percent threshold as 
ignoring up to 70 percent of wage rates distorts how the analysis is 
applied in practice. In the three-step process, the first step is to 
adopt the majority rate if there is one. Under both the proposed three-
step process and the current majority-only rule, any wage rate that is 
paid to a majority of workers would be identified as prevailing. Under 
either method, the weighted average will be used whenever there is no 
wage rate that is paid to more than 30 percent of employees in the 
survey response. The difference between the current majority process 
and the three-step methodology is solely in how a wage rate is 
determined when there is no majority, but there is a significant 
plurality wage rate paid to between 30 and 50 percent of workers. In 
that circumstance, the current ``majority'' rule uses averages instead 
of the rate that is actually paid to that significant plurality of the 
survey population. This is true, for example, even where the same wage 
rate is paid to 45 percent of workers and no other rate is paid to as 
high a percentage of workers. In such circumstances, the Department 
believes that a wage rate paid to between 30 and 50 percent of 
workers--instead of an average rate that may be actually paid to few 
workers or none at all--is more of a ``prevailing'' wage rate.\39\
---------------------------------------------------------------------------

    \39\ As the OLC concluded in 1981, the use of an average instead 
of the 30-percent rule may be particularly inappropriate in 
circumstances where ``there is a wide variation in rates of wages 
and a large minority of persons paid significantly lower wages; use 
of an average in such a case might result in a contract wage well 
below the actual wages paid a majority of employees.'' 5 Op. O.L.C. 
at 177 n.3.
---------------------------------------------------------------------------

    NABTU and other commenters in favor of the Department's proposed 
return to the 30-percent threshold noted that Congress specifically 
considered on numerous occasions whether to abolish the 30-percent rule 
and declined to do so.\40\ Similarly, CEA commented that Congress's 
repeated expansion and amendment of the Act from 1935 to 1982 without 
changing or addressing the definition of prevailing wage should be 
interpreted as ``persuasive evidence that the interpretation is the one 
intended by Congress.' '' CFTC v. Schor, 478 U.S. 833, 846 (1986) 
(quoting NLRB v. Bell Aerospace Co., 416 U.S. 267, 274-75 (1974) 
(footnotes omitted)). The Department agrees that this legislative 
acquiescence is significant. It may not necessarily mean that the 30-
percent rule was the only interpretation that was intended by 
Congress--especially in light of the subsequent Congressional 
acquiescence to the imposition of the majority-only rule.\41\ However, 
the expansion of the Act, particularly in 1964 after the extensive 
hearings regarding the 30-percent rule, suggests that Congress did not 
believe that the 30-percent rule was ``erroneous'' at the time of its 
enactment or otherwise believe that it ``did not comport'' with the 
definition of prevailing. Cf. 5. Op. O.L.C. at 176 (noting Congress had 
acquiesced to the Department's interpretation of the term prevailing as 
embodied in its 1935 regulations).
---------------------------------------------------------------------------

    \40\ See, e.g., Federal Construction Costs Reduction Act of 1977 
(S. 1540, H.R. 6100); Davis-Bacon Act--Fringe Benefits (H.R. 404): 
Hearings Before the General Subcomm. on Labor of the H. Comm. on 
Educ. & Labor, 88th Cong. at 38-39, 125, 219, 225-230 (Mar. 1, 7, 
12, 21, 22, and 26, 1963).
    \41\ One individual commenter opposing the Department's proposal 
asserted that Congress's inaction in reimposing the 30-percent rule 
should be considered evidence that the 30-percent rule 
``contravenes, rather than is required by, the statutory text.'' But 
given the wide discretion the courts have found the DBA affords to 
the Secretary of Labor, the Department does not believe that the 
acquiescence to the Department's decision to use one specific modal 
threshold can be understood as barring it from using another.
---------------------------------------------------------------------------

    In addition to considering questions regarding Congressional 
acquiescence, the Department has also considered whether the length of 
time that the majority-only rule has been in place has led to reliance 
interests among regulated entities that would counsel against reversion 
to the three-step process. While some commenters referred to the length 
of time the rule had been in effect, their comments generally did not 
focus on related reliance interests. The Department does not believe 
that any potential reliance interests would be so significant as to 
outweigh the objectives of seeking to align the prevailing wage 
methodology better with the longstanding meaning of the term prevailing 
and of seeking to better protect workers against the depressive

[[Page 57536]]

effect on wage rates of low-wage contractors. The Department's 
illustrative study of the proposed methodology change, in section V.D. 
below, suggests that the change may lead to higher required prevailing 
wage rates in some places and lower wage rates in others. The magnitude 
and direction of changes, however, should not be significantly 
different in their effect on contractors than the fluctuations in 
prevailing wage rates that already occur between wage surveys as a 
result of changes in local economies and shifts in regional labor 
markets. Even if the part 1 changes were to have significant effects on 
wage rates in certain local areas, any reliance interests of local 
contractors, governmental agencies, or workers on prior wage rates 
would be minimal, given that the changes to the wage determination 
processes generally will not affect current contracts--which will 
continue to be governed by the wage determinations incorporated at the 
time of their award, with limited exceptions. Most of the revisions to 
part 1 will only apply to wage surveys that are finalized after the 
rule becomes effective, and thus they will generally apply only to 
contracts awarded after such new wage determinations are issued.\42\ 
Contractors will therefore be able to factor any new wage rates into 
their bids or negotiations on future contracts.
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    \42\ As explained in Sec.  1.6(c), whenever a new wage 
determination is issued (either after the completion of a new wage 
survey or through the new periodic adjustment mechanism), that 
revision as a general matter does not and will not apply to 
contracts which have already been awarded, with three exceptions. 
These exceptions are explained in Sec.  1.6(c)(2)(iii), and they 
include where a contract or order is changed to include substantial 
covered work that was not within the original scope of work, where 
an option is exercised, and also certain ongoing contracts that are 
not for specific construction, for which new wage determinations 
must be incorporated on an annual basis under Sec.  
1.6(c)(2)(iii)(B) of the final rule. The final rule instructs 
contracting agencies to apply the terms of Sec.  1.6(c)(2)(iii) to 
all existing contracts, without regard to the date of contract 
award, if practicable and consistent with applicable law. The 
Department does not anticipate that the application of the amended 
wage determination methodologies in these situations will result in 
unfair harm to reliance interests in a manner sufficient to outweigh 
the benefits of the final rule implementation as planned. See also 
section III.C. (``Applicability Date'') below.
---------------------------------------------------------------------------

    The Department received many comments in favor of and opposed to 
the use of the 30-percent threshold for other reasons. A number of 
commenters commented favorably on the use of 30 percent specifically as 
a reasonable modal threshold to choose. As the LCCHR, the National 
Women's Law Center, Oxfam America, and several other civil rights and 
worker advocacy organizations commented, the choice of the 30-percent 
threshold appropriately aligns the rate selected with the actual wages 
paid to ``significant shares'' of workers in a covered job 
classification. The Dakotas Mechanical Contractors Association (DMCA) 
and the Sheet Metal, Air Conditioning and Roofing Contractors 
Association stated that if 30 percent are paid the same rate, it is 
likely the prevailing rate for skilled workers in the area. The Center 
for American Progress Action Fund noted that the 30-percent rule is 
also followed by some states in the implementation of their own State 
prevailing wage programs.\43\ Some commenters argued that a 50-percent 
threshold for using a modal rate is simply too high for many geographic 
areas. The DMCA, for example, noted that when there are multiple large 
construction projects going on in the Dakotas, many contractors travel 
from outside the area, and counting wage rates from these out-of-town 
contractors can make it difficult for the actual local rate to satisfy 
a 50-percent threshold.
---------------------------------------------------------------------------

    \43\ See, e.g., Haw. Code R. section 12-22-2(b) (30-percent 
threshold in Hawaii); 820 Ill. Comp. Stat. 130/4 section 4(a) (30-
percent threshold in Illinois). Wyoming uses a version of the three-
step process in which the prevailing wage is a majority, or 30-
percent, unless more than one wage rate reaches the 30-percent 
threshold, in which case a weighted average is used. See https://dws.wyo.gov/wp-content/uploads/2022/04/Labor-Standards-2022-Prevailing-Wage-Rates.pdf. Minnesota and California use modal 
methodologies, but do not have specific thresholds. See Minn. Stat. 
section 177.42; Cal. Lab. Code section 1773.9(b)(1).
---------------------------------------------------------------------------

    Several commenters opposing the proposed reversion to the 30-
percent rule asserted that a reversion to the 30-percent rule would 
result in rates that are less accurate or less likely to reflect the 
actual wage and fringe benefit rates in a locality, and therefore are 
inherently not ``prevailing'' under the meaning of the statute. ABC 
stated that a survey of its Federal contractor members showed that only 
12.6 percent of its respondents stated that the reversion to the 30-
percent rule would increase the accuracy of wage determinations. The 
Modular Building Institute (MBI) commented that a 30-percent threshold 
is too small a sample on which to base a prevailing wage. According to 
the Taxpayers Protection Alliance, returning to the 30-percent rule 
``invites cherry-picking rather than serious analysis.'' On the other 
hand, several commenters in favor of the Department's proposal 
asserted, similar to the minority of respondents to ABC's survey, that 
returning to the 30-percent rule would increase the accuracy of wage 
determinations.
    In making arguments about accuracy, most commenters for and against 
the proposal did not reference data or evidence to support their views. 
Commenters opposing the proposal that did cite data compared potential 
outcomes under the 30-percent threshold--or any modal determinations 
based on voluntary wage surveys--with average rates calculated by other 
sources or by reference to studies that found increases in total costs 
from the use of any prevailing wage at all. Commenters also argued that 
accuracy can be judged by the potential for the percentage of wage 
determinations based on CBAs to be higher than the union density in the 
local area.\44\ The Department does not agree with these measurements 
of accuracy and instead understands these arguments as fundamentally 
about what the meaning of ``prevailing'' should be, or whether 
prevailing wage laws are good policy in the first place. While a 
comparison of costs in jurisdictions in which a State prevailing wage 
law applies with those where there is no such requirement may be 
helpful to understanding the cost impacts of prevailing wage 
requirements, that comparison is not helpful in understanding whether a 
certain prevailing wage methodology results in wage determinations that 
are ``accurate'' or not, because the point of the prevailing wage law 
is to eliminate the payment of substandard wage rates that may be paid 
in the absence of the law. For similar reasons, a comparison with 
average rates or union density does not reflect accuracy--rather it 
reflects different understandings of the term ``prevailing.'' \45\
---------------------------------------------------------------------------

    \44\ ABC and the National Association of Home Builders (NAHB) 
cited data from a 2010 GAO report and subsequent data showing that 
as of 2010, a union rate prevailed in 63 percent of all then-
existing wage determinations; in 2018, a union rate prevailed in 48 
percent of determinations; and in 2022, a union rate prevailed in 42 
percent of determinations. The commenters contrasted these numbers 
with data from the BLS that shows union density currently at less 
than 20 percent of the construction labor market.
    \45\ The Department also notes that, while the percentage of 
overall wage determinations based on collective bargaining rates 
nationwide has been higher than measures of union density in the 
construction industry generally, the percentage of wage 
determinations based on collectively bargained rates has 
significantly declined in recent years. NAHB and ABC pointed out 
that the 2011 GAO report stated that at the time 63 percent of 
published wage rates were union prevailing. See 2011 GAO Report, at 
20. ABC notes current statistics from the Department show 42 percent 
are based on collectively bargained rates.
---------------------------------------------------------------------------

    AFP-I4AW asserted that it is arbitrary to choose 30 percent instead 
of one of the other ``infinite percentages that might be chosen between 
0 and 50 percent.'' The Department disagrees with the premise that the 
30-percent threshold is arbitrary and therefore

[[Page 57537]]

impermissible. As one commenter in favor of the proposal, the Iron 
Workers International Union (Iron Workers), stated, the ``30 percent'' 
rule can be seen as a ``middle position'' that the Department adopted 
in 1935. Among modal rates, the wage rate based on a 20 percent modal 
rate or even lower might also have been considered a reasonable 
interpretation of the term ``prevailing wage,'' rendering 30-percent a 
compromise among all of the different definitions being advanced at the 
time. See Bldg. & Constr. Trades Dep't v. Donovan, 553 F. Supp. 352, 
354 (D.D.C. 1982) (``There is nothing intrinsically appropriate or 
inappropriate to the thirty percent rule or to any other figure as 
representing the `prevailing wage.' '').\46\ The fact that the 
Department could have chosen an even lower number, or no modal 
threshold at all, does not make the choice of 30 percent impermissible. 
The number is a familiar one that the Department used over five 
decades; as commenters noted, it represents at least a significant 
share of workers in a survey; and the Department has tested the 
potential outcome of returning to the number and found that it will 
alleviate concerns about overuse of average rates. Cf. Ralph Knight, 
Inc. v. Mantel, 135 F.2d 514, 518-19 (8th Cir. 1943) (holding the 
percentage threshold in an FLSA regulation was not arbitrary because it 
was reasonable).
---------------------------------------------------------------------------

    \46\ The 1982 Donovan district court decision enjoined several 
elements of the 1981-1982 rulemaking but upheld the Department's 
decision to eliminate the 30-percent threshold. In affirming the 
district court's decision on the 30-percent threshold, the D.C. 
Circuit stated that it affirmed ``generally for the reasons stated 
in [the district court's] opinion.'' Donovan, 712 F.2d at 616.
---------------------------------------------------------------------------

    The ABC and several other commenters criticized the Department for 
proposing to return to the 30-percent threshold without addressing 
concerns they have about the methodology of the wage survey program 
that produces the underlying numbers to which the three-step process 
would be applied. According to ABC and others, the Department should 
use more sophisticated representative sampling and statistical 
regression methods to come up with prevailing rates because of low 
response rates, low sufficiency thresholds and therefore small sample 
sizes, and response bias in the Department's voluntary Davis-Bacon wage 
survey program. ABC and the National Association of Home Builders 
(NAHB) referenced reports by the Department's OIG expressing concern 
about low response rates to WHD's wage surveys, including a 2019 report 
in which OIG calculated that as many as 53 percent of eligible 
contractors had not provided wage data on 7 surveys that were 
analyzed.\47\ ABC and others argued that union contractors have a 
higher interest in responding to the wage surveys, and so the surveys 
tend to disproportionately reflect union rates and are therefore 
unreliable.\48\ In a joint comment, a group of housing industry 
associations and entities stated that certain segments of the 
residential building industry have ``no incentive to participate in a 
survey method that provides no direct benefit to their business.'' 
Without making changes to the survey process to better account for non-
union contractors, ABC argued, the Department should not be changing 
the threshold for identifying the prevailing wage. ABC stated that the 
survey process in its current form is ``incapable of accurately 
determining whether a single rate is paid to 30% (or a majority) of 
local construction workers.''
---------------------------------------------------------------------------

    \47\ See OIG, U.S. Department of Labor, No. 04-19-001-15-001, 
``Better Strategies are Needed to Improve the Timeliness and 
Accuracy of Davis-Bacon Act Prevailing Wage Rates,'' 8, 15 (2019). 
Available at https://www.oig.dol.gov/public/reports/oa/2019/04-19-001-15-001.pdf.
    \48\ As evidence that the Department's Davis-Bacon wage surveys 
are statistically unrepresentative of the construction workforce, 
ABC asserted that average wages--both economywide and in specific 
occupations (construction or otherwise)--are consistently higher 
than median wages in the United States and most industrialized 
economies. For example, ABC points to BLS's May 2021 Occupational 
Employment and Wage Statistics (OEWS) survey showing that, 
nationally, average wages exceed median wages in 51 of 64 detailed 
construction occupations. ABC argues that the Department's surveys 
are unrepresentative because, in the wage determinations developed 
using the survey data and using the majority rule, the majority rate 
(which should be the same as the median) consistently exceeds wages 
calculated as survey averages.
---------------------------------------------------------------------------

    ABC, NAHB, and other commenters stated that the Department should 
have considered using data from the BLS, which performs representative 
sampling on surveys with higher response rates and larger sample sizes 
and uses other more sophisticated regression methods, and therefore 
would be more accurate. According to ABC and an individual commenter, 
the use of BLS data would result in more timely wage determinations and 
decrease the costs of Federal construction, making more projects viable 
and increasing construction employment. ABC acknowledged that the 
Department has previously declined to use BLS data for DBA wage 
determinations for a number of reasons, including that BLS data does 
not have the same benefits information, data by county level, or by 
construction type. But ABC asserted that none of these reasons entirely 
foreclose the use of such data, and it cited the fact that the 
Department already uses BLS data for wage determinations under the 
Service Contract Act (SCA), which has similar statutory parameters, as 
well as the Foreign Labor Certification Program, and with some 
statistical modeling, for Federal employee pay under the Federal 
Employee Pay Comparability Act. ABC also argued that the Department's 
current use of larger county groupings to identify wage rates for 
counties with insufficient data and the proposal in the NPRM to remove 
the bar on cross-consideration of rural and metropolitan data both 
undercut the Department's arguments against using BLS data. NAHB and 
the Mortgage Bankers Association (MBA) also suggested that the 
Department should consider outsourcing the wage data collection process 
to third-party organizations they believe would be better equipped to 
collect greater quantities of data.
    A joint comment from the National Asphalt Pavement Association, 
National Ready Mixed Concrete Association, and National Stone, Sand & 
Gravel Association (NAPA, NRMPCA, and NSSGA) suggested that reverting 
to the use of a 30-percent threshold is ``unnecessary'' because there 
are other ways to improve the survey process. They suggested using the 
certified payrolls that are submitted on DBRA projects to help identify 
prevailing wages.\49\ They also suggested updating and standardizing 
classifications that are ``outdated'' and confusing where they differ 
across political subdivisions. AGC suggested that the Department should 
revise the wage survey process to allow contractors to report wage 
information by individual craft classifications in each county by 
construction type, instead of broken-down project-by-project.
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    \49\ The Department appreciates this suggestion, but notes that 
using certified payrolls instead of the wage survey process would 
result in prevailing rates based entirely on data from DBRA-covered 
projects. While such data could be helpful in certain circumstances 
in which there is not sufficient data from private sources, it could 
not be used instead of the wage survey process because the DBA 
contemplates a wider analysis of wage rates that includes those on 
wholly privately funded projects where such data is available. See 
generally infra section III.B.1.iii.(B) (``29 CFR 1.3(d)'').
---------------------------------------------------------------------------

    Several commenters stated that even if the 30-percent rule had been 
permissible previously, the Department could not reasonably return to 
it because the construction labor market has changed and prevailing 
rates ``rarely occur in the modern economy.'' ABC noted that union 
density has declined in the construction labor market from 34 percent 
in 1981 to under 14 percent in recent years. The Association of 
Washington Housing Authorities (AWHA) stated that the increase in

[[Page 57538]]

reliance on weighted averages actually reflects reality in certain 
construction types where union participation is lacking. AWHA also 
stated that there is no need to return to the 30-percent rule because 
there is better labor market wage information now available than there 
was when the 30-percent rule was last in effect, with both proprietary 
and public databases now containing ``up-to-date wage and salary 
information on thousands of job classifications at varying geographic 
levels.''
    Finally, comments from ABC and a group of U.S. Senators asserted 
that the Department's reasoning for its proposal is contrary to the 
D.C. Circuit's decision in Building & Construction Trades' Department 
v. Donovan, 712 F.2d 611, 616-17 (D.C. Cir. 1983). In that decision, 
the Department's 1981-1982 rulemaking eliminating the 30-percent 
threshold had been challenged. The D.C. Circuit stated that the 
Department's new definition of ``prevailing'' as, first, the majority 
rate, and second, a weighted average, was ``within a common and 
reasonable reading of the term'' and ``would not defeat the essential 
purpose of the statute, which was to ensure that federal wages 
reflected those generally paid in the area.'' Id. at 616-17. ABC stated 
that this holding allowing the Department to eliminate the 30-percent 
threshold could not be squared with the Department's reasoning in the 
NPRM that the overuse of averages was inconsistent with the text and 
purpose of the Act. See 87 FR 15704.
    Considering these comments, the Department agrees with the 
commenters in favor of the proposal that the 30-percent threshold is a 
reasonable threshold that represents the best course for making wage 
determinations based on wage rates that are actually paid to workers in 
the relevant area. The Department also believes that returning to the 
use of the 30-percent threshold at the second step in the wage 
determination process is preferable for the same reasons that it is 
preferable to use a modal methodology at all instead of using averages 
or the median for all wage determinations. The mode is more consistent 
with the term ``prevailing,'' and it is in general more protective of 
prevailing wage rates against the depressive effect of low-wage 
contractors. Even when adopting the current majority threshold for 
modal wage determinations in 1982, the Department reiterated this long-
held interpretation that the ``most widely paid rate'' should be the 
``definition of first choice'' for the prevailing wage, and that wage 
determinations should ``mirror, to the extent possible, those rates 
actually paid in appropriate labor markets.'' 47 FR 23645.
    The Department disagrees that the D.C. Circuit's Donovan decision 
precludes a return to the 30-percent threshold or prevents the 
Department from concluding that an overuse of averages is in tension 
with the Department's long-held interpretation of the Act. In Donovan, 
the court stated that the majority-only rule was ``within a common and 
reasonable reading'' of the term prevailing, and ``would not defeat the 
essential purpose of the statute.'' 712 F.2d at 616-17. The court did 
not, however, state or even suggest that the majority rule represented 
the only proper reading of the statute. To the contrary, the court 
stated that it was upholding the new rule because ``the statute 
delegates to the Secretary, in the broadest terms imaginable, the 
authority to determine which wages are prevailing.'' 712 F.2d at 616.
    As the Department explained in the NPRM, there has been a 
significant increase in the use of weighted averages between 1983 and 
the present--from as low as 15 percent prior to the implementation of 
the current regulations to 63 percent in the Department's review of 19 
recent surveys. Several commenters noted that this increase in the use 
of averages appears to be far beyond what was expected at the time the 
Department implemented the majority-only rule and at the time of the 
D.C. Circuit opinion. For example, the unions that opposed the 1981-
1982 rulemaking in court argued that it could result in ``a third or 
more'' of wage rates based on weighted averages. Donovan, 712 F.2d at 
616. Now, nearly double that number--two thirds--of prevailing wage 
rates published from recent surveys have been based on weighted 
averages. These new circumstances represent a departure from the 
Department's longstanding interpretation of the Act. 5 Op. O.L.C. at 
176-77.
    The Department also disagrees with comments suggesting the 
Department can only justify its return to the 30-percent threshold by 
finding that the current majority rule is per se not allowed by the 
statute and suggesting furthermore that the Donovan decision bars the 
Department from reaching that conclusion. As noted, however, the 
decision in Donovan reflects that there can be more than one possible 
threshold for determining whether a wage rate is prevailing, and that 
the statute delegates the decision about methodology to the Secretary 
of Labor. 712 F.2d at 616. The Department has concluded that the 
original three-step process is preferable to the majority-only rule 
because it is more consistent with the meaning of the word 
``prevailing'' and will be more protective against the depression of 
wage rates by low-wage contractors. Under these circumstances, the 
Department does not need to find that the current overuse of averages 
renders the majority-only rule effectively barred by the statute.
    The Department also considered the comments critiquing the 
interface between the wage survey program and the Department's use of a 
modal methodology to determine prevailing wages and the use of the 30-
percent modal threshold in particular. The Department does not believe 
it is necessary or preferable to abandon the current Davis-Bacon wage 
survey process, or to require by regulation that survey data be 
adjusted with regression or other similar statistical analyses. The 
process of adjusting survey data using weighting, imputation, or other 
representative sampling methods would require additional data regarding 
the universe of projects and classifications of workers--divided by 
construction type--that does not currently exist and would be overly 
burdensome and costly to obtain.\50\ Moreover, other commenters on the 
rule specifically opposed the use of sampling or other similar 
methodologies because the decisions about the underlying assumptions 
used in the calculations or modeling would give the Department too much 
discretion that would be difficult for stakeholders to scrutinize. 
Finally, such sampling or other statistical methods could also 
significantly increase the likelihood that the wage rates the 
Department publishes would be akin to weighted averages and would not 
be wage rates that are actually paid to workers in the relevant areas. 
The Department declines to impose such requirements in this final rule.
---------------------------------------------------------------------------

    \50\ Similarly, the 2019 OIG report noted WHD officials' concern 
that using statistical sampling during the clarification process 
instead of manual reviews of survey data might be less efficient and 
effective than current processes, and that ``use of statistical 
sampling in lieu of comprehensive clarification would likely result 
in the publication of fewer, and less robust, wage determinations.'' 
Report at 7, 43.
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    The Department also considered ABC's and others' arguments that it 
should entirely discontinue the Davis-Bacon wage surveys and instead 
use data from BLS surveys to determine prevailing wages in the first 
instance. As ABC recognized in its comment, the Department has explored 
this possibility on various occasions in the past at the recommendation 
of the GAO and others. For example, ABC cited a 2004 letter

[[Page 57539]]

from the Assistant Secretary for Employment Standards, to the 
Department's OIG, noting the actions the Department had taken to 
consider this option, including funding pilot surveys to determine the 
feasibility of collecting fringe benefit data as part of BLS's National 
Compensation Survey (NCS), and working with BLS to examine the extent 
to which the Occupational Employment and Wage Statistics (OEWS) survey 
might provide detailed construction industry wage rate information by 
locality and occupation.\51\
---------------------------------------------------------------------------

    \51\ Letter from Victoria A. Lipnic, Assistant Secretary for 
Employment Standards, to Elliot P. Lewis, Assistant Inspector 
General for Audit (Feb. 18, 2004). Available at: https://www.oig.dol.gov/public/reports/oa/2004/04-04-003-04-420x.pdf.
---------------------------------------------------------------------------

    The Department has repeatedly concluded that relying on BLS data 
sources to determine prevailing wages instead of continuing to conduct 
Davis-Bacon wage surveys is not preferable, and the Department again 
reaches this conclusion. No BLS survey publishes, at a county level, 
the wage data, fringe benefit data, data for sufficiently specific 
construction craft classifications, and data by construction type, that 
would align with the Department's interpretations of the statutory 
requirements to determine prevailing wages for ``corresponding 
class[es]'' of workers on ``projects of a character similar'' within 
``civil subdivisions of the State'' in which the work is to be 
performed. 40 U.S.C. 3142(b).\52\ The Department does not agree with 
ABC that the Department's current use of larger geographic groupings 
under certain conditions suggests that the Department should adopt BLS 
data that is compiled for areas larger than a county. The scope of 
consideration regulations at Sec.  1.7 allow the Department to consider 
data from larger geographic areas only when there is insufficient wage 
survey data in a given county. This reflects the Department's long-
established position that the county level is the appropriate level at 
which to determine prevailing wage rates where possible, and as such 
that the wholesale adoption of BLS data compiled for larger areas 
generally would not be appropriate. The Department also considered 
whether it would be possible to combine BLS surveys or use underlying 
BLS microdata instead of the Department's wage surveys but determined 
that the BLS's methodology does not allow such a procedure because, 
among other reasons, BLS does not collect data on a project-by-project 
basis and therefore does not capture circumstances in which employees 
may be paid different hourly rates for work based on the type of 
project. Finally, the Department's conclusion is bolstered by the 
widespread practice of states, many of which have adopted prevailing 
wage laws, that have likewise determined that wage surveys are an 
appropriate mechanism to set prevailing wages.\53\
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    \52\ The BLS OEWS program produces employment and wage estimates 
for the nation as a whole, for individual states, for metropolitan 
areas delineated by the Office of Management and Budget (OMB), and 
nonmetropolitan areas, but it does not produce wage estimates at the 
county level, which is the default ``civil subdivision'' that the 
Department uses to determine prevailing wages. See Michael K. Lettau 
and Dee A. Zamora, BLS, ``Wage estimates by job characteristic: NCS 
and OES program data'' (2013). Available at: https://doi.org/10.21916/mlr.2013.27. Additionally, the data for metropolitan and 
nonmetropolitan areas do not allow for wage rates for occupations by 
industry. The NCS program provides measures of compensation trends 
and the incidence of employer-sponsored benefits, but only at the 
national and Census region levels. The BLS's Quarterly Census of 
Employment and Wages has data at the county level, but the data are 
not available by craft. Both the OEWS and NCS programs classify 
occupations based on job duties and responsibilities that apply 
nationwide in accordance with the Standard Occupational 
Classification system. WHD's survey program, on the other hand, has 
always considered local area practice in determining how work is 
classified for each occupation.
    \53\ See, e.g., 26 Me. Rev. Stat. Ann. section 1308 (requiring 
the Maine Bureau of Labor Standards to determine prevailing wages 
through a regularly conducted wage and benefits survey); Minn. R. 
section 5200.1020 (providing for annual surveys to calculate 
prevailing wages on covered highway and construction projects); 
Mont. Code Ann. section 18-2-414 (authorizing the Montana Commission 
of Labor and Industry to either perform a wage survey or adopt the 
rates set by the United States Department of Labor); Tex. Gov't Code 
Ann. section 2258.022 (setting the state prevailing wage either 
through wage surveys or by incorporating the rates set by the United 
States Department of Labor).
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    ABC is correct that the Department uses BLS data for wage 
determinations under the SCA, which has important statutory 
similarities with the DBA in that it requires payment of wages ``in 
accordance with prevailing rates in the locality.'' 41 U.S.C. 6703(1). 
There are several reasons, however, why the Department's decisions have 
been different under the SCA than under the DBA. The first is that the 
SCA does not contain the same statutory text as the DBA requiring 
prevailing wages to be based on ``projects of a character similar.'' 40 
U.S.C. 3142(b). This distinction underscores the Department's need to 
survey DBA wage rates by construction type, a level of detail that does 
not exist in any BLS data source. In addition, the SCA contains an 
alternative mechanism that gives weight to collectively bargained rates 
by requiring them to govern certain successor contracts where the 
predecessor contract was covered by a CBA. 41 U.S.C. 6703(1).
    Comparisons between the DBA and SCA can also be fraught because 
construction work is significantly different from most service work. As 
a Professor of Economics at the University of Utah commented on this 
rulemaking, the construction industry is based on a ``craft 
classification'' model--in which crafts are understood to be a 
collection of related skills that allow a craft worker to address a 
range of jobs as that worker goes from project to project, and which 
can only be supported with proper investment and skills training. 
Protecting craft classifications where they prevail was one of the core 
original purposes of the Davis-Bacon Act. See Charles Donahue, ``The 
Davis-Bacon Act and the Walsh-Healey Public Contracts Act: A Comparison 
of Coverage and Minimum Wage Provisions,'' 29 Law & Contemp. Probs. 
488, 508 (1964) (noting the Department's deference to local craft 
organization in wage determinations because ``[t]o do otherwise would 
destroy craft lines which the statute seeks to preserve''); see also 
Donovan, 712 F.2d at 625 (noting that Congress was ``quite clear'' in 
1935 that it was an ``evasion of the Act'' to break down craft 
classifications where they prevail). This industrial organization and 
the legislative history support the Department's stricter approach 
under the DBRA to protecting actual wage rates that prevail because 
when those rates are higher than the average wage, they are often 
higher because they are incorporating apprenticeship and other training 
costs that are critical for the maintenance of the craft organization 
of the local construction market.\54\ It also explains why the 
Department does not agree with ABC's suggestions that the Davis-Bacon 
program should adopt the standardized national Standard Occupational 
Classification system for identifying construction worker 
classifications and also abandon the division of wage rates by 
``construction type,'' so as to align all Davis-Bacon classifications 
with the format of BLS program data. Similarly, the differences between 
the SCA and the DBA and the industry sectors they cover, and the craft-
protection focus of the DBA, also explain why the Department does not 
believe it is appropriate, as ABC suggests, to adopt a single 
nationwide

[[Page 57540]]

fringe benefit rate under the DBRA in the same way that it has under 
the SCA.
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    \54\ Notwithstanding these differences, under the SCA 
regulations, the Department also may publish prevailing collectively 
bargained rates rather than rely on BLS data. See 29 CFR 4.51(b) 
(``Where a single rate is paid to a majority (50 percent or more) of 
the workers in a class of service employees engaged in similar work 
in a particular locality, that rate is determined to prevail.'').
---------------------------------------------------------------------------

    ABC commented that the Department should be more flexible with how 
it analyzes the statutory requirements and find that the statute 
permits the use of averages or modal approximations derived from 
statistical modeling rather than revert to the three-step process and 
retain the current wage survey process. ABC and other commenters also 
suggested the use of BLS data would have other important benefits. ABC 
stated that directly using BLS data would improve the timeliness of 
wage determinations because BLS surveys are updated annually. ABC and 
the group of U.S. Senators stated that using BLS data would eliminate 
an impediment preventing small firms from bidding on Davis-Bacon 
contracts because it would eliminate the problem of missing 
classifications on wage determinations. The commenters said that such 
missing classifications can be an impediment for small firms because it 
is costly and complicated to request conformances. ABC suggested that 
the Department should consider transferring funding from WHD to BLS by 
contracting with BLS to provide data, with the additional funding to 
BLS going to address any ways in which BLS methods are deficient for 
DBRA purposes.
    Having considered these arguments, the Department continues to 
believe that the best course of action is to adopt the proposed 
reversion from the majority rule to the three-step process as the 
methodology for making wage determinations. The Department agrees that 
it is important to continue seeking ways to improve contractor 
participation in its voluntary wage surveys, which will have the 
benefit of increasing sample sizes for wage determinations and making 
wage determinations possible for more classifications. The Department 
has initiated a process to revise the wage survey form (WD-10 form) 
that is used during wage surveys. In that process, it proposed a number 
of changes in order to decrease the burden on contractors of responding 
to the survey and lead to higher survey response rates. See 87 FR 
36152, 36152-53 (June 15, 2022). The Department, through that process, 
is also considering updates to the directory of classifications that is 
listed on the form, and to procedures to assist in capturing 
information about local area practice and industry changes in 
classifications over time. Thus, the Department does not believe NAPA, 
NRMPCA, and NSSGA's concerns about outdated classifications is a 
persuasive reason not to adopt the changes to the methodology of 
determining prevailing wages from survey data. Collecting more accurate 
data and returning to the 30-percent threshold are supplementary, not 
mutually exclusive, means to determining appropriate wage rates. The 
Department is therefore not only returning to the use of the 30-percent 
threshold in this final rule, but also will continue to promote greater 
participation in its surveys and take related steps, such as its 
revision to the WD-10 form outside this rulemaking, in order to 
increase the pool of data that is available to determine accurate 
prevailing wage rates.
    While the Department appreciates AGC's suggestions regarding 
revising the wage survey process to allow contractors to report data 
for workers more generally instead of on a project-by-project basis, 
the Department notes that the statute discusses the determination of 
the prevailing wage on the basis of ``projects of a similar 
character,'' 40 U.S.C. 3142(b), and that project-by-project reporting 
promotes accuracy in the survey process because it more readily enables 
the Department to identify the number of workers that were paid each 
reported rate (and hence to properly calculate the prevailing wage) in 
a given area. A data submission consisting solely of the wages and 
fringe benefits paid generally to a particular classification, 
particularly if such a submission did not identify how many workers 
received each identified rate, would at a minimum create challenges and 
inefficiencies in determining the prevailing wage rate.
    The Department also agrees with commenters that addressing 
timeliness issues and the overuse of conformances are important goals. 
The use of BLS data, however, could cause its own problems with missing 
classifications. BLS's OEWS program, for example, uses the Office of 
Management and Budget's (OMB) Standard Occupational Classification 
(SOC) system when publishing wage estimates. The SOC system does not 
include a number of individual classifications that the Department 
commonly uses to appropriately account for local area practice and the 
craft system. For example, the Department often issues separate wage 
rates for Plumbers, Pipefitters, and Steamfitters. The OEWS program 
only issues a single wage rate in a given locality under SOC code 47-
2152 (``Plumbers, Pipefitters, and Steamfitters''). For this reason, 
the Department believes that ABC's proposal to directly use the SOC 
system would result in less accurate craft classifications. As 
discussed further below, in this rulemaking, the Department is adopting 
new methods of reducing the need for conformances and more frequently 
updating wage determinations, including through the limited use of BLS 
data where it can reasonably be used to estimate wage-rate increases in 
between voluntary surveys. The Department believes these changes, once 
implemented, will improve the wage determination program without making 
a significant departure from longstanding interpretations of the 
statutory text and purpose of the DBRA.
(2) Comments Regarding Costs of the 30-Percent Threshold
    In proposing the return to the 30-percent threshold, the Department 
also considered the other explanations it provided in 1982 for 
eliminating the rule in the first place--in particular, the potential 
for a possible upward pressure on wages, contract costs, or prices. In 
the 1982 final rule, the Department summarized comments stating that 
the rule is ``inflationary because it sometimes results in wage 
determination rates higher than the average.'' 47 FR 23644. The 
Department did not explain exactly what the commenters meant by the 
term ``inflationary.'' See id. Later, the Department stated simply that 
it ``agree[d] with the criticisms of the 30-percent rule,'' without 
specifically referencing the wage-inflation concerns. Id. at 23645. 
Later still, in a discussion of the final regulatory impact and 
regulatory flexibility analysis, the Department estimated that 
eliminating the 30-percent rule could result in a cost savings of $120 
million per year. Id. at 23648. The Department then stated that it was 
adopting the new rule ``not only because it will result in substantial 
budgetary savings, but also because it is most consistent with the 
`prevailing wage' concept contemplated in the legislation.'' Id.
    In the current rulemaking, many commenters opposing the 
Department's proposed reversion to the 30-percent threshold, including 
several housing industry associations and entities, referenced and 
restated the earlier concerns about an ``inflationary effect.'' ABC and 
the group of Senators referenced criticism of the 30-percent rule by 
the GAO in the 1960's and 1970's, including the 1979 report that urged 
the repeal of the Act as a whole and related congressional hearings in 
which the GAO referred to the 30-percent rule as resulting in 
``inflated wage rates.'' \55\ Several commenters

[[Page 57541]]

pointed to two studies finding that prevailing wages under the DBA 
increase costs to taxpayers. The NAHB pointed to a 2008 study by the 
Beacon Hill Institute, finding that Davis-Bacon wage determinations 
increase the cost of Federal construction by ``nearly 10 percent,'' 
\56\ and a study by the Congressional Budget Office (CBO) that 
estimated a $12 billion reduction in Federal spending from 2019 through 
2028 if DBA requirements were not applied to covered projects.\57\ CEI, 
stating that no more recent data is available on the economic impact of 
the 30-percent rule, cited a 1983 CBO estimate that the DBA's 
requirements added 3.7 percent to the overall cost of Federal 
construction projects.\58\ They also cited a later estimate from after 
implementation of the majority rule, estimating that DBA requirements 
added 3.4 percent to the cost of Federal construction projects.\59\ 
Comparing these two studies, CEI claimed, shows the difference between 
the 30-percent threshold and the majority-only rule accounts for about 
8 percent in the overall cost of complying with the Act (or, presented 
differently, about 0.3 percent in the total cost of Federal 
construction projects).
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    \55\ See Administration of the Davis-Bacon Act, Hearings before 
the Spec. Subcomm. on Lab. of the H. Comm. on Educ. & Lab., 87th 
Cong. 283 (1962) (testimony of J.E. Welch, Deputy General Counsel, 
General Accounting Office) (``Our experience indicates that the 
methods and procedures by which minimum wage requirements for 
Federal and federally assisted construction contracts are 
established and enforced under present law have not kept pace with 
the expansion and increased use of such requirements.''); Oversight 
Hearing on the Davis-Bacon Act, Before the Subcomm. on Lab. 
Standards of the H. Comm. on Educ. & Lab., 96th Cong. 4 (1979) 
(testimony of Comptroller General Elmer Staats) and 60-64 (testimony 
of Secretary of Labor Ray Marshall criticizing GAO methodology).
    \56\ Paul Bachman, Michael Head, Sarah Glassman, & David G. 
Tuerck, Beacon Hill Inst., ``The Federal Davis-Bacon Act: The 
Prevailing Mismeasure of Wages,'' (2008). ABC cited this 2008 
report, as well as a subsequent Beacon Hill report, which updated 
it. See William F. Burke & David G. Tuerck, Beacon Hill Inst., ``The 
Federal Davis-Bacon Act: Mismeasuring the Prevailing Wage,'' (2022).
    \57\ CBO, ``Repeal the Davis-Bacon Act,'' Dec. 13, 2018, https://www.cbo.gov/budget-options/54786.
    \58\ CBO, ``Modifying the Davis-Bacon Act: Implications for the 
Labor Market and the Federal Budget,'' July 1983, https://www.cbo.gov/sites/default/files/98th-congress-1983-1984/reports/doc12-entire_0.pdf.
    \59\ CBO, ``Toll Funding of U.S. Highways,'' Dec. 1985, https://www.cbo.gov/sites/default/files/99th-congress-1985-1986/reports/1985_12_tollfinancing.pdf.
---------------------------------------------------------------------------

    Several commenters, in particular in the residential building 
industry, expressed general concern that higher labor costs could put 
some projects at risk of being financially infeasible. The NAHB stated 
that ``relatively small price increases can have an immediate impact on 
low-to moderate-income homebuyers and renters who are more susceptible 
to being priced out of the market.'' According to NAHB, there are 
already a number of other current difficulties with building housing 
that the proposed change does not address, including rising costs for 
materials, an increasingly transient and aging workforce, and the 
economic impact of COVID-19. The National Association of Housing and 
Redevelopment Officials (NAHRO) stated that Congress has underfunded 
affordable and public housing, and that because there is a limited 
amount of funding for such efforts, the number of units built will go 
down if costs go up. Because of this, the organization recommended that 
the HUD programs be excluded from the final rule.
    Some commenters stated their opposition to the proposed reversion 
to the three-step process but appeared to misunderstand that the rule 
does not require, or always result in, the highest wage rate being 
identified as prevailing. AFP-I4AW, for example, stated that the 30-
percent rule would ``serve to inflate the wage determination by relying 
only on the highest wage earners in the locality.'' This assumption is 
not correct. The 30-percent threshold does not distinguish between 
rates based on whether they are higher or lower. Rather, under the 
rule, the Department will determine that a wage rate is prevailing if 
that wage rate is earned by the most workers in a wage survey and if 
that number is also more than 30 percent of workers in the survey--
whether that wage rate is higher or lower than any other wage rate in 
the survey, and whether it is collectively bargained or not. The 
Department's review of recent wage surveys suggests that the return to 
the 30-percent threshold will in some cases result in wage rates that 
are higher than the currently used average and in other cases lower 
rates. See section V.D.1.ii. This is consistent with the results of the 
30-percent threshold when it was last in effect before the 1981-1982 
rulemaking. See 1979 GAO Report, at 53 (noting the data showed that 
under the 30-percent rule, where a lower hourly rate prevailed, the 
Department identified the lower rate as the prevailing rate).
    In contrast to the commenters that opposed the proposal, many 
commenters that supported the proposal argued that the rule would not 
significantly increase project costs or increase inflation. Several of 
these commenters noted studies regarding the cost effects of prevailing 
wage regulations in general. For example, the III-FFC noted that the 
``economic consensus'' today is that prevailing wage requirements 
generally do not raise total construction costs. III-FFC cited a 
literature review that analyzed the 19 peer-reviewed studies that have 
been published since 2000 about the impacts of prevailing wage 
regulations in public construction (together covering more than 22,000 
public works projects). See Kevin Duncan & Russell Ormiston, ``What 
Does the Research Tell Us About Prevailing Wage Laws,'' 44 Lab. Stud. 
J. 139, 141-42 (2018). A significant majority of those peer-reviewed 
studies did not find evidence that prevailing wages affected overall 
construction costs. As III-FFC noted, a key driver of this outcome is 
that contractors on covered projects will tend to hire higher-skilled 
workers and utilize more capital equipment. See William Blankenau & 
Steven Cassou, ``Industry Differences in the Elasticity of Substitution 
and Rate of Biased Technological Change between Skilled and Unskilled 
Labor,'' 43 Applied Econ. 3129-42 (2011); Edward Balistreri, Christine 
McDaniel, & Eina V. Wong, ``An Estimation of U.S. Industry-Level 
Capital-Labor Substitution Elasticities: Support for Cobb-Douglas,'' 14 
N. Am. J. of Econ. & Fin 343-56 (2003). Other commenters submitted 
similar research showing that prevailing wages are associated with 
higher productivity and that labor costs are only a small part of 
overall project costs in many segments of the construction industry, 
limiting the impact of any increased wage costs on overall project 
costs. See Frank Manzo & Kevin Duncan, Midwest Econ. Policy Inst., 
Examination of Minnesota's Prevailing Wage Law: Effects on Costs, 
Training, and Economic Development 4 (2018); Nooshin Mahalia, Econ. 
Policy Inst., Prevailing Wages and Government Contracting Costs 3-4 
(2008).
    Several of these commenters specifically criticized the 
Department's apparent reliance in 1982 on arguments that the 30-percent 
rule had an ``inflationary effect.'' These commenters noted that the 
concerns about an ``inflationary effect'' at the time were drawn from 
the same 1979 GAO report on which the opponents of the proposal now 
rely.\60\ The Iron Workers, for

[[Page 57542]]

example, noted that in 1979 the Department had strongly criticized the 
GAO report's statistical methods. In 1979, the Department maintained 
that the GAO's conclusions lacked ``statistical validity'' because it 
was methodologically flawed and failed to consider important variables, 
such as productivity. See 1979 GAO Report, at 15. However, in its 1982 
rulemaking, the Department did not acknowledge other evidence 
undermining the GAO's conclusions, or the Department's own prior 
position that the 1979 GAO report could not be relied upon. Another 
commenter noted that the GAO itself had conceded that its sample size 
was insufficient for projecting results with statistical validity. Id.
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    \60\ The GAO issued a report in 1979 urging Congress to repeal 
the Act because of ``inflationary'' concerns. See Gov't 
Accountability Office, HRD-79-18, ``The Davis Bacon Act Should be 
Repealed'' (1979) (1979 GAO Report). Available at: https://www.gao.gov/assets/hrd-79-18.pdf. The report argued that even using 
only weighted averages for prevailing rates would be inflationary 
because they could increase the minimum wage paid on contracts and 
therefore result in wages that were higher than they otherwise would 
be. The House Subcommittee on Labor Standards reviewed the report 
during oversight hearings in 1979, but Congress did not amend or 
repeal the Act, and instead continued to expand its reach. See, 
e.g., Cranston-Gonzalez National Affordable Housing Act, Public Law 
101-625, Sec. 811(j)(6), 104 Stat. 4329 (1990); Energy Independence 
and Security Act of 2007, Public Law No, 110-140, Sec. 491(d), 121 
Stat. 1651 (2007); American Recovery and Reinvestment Act, Public 
Law 111-5, Sec. 1606, 123 Stat. 303 (2009); Consolidated 
Appropriations Act of 2021, Public Law 116-260, Sec. 9006(b), 134 
Stat. 1182 (2021).
---------------------------------------------------------------------------

    The commenters supporting the Department's current proposed 
reversion to the 30-percent rule also noted that, whatever its 
persuasiveness at the time, the 1979 GAO report cannot be relied on now 
because of its outdated statistical methods and because of the 
existence of other, more contemporary, evidence undermining its 
conclusions. Commenters noted that the three main studies relied on by 
opponents of the 30-percent threshold, including the GAO report, the 
Department's 1981-1982 regulatory flexibility analysis, and the Beacon 
Hill studies, were all based on a ``wage differential'' calculation 
methodology that has been discredited by peer-reviewed scholarship 
published since the 1981-1982 rulemaking.\61\ In a comment, two 
Professors of Economics argued that ``the results of any study that 
measures the cost of prevailing wages based on [the wage differential 
method] should be interpreted with extreme caution and is not suitable 
as a basis of public policy decisions.'' Commenters noted that more 
advanced statistical methods than those used by GAO have since 
established that in the construction industry, the substitution of 
lower-wage and lower-skilled workers for higher-paid and higher-skilled 
workers does not necessarily reduce project costs because the lower 
productivity of lower-skilled workers can offset incrementally higher 
wages paid to more-skilled workers.\62\ That is why, they asserted, the 
preponderance of peer-reviewed studies conclude that prevailing wage 
laws as a whole have little or no effect on overall project costs.\63\ 
Given the evidence for prevailing wage laws as a whole, the commenters 
expressed skepticism that the return to the 30-percent rule would have 
an effect on project costs.
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    \61\ See Kevin Duncan & Russell Ormiston, ``What Does the 
Research Tell Us About Prevailing Wage Laws,'' 44 Lab. Stud. J. 139, 
141-42 (2018). The Beacon Hill Report was not peer-reviewed. Id. at 
141. The 2022 Beacon Hill Report uses the same methodology as the 
2008 Beacon Hill Report.
    \62\ See William Blankenau & Steven Cassou, ``Industry 
Differences in the Elasticity of Substitution and Rate of Biased 
Technological Change between Skilled and Unskilled Labor,'' 43 
Applied Econ. 3129-42 (2011); Edward Balistreri, Christine McDaniel, 
& Eina V. Wong, ``An Estimation of U.S. Industry-Level Capital-Labor 
Substitution Elasticities: Support for Cobb-Douglas,'' 14 N. Am. J. 
of Econ. & Fin 343-56 (2003).
    \63\ See Duncan & Ormiston, supra note 61, at 142-48 (collecting 
peer-reviewed studies).
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    The Department agrees with those commenters that found the 1979 GAO 
Report and the Department's 1981-1982 analysis unpersuasive. The 
Department does not believe that these analyses are reliable or 
accurate.\64\ For example, the Department's 1981-1982 analysis did not 
consider labor market forces that could prevent contractors from 
lowering wage rates in the short run. The analysis also did not attempt 
to address productivity losses or other costs of setting a lower 
minimum wage, such as higher turnover and a reduced ability to recruit 
high-skilled workers. For these reasons, the Department does not 
believe that the analysis in the 1982 final rule implies that the 
current proposed reversion to the 30-percent rule would have a 
significant impact on contract costs. Moreover, even if the Department 
were to rely on this analysis as an accurate measure of impact, such 
purported cost savings (adjusted to 2019 dollars) would only amount to 
approximately two-tenths of a percent of total estimated covered 
contract costs.
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    \64\ The Department has not attempted to assess the relative 
accuracy of the $120 million estimate over the decades, which would 
be challenging given the dynamic nature of the construction industry 
and the relatively small impact of even $120 million in savings. The 
Department at the time acknowledged that its estimate had been 
heavily criticized by commenters and was only a ``best guess''--in 
part because it could not foresee how close a correlation there 
would be between the wage rates that are actually paid on covered 
contracts and the wage determinations that set the Davis-Bacon 
minimum wages. 47 FR 23648.
---------------------------------------------------------------------------

    The two CBO reports from 1983 and 1985 cited in a comment by CEI 
are not persuasive for the same reason. The 1983 CBO study projected 
that the elimination of the 30-percent rule would save an average of 
$112 million per year from 1984 to 1988. Id. at 36. That report, 
however, was based on the Department's own analysis in the 1981-1982 
rulemaking, id. at xii, which was flawed as previously noted. The 1985 
CBO report did not contain an independent analysis and simply cited to 
the 1983 report. See 1985 CBO Report, at 16 n.2. Thus, the reports 
provide no additional helpful evidence and instead suffer from the same 
analytical problems as the Department's own 1981-1982 study and other 
simple wage-differential analyses.\65\
---------------------------------------------------------------------------

    \65\ The 1983 CBO study acknowledged these issues. It noted that 
the 1979 GAO study had been questioned because of inadequate sample 
sizes, the choice of projects covering small volumes of 
construction, and inappropriate assumptions. See 1983 CBO Report, at 
48. It also noted that ``questions have been raised regarding the 
general approach of translating wage increases directly into cost 
increases.'' Such an approach, the report notes, ``may be incorrect 
. . . to the extent that workers at different wage levels may not be 
equally productive.'' Id. at 48-49. The 2018 CBO projection that 
NAHB cites does not explain its methodology, but it estimates 
savings from eliminating the entire Davis-Bacon Act as amounting to 
only 0.8 percentage points in project costs associated with a 
reduction in wages and benefits. See supra note 57, https://www.cbo.gov/budget-options/54786.
---------------------------------------------------------------------------

    After considering the available data, and assuming for the purposes 
of this discussion that costs are in fact a permissible consideration 
in defining the term ``prevailing wage,'' the Department is not 
persuaded that returning to the 30 percent threshold will cause a 
meaningful increase in Federal construction costs. Based on the 
Department's demonstration in the economic analysis of what the 
prevailing wage would be after applying the 30-percent threshold to a 
sample of recently published prevailing wage rates, the Department 
found no clear evidence of a systematic increase in the prevailing wage 
sufficient to affect prices across the economy. The illustrative 
analysis in section V.D. shows returning to the 30-percent rule will 
significantly reduce the reliance on the weighted average method to 
produce prevailing wage rates. Applying the 30-percent threshold, some 
prevailing wage determinations may increase and others may decrease, 
but the magnitude of these changes will, overall, be negligible. Even 
where wage determinations may increase, the Department is persuaded by 
recent peer-reviewed research, which generally has not found a 
significant effect from wage increases related to prevailing wage 
requirements on the total construction costs of public works projects.
    For similar reasons, the Department is not persuaded that the 
reversion to the 30-percent threshold would have any impact on national 
inflation rates. Several commenters, including CEI and certain members 
of Congress, stated that the Department's proposal is ill-timed because 
of the current levels of

[[Page 57543]]

economy-wide inflation and the risks of a wage-price spiral. Returning 
to the 30-percent rule, CEI claimed, ``would likely contribute to the 
pressures'' that could create such a spiral. Although CEI referenced 
the 1983 CBO Report to support its argument that the 30-percent 
threshold would increase construction costs, CEI did not note the 
conclusion in that study that the DBA as a whole ``seems to have no 
measurable effect on the overall rate of inflation.'' 1983 CBO Report, 
at xii, 30-31.
    One individual commenter asserted that the Department should be 
required to consider not only whether the 30-percent rule can alone 
cause inflation, but also whether the proposal, in combination with 
other regulatory and spending measures, would have an effect on 
inflation and what that effect would be. The commenter stated that the 
infusion of Federal infrastructure spending from the Infrastructure 
Investment and Jobs Act (IIJA), Public Law 117-58, will likely lead to 
substantial compensation premiums for construction workers. The 
commenter stated that such wage increases would occur ``because a 
sudden increase in federal infrastructure spending does not necessarily 
lead to a commensurate increase in construction sector employment.''
    The Department disagrees that this rule will substantially impact 
inflation. As noted, the Department's illustrative analysis in section 
V.D. suggests that the reimplementation of the 30-percent threshold 
will result in some prevailing wage determinations increasing and 
others decreasing, but the magnitude of these changes will, overall, be 
negligible. In addition, even if this rule leads to an increase in some 
required prevailing wage rates, it will not have an equal impact on 
actual wages paid to workers on DBRA-covered contracts, because some 
workers may already be earning above the new prevailing wage rate.
    If wages for potentially affected workers were to increase, the 
Department does not believe that it would lead to inflation. Recent 
research shows that wage increases, particularly at the lower end of 
the distribution, do not cause significant economy-wide price 
increases.\66\ For example, a 2015 Federal Reserve Board study found 
little evidence that changes in labor costs have had a material effect 
on price inflation in recent years.\67\ Even in the recent period of 
increased inflation, there was little evidence that the inflation was 
caused by increases in wages. A study of producer price inflation and 
hourly earnings from December 2020 to November 2021 found that 
inflation and wage growth were uncorrelated across industries.\68\ 
Additionally, as two Professors of Economics commented, ``since 
prevailing wages are not associated with increased construction costs, 
there is no reason to assume that the policy causes inflation in the 
macroeconomy.''
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    \66\ See, e.g., J.P. Morgan, ``Why Higher Wages Don't Always 
Lead to Inflation'' (Feb. 7, 2018), available at: https://www.jpmorgan.com/commercial-banking/insights/higher-wages-inflation; 
Daniel MacDonald & Eric Nilsson, ``The Effects of Increasing the 
Minimum Wage on Prices: Analyzing the Incidence of Policy Design and 
Context,'' Upjohn Institute working paper; 16-260 (June 2016), 
available at https://research.upjohn.org/up_workingpapers/260/; 
Nguyen Viet Cuong, ``Do Minimum Wage Increases Cause Inflation? 
Evidence from Vietnam,'' ASEAN Economic Bulletin Vol. 28, No. 3 
(2011), pp. 337-59, available at: https://www.jstor.org/stable/41445397; Magnus Jonsson & Stefan Palmqvist, ``Do Higher Wages Cause 
Inflation?,'' Sveriges Riksbank Working Paper Series 159 (Apr. 
2004), available at: http://archive.riksbank.se/Upload/WorkingPapers/WP_159.pdf; Kenneth M. Emery & Chih-Ping Chang, ``Do 
Wages Help Predict Inflation?,'' Federal Reserve Bank of Dallas, 
Economic Review First Quarter 1996 (1996), available at: https://
www.dallasfed.org/~/media/documents/research/er/1996/er9601a.pdf.
    \67\ Ekaterina V. Peneva & Jeremy B. Rudd, ``The Passthrough of 
Labor Costs to Price Inflation,'' Federal Reserve Board (2015), 
available at: https://www.federalreserve.gov/econres/feds/the-passthrough-of-labor-costs-to-price-inflation.htm.
    \68\ Josh Bivens, ``U.S. Workers Have Already Been Disempowered 
in the Name of Fighting Inflation,'' Figure A, Economic Policy 
Institute (Jan. 2022), available at: https://www.epi.org/blog/u-s-workers-have-already-been-disempowered-in-the-name-of-fighting-inflation-policymakers-should-not-make-it-even-worse-by-raising-interest-rates-too-aggressively/.
---------------------------------------------------------------------------

    More importantly, DBRA-covered contracts make up a small share of 
overall economic output. Because federally-funded construction only 
makes up approximately 13 percent of total construction output and the 
number of potentially affected workers (1.2 million) is less than 1 
percent of the total workforce, the Department does not believe that 
any wage increase associated with this rule would significantly 
increase prices or have any appreciable effect on the macroeconomy.\69\
---------------------------------------------------------------------------

    \69\ Federally funded construction as a share of total 
construction output can be calculated from the data in Table 3 
($216,700,000,000 / $1,667,000,000,000 = 0.13). The estimate of 1.2 
million potentially affected workers is calculated in section V.B.2.
---------------------------------------------------------------------------

    In sum, the factual conclusions about ``inflationary effects'' 
underlying the 1982 elimination of the 30-percent rule are no longer 
supportable because they have been discounted over the past 40 years by 
more sophisticated analytical tools. Furthermore, the available 
evidence does not suggest that concerns about the 30-percent threshold 
increasing project costs or national inflation rates are justified.
    The Department also considered the comments that express concern 
about whether the 30-percent threshold may affect certain sectors or 
areas, and the residential construction industry in particular, 
differently than the national economy as a whole. As they are for other 
types of construction, respectively, prevailing wage rates for DBRA-
covered residential construction are based on WHD wage surveys of 
residential construction projects. Residential construction can be 
distinguished from other construction types in several important ways: 
it tends to be less capital- and skill- intensive and thus generally 
has fewer barriers to entry for firms as well as for workers, projects 
tend to be of smaller and shorter duration, workers tend to move more 
often between firms, and firms tend to provide less training.\70\ Wages 
also tend to be lower in residential construction than in 
nonresidential construction types, and unionization rates have 
historically been lower. Because of lower unionization rates in the 
residential construction industry, where the methodology for 
determining prevailing rates is based on the mode (whether majority or 
30-percent threshold), the rates that prevail are more likely to come 
from non-union wage rates than from higher, collectively bargained 
rates. As a result, in comparison to other construction types, it is 
less likely--not more likely--that the 30-percent threshold will result 
in increases in prevailing wage rates on residential construction 
projects. However, in the more limited circumstances in which 
residential construction rates may change from averages to rates based 
on CBAs, the increases in wage rates could be larger given the 
generally lower wage floors in the industry.\71\
---------------------------------------------------------------------------

    \70\ See Russell Ormiston et al., ``Rebuilding Residential 
Construction,'' in Creating Good Jobs: An Industry-Based Strategy 
75, 78-79 (Paul Osterman ed., 2020).
    \71\ Although the transfer analysis presented in Section V.D.1 
is simply illustrative and may not be representative of the impact 
of this rule, the results of this analysis reflect that only 5 
percent of the residential fringe benefit rates analyzed were 
affected by the reversion to the 30-percent threshold, compared to 
14 percent of building fringe rates, 19 percent of heavy fringe 
rates and 23 percent of highway fringe rates. In those limited 
circumstances where residential fringe rates were affected, however, 
they tended to increase more significantly given their largely 
nonunion baseline.
---------------------------------------------------------------------------

    Moreover, even if implementation of the proposal were to lead in 
some areas to increased wages, and even assuming those increased wages 
resulted in increased project costs for federally financed residential 
construction, the

[[Page 57544]]

effects on overall housing prices or rents would not be significant. 
DBRA-covered construction makes up only a very small percentage of the 
total new construction in the residential construction market--only 1 
percent as of July 2022.\72\ And, annual new residential construction 
itself tends to be less than 1 percent of all available residential 
units.\73\ Among the residential construction covered by the DBRA, many 
projects would be unaffected by the proposed reversion to the 30-
percent threshold. The Department's illustrative analysis suggests that 
the proposal would only affect the methodology for approximately one-
third of new wage determinations, and of those, some would result in 
decreases in the required wage rate, not an increase. See section 
V.D.1.ii.\74\ The most reasonable conclusion is that any limited 
potential increase in some construction costs for such a small 
percentage of the residential market would not affect housing prices or 
rents generally.\75\
---------------------------------------------------------------------------

    \72\ According to the Census Bureau, the Seasonally Adjusted 
Annual Value of Private Residential Construction Put in Place, as of 
July 2022, was $920.4 billion; public residential construction was 
$9.3 billion. https://www.census.gov/construction/c30/c30index.html.
    \73\ See U.S. Census Bureau, National and State Housing Unit 
Estimates: 2010 to 2019, https://www.census.gov/data/tables/time-series/demo/popest/2010s-total-housing-units.html,
    \74\ There are additional reasons why increasing labor costs do 
not have a one-to-one correlation with housing and rent prices. In 
recent decades, housing prices have significantly outpaced real 
construction costs. See Joseph Gyourko & Raven Molloy, ``Regulation 
and Housing Supply,'' (Nat'l Bureau of Econ. Rsch., Working Paper 
No. 20536, 2014), https://www.nber.org/system/files/working_papers/w20536/w20536.pdf. Gyourko and Molloy conclude that, as a general 
matter, labor and material costs do not appear to act as a major 
constraint on residential development, in comparison to land-use 
policy constraints.
    \75\ In addition, the reversion to the 30-percent threshold will 
not result in any wage increases in the short-term. Any effect on 
wage increase will only occur after wage new residential 
construction-type surveys are initiated and completed, and then wage 
determinations based on those surveys are incorporated into new 
construction contracts.
---------------------------------------------------------------------------

    The Department also considered the concerns commenters raised about 
the construction of publicly funded affordable housing in particular. 
In a comment, two Professors of Economics said that three studies have 
found that the application of prevailing wage laws in general may be 
correlated with increased project costs for affordable housing 
projects.\76\ But, for two reasons, these studies are of limited value 
for forecasting the effects of reversion to the 30-percent rule. First, 
as noted, the Department's illustrative analysis of the effects of the 
30-percent threshold, which included residential construction survey 
data, does not show a systematic increase in prevailing wage rates. 
Second, the peer-reviewed studies showing potential increased project 
costs on affordable housing projects do not compare different 
prevailing wage methodologies, but instead compare whether projects are 
either covered or not covered at all by prevailing wage requirements. 
Where studies compare the existence of prevailing wage requirements at 
all (as opposed to a simple change in wage determination 
methodologies), other factors can explain project cost increases.\77\
---------------------------------------------------------------------------

    \76\ See also Duncan & Ormiston, supra n. 61, at 142-48 
(discussing peer-reviewed studies).
    \77\ For example, cost differences may be attributable in part 
to reductions in independent-contractor misclassification, failure 
to pay overtime, and other basic wage violations that are 
disincentivized because of the prevailing-wage requirement to submit 
certified payroll. Id. at 146.
---------------------------------------------------------------------------

    The Department also considered the comments regarding the potential 
effects of economic conditions that may result from increased 
infrastructure spending. While it is true that increases in 
construction spending can lead to increases in construction wage rates 
in the short run,\78\ this potential does not suggest the Department's 
proposal is unwarranted. Under the 30-percent threshold, as under the 
current majority rule or any other measure of prevailing wages, wage 
determinations will and should generally reflect increases in wage 
rates that result from separate policy decisions by Federal, State, or 
Local governments, or other macro-economic phenomena. The commenters 
did not suggest, and the Department did not identify, any specific 
mechanism through which the 30-percent threshold would interact with 
construction spending increases in a way that would materially affect 
the results of the Department's illustrative analyses or suggest 
outcomes other than those supported by the peer-reviewed literature. 
Finally, the prevailing wage methodology in this rule is not a short-
term policy; it is intended to apply during timeframes when public 
infrastructure spending is lower, as well as those when it is higher, 
and during all phases of the construction industry business cycle.
---------------------------------------------------------------------------

    \78\ One commenter suggested that increased infrastructure 
spending could lead to an increase in demand for construction 
workers, and that the supply of skilled workers might not be 
commensurate in the short term, which could lead to an increase in 
wage rates.
---------------------------------------------------------------------------

    Finally, the Department disagrees with NAHB that the proposal 
should be withdrawn because, among other reasons, the proposal does not 
address certain challenges in the residential building industry, 
including ``an increasingly transient and aging workforce, increased 
building costs resulting from supply shortages, and the economic impact 
of COVID-19, among other things.'' NAHB explains, in addition, that the 
residential construction industry has been ``suffering from a skilled 
labor shortage for many years.'' The Department agrees with NAHB that 
these topics are important for policymakers to consider. NAHB does not 
explain why the methodology for determining the prevailing wage under 
the DBRA is relevant to addressing these challenges, or why a 
methodology other than the Department's proposed reversion to the 
three-step process would be more beneficial. However, to the extent 
that the 30-percent threshold could increase wage rates in some areas, 
as NAHB also asserts, such an outcome would be beneficial to the 
industry by attracting more workers to the construction labor market 
and allowing required prevailing wages to more often support the 
maintenance of apprenticeship and training costs that will contribute 
to the expansion of the skilled workforce.
    In addition to all of these factual arguments about whether costs 
or inflation may increase, however, several unions and contractor 
associations argued that the Department should not be permitted as a 
legal matter to consider contract costs or other similar effects of any 
wage increases when it determines the proper prevailing wage 
methodology. The United Brotherhood of Carpenters and Joiners of 
America (UBC) and NABTU argued that the Department's apparent goal in 
1981-1982 of reducing construction costs was not consistent with the 
purpose of the Act. NABTU stated that such a reliance on cost 
considerations was arbitrary and capricious under the Supreme Court's 
decision in Motor Vehicle Manufacturers Ass'n of the United States v. 
State Farm Mutual Automobile Insurance Co., 463 U.S. 29, 43 (1983) 
(State Farm), because it relied on a factor (cost) that Congress had 
not intended to be considered. To the contrary, commenters noted, 
statements in the legislative history suggest that Congress's ``chief 
concern'' was ``to maintain the wages of our workers and to increase 
them wherever possible.'' 74 Cong. Rec. 6513 (1931) (remarks of Rep. 
Mead); see also United States v. Binghamton Constr. Co., 347 U.S. 171, 
176-77 (1954) (noting that the legislative history demonstrates that 
the DBA was ``not enacted for the benefit of contractors, but rather to 
protect their employees from substandard earnings'').
    The Department agrees with these commenters that there is a 
legitimate question as to whether it would be appropriate to use a 
methodology that is

[[Page 57545]]

less consistent with the definition of ``prevailing wage'' in order to 
reduce contract costs. Such a determination would not seem to be 
consistent with Congressional intent. As Solicitor Donahue testified in 
the 1962 hearings on the Act, ``Congress has not injected a cost factor 
into the Davis-Bacon Act as one of the standards to be used in 
determining which wage rates will apply.'' \79\ The ``basic purpose of 
the Davis-Bacon Act is to protect the wages of construction workers 
even if the effect is to increase costs to the [F]ederal 
[G]overnment.'' Bldg. & Constr. Trades Dep't, 543 F. Supp. at 1290. 
Congress considered cost concerns and enacted and expanded the DBA 
notwithstanding them. Id. at 1290-91; 1963 House Subcommittee Report, 
at 2-3; Reorganization Plan No. 14 of 1950, 15 FR 3176, 5 U.S.C. app. 
1.\80\
---------------------------------------------------------------------------

    \79\ Administration of the Davis-Bacon Act: Hearings before the 
Spec. Subcomm. Of Lab. Of the H. Comm. On Educ. & Lab., 87th Cong. 
153 (1962).
    \80\ In his message accompanying Reorganization Plan No. 14, 
President Truman noted that ``[s]ince the principal objective of the 
plan is more effective enforcement of labor standards, it is not 
probable that it will result in savings. But it will provide more 
uniform and more adequate protection for workers through the 
expenditures made for the enforcement of the existing legislation.'' 
15 FR 3176; 5 U.S.C. app. 1.
---------------------------------------------------------------------------

    Thus, even if concerns about an inflationary effect on government 
contract costs or speculative effects on the national macro economy 
were used to justify eliminating the 30-percent rule in 1982, the 
Department does not believe such reasoning now provides a persuasive 
factual basis or legal requirement to maintain the current majority 
rule. While the Department agrees with the commenters that are 
skeptical about the permissibility of considering costs or cost effects 
at all in deciding the appropriate definition of ``prevailing,'' the 
Department considered these cost-related arguments nonetheless and does 
not find them convincing, given the weakness of the wage-differential 
analyses on which they are based. However, even if the reversion to the 
30-percent rule were to add 0.3 percent to total Federal construction 
contract costs (as CEI estimates and the Department disputes), and have 
idiosyncratic cost effects in certain localities or construction types, 
the Department would still conclude that this is the better course in 
order to more often ensure that the prevailing wage rates incorporated 
into covered contracts are rates that are actually paid to workers in 
an area and that are therefore, on balance, more protective of local 
construction wage rates.\81\
---------------------------------------------------------------------------

    \81\ The Department also considered NAHRO's narrower suggestion 
that HUD programs should be excepted from the final rule because of 
concerns about potential cost impacts on affordable housing 
development. As discussed, the Department disagrees with the 
assertion that the reversion to the 30-percent threshold will 
necessarily raise costs to affordable housing projects in a 
significant or systematic manner so as to suggest the threshold 
should not be applied.
---------------------------------------------------------------------------

    The Department also considered whether the 30-percent threshold 
gives ``undue weight'' to collectively bargained rates. In the 1982 
final rule, the Department noted criticism of the 30-percent rule on 
that basis, and later--though without specifically discussing the 
issue--the Department stated generally that it agreed with the comments 
criticizing the rule. Now, certain commenters opposing the Department's 
proposal to return to the 30-percent rule have made similar arguments. 
ABC pointed to the phenomenon of ``wage dispersion,'' which affects 
non-union contractors more than it does union contractors. According to 
ABC, non-union contractors more often base compensation on skills or 
productivity rather than job category, unlike union contractors. Thus, 
they argue, union contractors are more likely than non-union 
contractors to pay their workers the same rate.\82\ AFP-I4AW commented 
that nothing in the NPRM contradicts the conclusion in 1982 that the 
30-percent rule gives undue weight to collectively bargained rates.
---------------------------------------------------------------------------

    \82\ See also 1979 GAO Report, at 52 (describing the difference 
between CBA pay scales and non-union contractor pay practices).
---------------------------------------------------------------------------

    On the other hand, commenters supporting a return to the 30-percent 
rule criticized the reasoning in 1982 that the 30-percent rule provided 
``undue weight'' to collectively bargained rates. These commenters 
argued that this reasoning was a symptom of anti-union bias and had no 
basis in the statute. The Iron Workers quoted the 1962 congressional 
testimony of Solicitor of Labor Charles Donahue regarding the interface 
between the rule and union rates. As Solicitor Donahue pointed out, the 
30-percent rule did not uniformly lead to the identification of union 
rates as prevailing, but, in any case, the question of whether union or 
non-union contractors are disadvantaged by the Department's prevailing 
wage determinations is not something that the Department should be 
properly taking into consideration in making its wage 
determinations.\83\ In a related comment, two Professors of Economics 
noted that the potential for union rates being identified as the 
prevailing rate does not necessarily mean that project costs will 
increase. The comment cited several peer-reviewed studies that found no 
statistically significant cost difference between projects built with 
prevailing rates based on union rates and projects that were not.\84\
---------------------------------------------------------------------------

    \83\ Administration of the Davis Bacon Act: Hearings before the 
Spec. Subcomm. of Lab. of the H. Comm. on Educ. & Lab., 87th Cong. 
819-20 (1962) (statement and submission of Charles Donahue, 
Solicitor of Labor).
    \84\ See Lamek Onsarigo et al., ``The Effect of Prevailing Wages 
on Building Costs, Bid Competition, and Bidder Behaviour: Evidence 
from Ohio School Construction,'' 38 Constr. Mgmt. & Econ. 917 
(2020); Kevin Duncan & Jeffrey Waddoups, ``Unintended Consequences 
of Nevada's Ninety-Percent Prevailing Wage Rule,'' 45 Lab. Stud. J. 
166 (2020); Jaewhan Kim et al., ``The Effect of Prevailing Wage 
Regulations on Contractor Bid Participation and Behavior: A 
Comparison of Palo Alto, California with Four Nearby Prevailing Wage 
Municipalities,'' 51 Indus. Rels. 874 (2012).
---------------------------------------------------------------------------

    The Department is no longer persuaded that the 30-percent threshold 
gives undue weight to collectively bargained rates or that whatever 
weight it gives to collectively bargained rates is a convincing basis 
to maintain the status quo. The underlying concern in 1982 was, as ABC 
explained, that identification of a modal prevailing wage could give 
more weight to union rates that more often tend to be the same across 
companies. If this occurs, however, it is a function of the statutory 
term ``prevailing,'' which, as both the Department and OLC have 
concluded, refers to a predominant modal wage rate. If a modal 
methodology with a modal threshold is used, then the modal threshold--
regardless of the number used--may on balance be more likely to be 
satisfied by collectively bargained rates than by non-collectively 
bargained rates. Said differently, the same weight is given to 
collectively bargained rates whether the Department chooses a 50-
percent or 30-percent threshold; thus any ``undue weight'' to 
collectively bargained rates should not be a basis for distinguishing 
between these two thresholds. The Department, accordingly, now 
understands the concerns about undue weight to collectively bargained 
rates to be concerns about the potential outcome (of more wage 
determinations based on collectively bargained rates) instead of 
concerns about any actual weight given to collectively bargained rates 
by the choice of the modal threshold. To choose a threshold because the 
outcome would be more beneficial to non-union contractors--as the 
Department seems to have suggested it was doing in 1982--does not have 
any basis in the statute. Donovan, 543 F. Supp. at 1291 n.16 (noting 
that the Secretary's concern about weight to collectively bargained 
rates ``bear[s] no relationship to the purposes of the statute'').
    The Department also notes that there appears to be confusion among 
some

[[Page 57546]]

commenters about what it means when the prevailing wage in a wage 
determination is set based on a collectively bargained wage rate. A 
comment on the Department's proposal from the group of U.S. Senators 
characterized the 1982 rule as having changed the definition of 
prevailing wage ``to allow open-shop contractors to bid on DBRA covered 
contracts on an equal footing with their unionized counterparts.'' This 
description seems to conflate the basis of a wage determination with 
its effect on competition. Whether wage determinations are based on 
collectively bargained rates or on non-collectively bargained rates, 
both non-union and union contractors are on similar footing in that 
they have similar notice of the Department's wage determinations and 
are required to pay at least the same specified minimum rates. See 74 
Cong. Rec. 6510 (1931) (Statement of Rep. Bacon) (``If an outside 
contractor gets the contract . . . it means that he will have to pay 
the prevailing wages, just like the local contractor.'').\85\ To the 
extent that a non-union contractor has to pay higher rates on a 
contract than it would have paid without the prevailing wage 
requirement, it is not unfairly harmed because all other bidders are 
required to pay at least the same prevailing rate.\86\
---------------------------------------------------------------------------

    \85\ As the AGC noted in a comment, the same is not necessarily 
true when the prevailing wage rate is set below a collectively 
bargained wage rate, as contractors bound by CBAs may not be able to 
pay their workers less than the collectively bargained rate on a 
covered project, while a non-union contractor could. For this 
reason, another commenter that is a member of a larger contractor 
association asserted the belief that its association was taking a 
position against the proposal because non-union contractors ``do not 
appear to want to compete on a level playing field by paying rates 
consistent with the determination. Rather, their position indicates 
they prefer to be able to undercut the wage/benefit determination by 
paying rates below these to gain an advantage over competitors.'' 
Thus, to the extent that eliminating the 30-percent rule in 1982 led 
to a decrease in the use of collectively bargained rates to set the 
prevailing wage, the effect was not to place non-union contractors 
on ``equal footing'' as union contractors, but to give non-union 
contractors an advantage.
    \86\ As the Department explains in section V.F.1., significant 
benefits flow from ensuring that as many contractors as possible can 
bid on a contract. One study on the impact of bid competition on 
final outcomes of State department of transportation construction 
projects, demonstrated that each additional bidder reduces final 
project cost overruns by 2.2 percent and increases the likelihood of 
achieving a high-quality bid by 4.9 times. See Delaney, J. (2018). 
``The Effect of Competition on Bid Quality and Final Results on 
State DOT Projects.'' https://www.proquest.com/openview/33655a0e4c7b8a6d25d30775d350b8ad/1?pq-origsite=gscholar&cbl=18750.
---------------------------------------------------------------------------

    Regardless, the Department's regulatory impact analysis does not 
suggest that a return to the 30-percent rule would give undue weight to 
collectively bargained rates. Among a sample of rates considered in an 
illustrative analysis, one-third of all rates (or about half of rates 
currently established based on weighted averages) would shift to a 
different method. Among these rates that would be set based on a new 
method, the majority would be based on non-collectively bargained 
rates. In the illustrative example, the Department estimates that the 
use of single (modal-based) prevailing wage rates that are not the 
product of CBAs would increase from 12 percent to 36 percent of all 
wage rates--an overall increase of 24 percentage points. See Table 6, 
section V.D.1.ii. The use of modal wage rates that are based on CBAs 
would increase from 25 percent to 34 percent--an overall increase of 9 
percentage points. Id.\87\
---------------------------------------------------------------------------

    \87\ As discussed in the regulatory impact analysis, the 
Department found that fringe benefits currently do not prevail in 
slightly over half of the classification-county observations it 
reviewed--resulting in no required fringe benefit rate for that 
classification. See Table 6, section V.D.1.ii. This would be largely 
unchanged under the proposed reversion to the three-step process, 
with nearly half of classification rates still not requiring the 
payment of fringe benefits. Only about 13 percent of fringe rates 
would shift from no fringes or an average rate to a modal prevailing 
fringe rate. Overall, under the estimate, the percentage of fringe 
benefit rates based on CBAs would increase from 25 percent to 34 
percent. The percentage of fringe benefit rates not based on 
collective bargaining rates would increase from 3 percent to 7 
percent.
---------------------------------------------------------------------------

    Having considered the comments both for and against the 
Department's proposed reversion to the three-step process for 
determining the prevailing wage, the final rule adopts the amended 
definition of prevailing wage in Sec.  1.2 of the regulations as 
proposed.
(3) Former Sec.  1.2(a)(2)
    In a non-substantive change, the Department proposed to move the 
language currently at Sec.  1.2(a)(2) that explains the interaction 
between the definition of prevailing wage and the sources of 
information in Sec.  1.3. The Department proposed to move that language 
(altered to update the cross-reference to the definition of prevailing 
wage) to the introductory section of Sec.  1.3. The Department received 
no comments on this proposal. The final rule therefore adopts this 
change as proposed.
(4) Variable Rates That Are Functionally Equivalent
    The Department also proposed to amend the regulations on compiling 
wage rate information at Sec.  1.3 to allow for variable rates that are 
functionally equivalent to be counted together for the purpose of 
determining whether a wage rate prevails under the proposed definition 
of ``prevailing wage'' in Sec.  1.2. The Department generally followed 
this proposed approach until after the 2006 decision of the ARB in 
Mistick Constr., ARB No. 04-051, 2006 WL 861357.
    Historically, when reviewing wage survey data, the Department has 
considered wage rates that may not be exactly the same to be 
functionally equivalent--and therefore counted as the same--as long as 
there was an underlying logic that explained the difference between 
them. For example, some workers may perform work under the same labor 
classification for the same contractor or under the same CBA on 
projects in the same geographical area being surveyed and get paid 
different wages based on the time of day that they performed work--
e.g., a ``night premium.'' In that circumstance, the Department would 
count the normal and night-premium wage rates as the ``same wage'' rate 
for purposes of calculating whether that wage rate prevailed under the 
majority rule that is discussed in Sec.  1.2. Similarly, where workers 
in the same labor classification were paid different ``zone rates'' for 
work on projects in different zones covered by the same CBA, the 
Department considered the difference between those rates to be 
compensating workers for the burden of traveling or staying away from 
home instead of reflecting fundamentally different underlying wage 
rates for the work actually completed. Variable zone rates would 
therefore be considered the ``same wage'' for the purpose of 
determining the prevailing wage rate.
    In another example, the Department took into consideration 
``escalator clauses'' in CBAs that may have increased wage rates across 
the board at some point during the survey period. Manual of Operations 
(1986), at 58-59. Wages for workers working under the same CBA could be 
reported differently on a survey solely because of the week their 
employer used in responding to the wage survey rather than an actual 
difference in prevailing wages. The Department has historically treated 
such variable rates the same for the purposes of determining the 
prevailing wages paid to laborers or mechanics in the survey area. Id. 
The Department has also considered wage rates to be the same where 
workers made the same combination of basic hourly rates and fringe 
rates, even if the basic hourly rates (and also the fringe rates) 
differed slightly.
    In these circumstances, where the Department has treated certain 
variable rates as the same, it has generally chosen one of those rates 
to use as the

[[Page 57547]]

prevailing rate. In the case of rates that are variable because of an 
escalator-clause issue, it uses the most current rate under the CBA. 
Similarly, where the Department identified combinations of hourly and 
fringe rates as the ``same,'' the Department previously identified one 
specific hourly rate and one specific fringe rate that prevailed, 
following the guidelines in 29 CFR 5.24, 5.25, and 5.30.
    In 2006, the ARB strictly interpreted the regulatory language of 
Sec.  1.2(a) in a way that limited some of these practices. See Mistick 
Constr., ARB No. 04-051, 2006 WL 861357, at *5-7. The decision affirmed 
the Administrator's continued use of the escalator-clause practice; but 
the ARB also found that the combination of basic hourly and fringe 
rates did not amount to a single ``wage,'' and thus the payment of the 
same combination of hourly and fringe rates could not justify a finding 
that the ``same wage,'' as used in Sec.  1.2(a), had been paid. Id. The 
ARB also viewed the flexibility shown to CBAs as inconsistent with the 
``purpose'' of the 1982 final rule, which the Administrator had 
explained was in part to avoid giving ``undue weight'' to collectively 
bargained rates. Id. The ARB held that, with the exception of escalator 
clauses, the Administrator could not consider variable rates under a 
CBA to be the ``same wage'' under Sec.  1.2(a) as the regulation was 
written. Id. If no ``same wage'' prevailed under the majority rule for 
a given classification, the Administrator would have to use the 
fallback weighted average to determine the prevailing wage. Id. at * 7.
    The ARB's conclusion in Mistick--particularly its determination 
that even wage data reflecting the same aggregate compensation but 
slight variations in the basic hourly rate and fringe benefit rates did 
not reflect the ``same wage'' as that term was used under the current 
regulations--could be construed as a determination that wage rates need 
to be identical ``to the penny'' in order to be regarded as the ``same 
wage,'' and that nearly any variation in wage rates, no matter how 
small and regardless of the reason for the variation, might need to be 
regarded as reflecting different, unique wage rates.
    The ARB's decision in Mistick limited the Administrator's 
methodology for determining a prevailing rate, thus contributing to the 
increased use of weighted average rates. As noted in the discussion of 
the definition of ``prevailing wage'' in Sec.  1.2, however, both the 
Department and OLC have agreed that averages should generally only be 
used as a last resort for determining prevailing wages. See section 
III.B.1.ii.A. As the OLC opinion noted, the use of an average is 
difficult to justify, ``particularly in cases where it coincides with 
none of the actual wage rates being paid.'' 5 Op. O.L.C. at 177.\88\ In 
discussing those cases, OLC quoted from the 1963 House Subcommittee 
Report summarizing extensive congressional oversight hearings of the 
Act. Id. The report had concluded that ``[u]se of an average rate would 
be artificial in that it would not reflect the actual wages being paid 
in a local community,'' and ``such a method would be disruptive of 
local wage standards if it were utilized with any great frequency.'' 
Id.\89\ To the extent that an inflexible approach to determining if 
wage data reflects the ``same wage'' promotes the use of average rates 
even when wage rate variations are based on CBAs or other written 
policies reflecting that the rates, while not identical, are 
functionally equivalent, such an approach would be inconsistent with 
these authorities and the statutory purpose they reflect.
---------------------------------------------------------------------------

    \88\ See note 1, supra.
    \89\ See 1963 House Subcommittee Report, supra, at 7-8.
---------------------------------------------------------------------------

    As reflected in Mistick, the existing regulation does not clearly 
authorize the use of functionally equivalent wages to determine the 
local prevailing wage. See ARB No. 04-051, 2006 WL 861357, at *5-7. 
Accordingly, the Department proposed in the NPRM to amend Sec.  1.3 to 
include a new paragraph at Sec.  1.3(e) that would permit the 
Administrator to count wage rates together--for the purpose of 
determining the prevailing wage--if the rates are functionally 
equivalent and the variation can be explained by a CBA or the written 
policy of a contractor.
    The Department received a number of comments from unions and 
contractor associations that supported the proposed new language in 
Sec.  1.3(e). These commenters noted that there are various ways that 
CBAs and management decisions can create slight compensation variations 
that may reflect special circumstances and not simply different wages 
paid for the same underlying work. NABTU explained that the same 
principle explains why the Department does not count an overtime 
premium as a separate wage rate from the worker's base hourly rate for 
the purpose of calculating the prevailing wage.
    The commenters in favor of the Department's proposal asserted that 
the reversion to the pre-Mistick practice of counting functionally 
equivalent rates as the same is consistent with the DBA's legislative 
history and the Department's longstanding preference for prevailing 
wages that reflect actual wages paid to workers instead of artificial 
averages. According to these commenters, the Mistick decision led to an 
increase in the unnecessary use of average rates for wage 
determinations, and it failed to adequately capture and reflect local 
area practice. See Fry Bros. Corp., WAB No. 76-06, 1977 WL 24823, at * 
6.\90\ One commenter, MCAA, also asserted that the decision in the 
Mistick case was based on a ``non-statutory aim, if not animus, of 
limiting the impact of CBA rates in the process.''
---------------------------------------------------------------------------

    \90\ In Fry Brothers, the Wage Appeals Board (WAB) described the 
importance of using CBAs to help determine classifications based on 
job content where collectively bargained rates prevail. 1977 WL 
24823, at *6. The WAB was the Department's administrative appellate 
entity from 1964 until 1996, when it was eliminated and the ARB was 
created and provided jurisdiction over appeals from decisions of the 
Administrator and the Department's ALJs under a number of statutes, 
including the Davis-Bacon and Related Acts. 61 FR 19978 (May 3, 
1996). WAB decisions from 1964 to 1996 are available on the 
Department's website at https://www.dol.gov/agencies/oalj/public/dba_sca/references/caselists/wablist.
---------------------------------------------------------------------------

    Conversely, ABC and several of its members stated that the 
Department's proposal conflicts with the Department's intended 
definition of ``prevailing wage'' and contradicts the ARB's Mistick 
decision. Numerous other contractors and individual commenters, as part 
of an organized initiative, stated that the ``functionally equivalent'' 
proposal, in combination with the return to the three-step process and 
the elimination of the bar on cross-consideration of metropolitan and 
rural wage data, was likely to ``further distort the accuracy'' of WHD 
wage determinations, a process that the commenters stated was ``already 
deeply flawed.'' These commenters urged the Department to abandon these 
proposed changes to the rule, including the proposed language in Sec.  
1.3(e).
    The Independent Electrical Contractors (IEC) and AFP-I4AW stated 
their opposition to the proposal because it would authorize the finding 
that rates are functionally equivalent on the basis of CBAs. AFP-I4AW 
stated that the modal analysis in the definition of prevailing wage in 
Sec.  1.2 already favors the more uniform rates characteristic of CBAs, 
and that the functional equivalence proposal's direction to the agency 
to look to these agreements for the analysis ``will only increase the 
likelihood of finding union rates to be the prevailing rates, leading 
to the unjustified inflation of labor costs.'' IEC stated that, while 
they appreciate the Department's intention of obtaining additional data 
points for the purpose of determining a predominant wage rate, it

[[Page 57548]]

is not sufficiently clear what principle will guide the Department's 
finding that varied rates are nonetheless functionally equivalent.
    The Department has reviewed the many comments received regarding 
the proposed language at Sec.  1.3(e) and agrees with the commenters 
that advocated in favor of the proposal. The Department's intent in the 
proposal is to ensure that prevailing wage rates reflect wage rates 
paid for the same underlying work, and do not instead give undue weight 
to artificial differences that can be explained because workers are 
being compensated for something other than the underlying work. This is 
consistent with the text and purpose of the Davis-Bacon Act and has the 
salutary effect of reducing the unnecessary reliance on average wage 
rates that are less protective of local construction wages.
    The Department disagrees with the comments, sent in response to an 
organized initiative, that the proposal conflicts with the Department's 
intended definition of ``prevailing wage.'' The three-step process and 
the functional-equivalence rule are consistent because they both seek 
to reduce the reliance on averages and increase the use of wage rates 
that are actually paid to workers in the area. In doing so, they both 
seek to protect local prevailing wage rates and the craft 
classifications of local area practice, which is the core purpose of 
the DBRA. Moreover, the Department disagrees that there is any conflict 
between the two regulatory sections. The proposed language at Sec.  
1.3(e) explicitly cross-references the definition in Sec.  1.2 and 
explains how it should apply to the real-world circumstances that WHD 
encounters when analyzing survey data. The new language in Sec.  1.3(e) 
is an amendment to, and becomes an element of, the definition itself. 
The Department also does not agree that the new language contradicts 
the Mistick decision; rather, the new language changes the rule that 
would be interpreted by the ARB in the future. The Mistick decision was 
an interpretation of the text of the Department's 1983 regulations that 
required a determination of whether wage rates were the ``same wage'' 
and its fundamental holding was that the Department had not abided by 
the regulatory language as it was then written. There would be no basis 
for the ARB to come to the same conclusion under the proposed new 
language at Sec.  1.3(e), which expressly authorizes the Administrator 
to count variable wage rates together as the ``same wage'' in 
appropriate circumstances.
    While no commenter made the argument explicitly, the Department 
also considered whether the comments regarding the proposed departure 
from the post-Mistick status quo should be understood as assertions 
that contractors have reliance interests in the Department's recent 
practice. To the extent that any assertion of reliance interest was 
made, however, the Department concludes that it is not sufficient to 
override the value of the functionally equivalent analysis. The 
functionally equivalent analysis, like the return to the 30-percent 
threshold, is a change that will likely lead to increased use of modal 
prevailing wages and decreased use of averages on wage determinations. 
As with the 30-percent threshold, this change should reasonably be 
expected to lead in some circumstances to increases in prevailing wage 
rates and in other circumstances to decreases. Similar to the 30-
percent rule and to other amendments to the wage determination process 
in part 1 of the regulations, the effects of this rule change will 
apply only to future wage determinations and the future contracts that 
incorporate them, with limited exception of certain ongoing contracts 
covered in Sec.  1.6(d) of the final rule. Accordingly, contractors 
will generally be able to adjust their bids or price negotiations on 
future contracts to account for any effects of the regulatory change on 
prevailing wages in a particular area.
    Many of the comments in opposition to the proposal, for example 
from IEC and AFP-I4AW, explained their opposition to be in part because 
of a perception that the use of CBAs to identify functionally 
equivalent rates would lead to more prevailing wage rates based on 
CBAs. At least some of these commenters appeared to misunderstand the 
proposal as only allowing for the use of CBAs to make an underlying 
determination. IEC, for example, stated that if the intent is to 
broaden the set of wage rates that can be used to determine that a 
certain wage rate is prevailing, then there is no reason the Department 
could not also find non-CBA wages ``functionally equivalent'' so long 
as they have the same acceptable variation proposed for CBA wages 
deemed functionally equivalent. The Department agrees. In the NPRM, the 
Department intended the functional equivalence analysis to be 
applicable to both collectively bargained and non-collectively 
bargained rates as appropriate. That is why the proposed text of Sec.  
1.3(e) expressly allowed for the determination of equivalence to be 
made based on a ``written policy'' maintained by a contractor or 
contractors--in addition to a CBA.
    The Department also disagrees with the other criticisms related to 
the use of collectively bargained rates. The Department disagrees with 
the write-in campaign comments stating that any potential for this 
proposal to increase the use of collectively bargained rates would mean 
that wage determinations would be less accurate. The commenters' 
conception of ``accuracy'' is not well explained in the context of the 
``functionally equivalent'' analysis, but the Department assumes it is 
similar to the way the term was used in the criticisms of the 30-
percent rule--in other words, how closely the ``prevailing wage'' hews 
to the average rate, what the market rate would be in the absence of 
the law, or whether the percentage of prevailing wage rates based on 
CBAs matches the union density in an area. As the Department has 
explained, these comparisons may demonstrate the differences between 
possible conceptions of the term ``prevailing wage,'' but the 
Department disagrees that potential differences between these numbers 
necessarily represent differences in accuracy.\91\
---------------------------------------------------------------------------

    \91\ ABC made a related argument that the proposed functional 
equivalence analysis would not improve accuracy because it is just a 
``tweak'' of the data that the Department received from its wage 
survey, which ABC believes should be replaced by use of BLS data or 
augmented through representative sampling. As explained above with 
regard to the definition of prevailing wage, the Department 
disagrees with ABC that its suggested alternatives to the wage 
survey program are either preferable or required. Regardless, the 
functional equivalence analysis can be beneficial to the 
determination of prevailing wages because the Department can avoid 
mistakenly assigning value in a wage determination to apparent 
differences in wage rates that a further examination would reveal to 
be superficial and not reflecting different pay received for the 
same work.
---------------------------------------------------------------------------

    The Department similarly disagrees with AFP-I4AW's argument that 
the proposal should be rejected because it could lead to an increase in 
the likelihood of finding collectively bargained rates to be the 
prevailing rates and therefore an ``unjustified inflation of labor 
costs.'' The Department has addressed variations of this argument above 
with respect to the definition of prevailing wage. The cost effects 
associated with shifting from the use of an average rate to a modal 
prevailing rate are complicated for a variety of reasons--in particular 
because there can be significant productivity gains associated with an 
increase in required wage rates on projects. Given these countervailing 
effects, and the fact that Congress did not specify the potential cost 
to the government as a factor in determining prevailing wage rates, the

[[Page 57549]]

Department is not persuaded that the potential cost effects AFP-I4AW 
identifies are sufficient reason to reject the proposal.
    Several commenters, both supporting and opposing the proposed 
language, asked for additional guidance regarding types of wage 
differentials that might appropriately be considered functionally 
equivalent. The Department believes that the term ``functionally 
equivalent'' as described here provides sufficient guidance--the 
difference between two wage rates must be explained by something other 
than simply different pay for the same work for the wage rates to be 
functionally equivalent. Furthermore, as the Foundation for Fair 
Contracting (FFC) and the Northern California District Council of 
Laborers (NCDCL) stated, the Department's specification that the 
functional-equivalence determination must be supported with reference 
to CBAs or the written policies represents a ``necessary precaution'' 
to appropriately limit the scope of the rule. The Department therefore 
has not added any additional language in Sec.  1.3(e) delineating 
specific categories of wage differentials that may or may not fit the 
analysis.
    While no amendment to the regulatory text is necessary, certain 
examples that commenters provided may be helpful to further illustrate 
the concept of functional equivalence. The Department does not mean for 
these examples to be an exhaustive list, but a discussion may be 
helpful in responding to commenters who asked for further 
clarification. For example, the NPRM mentioned the potential for 
different wages based on the time of day that hours are worked to be 
considered equivalent, but several commenters suggested a broader 
phrasing--to include differentials based on ``undesirable'' hours or 
shifts. This could include, for example, hours worked on certain 
undesirable days of the week or certain times of year. The Department 
agrees that where wage differentials are attributable to the timing of 
the work, they do not represent different wage rates for the same 
classification--and can be reasonably understood to be functionally 
equivalent.
    Similarly, the UA and several other commenters requested that the 
Department identify hazard pay for working in hazardous conditions as a 
wage differential that would be considered functionally equivalent as 
the base rate. In another example, SMART and SMACNA described working 
forepersons who spend most of their time working in a specific 
``mechanic'' classification. While their base rate is that of a 
journeyperson in that classification, they also get paid a premium to 
compensate them for the foreperson duties they perform as well. NABTU 
and several other commenters described premiums for call-back work as 
another example of a differential wage rate that should not be treated 
as a separate wage rate from the worker's underlying base hourly rate. 
All these examples are circumstances where two workers may be paid 
different amounts for work in the same classification but where the 
Department generally would not interpret those different amounts as 
representing different wage rates for the same underlying work. These 
are appropriate examples of variable rates that could be found to be 
functionally equivalent as long as the wage differentials are explained 
by CBAs or written policies.
    SMART and SMACNA requested clarification regarding whether rates 
can be functionally equivalent if one rate is paid pursuant to a CBA 
and the other rate is not. This might apply, for example, if a CBA 
provided for a base hourly rate of $20 per hour for a classification 
and a night premium rate of $25 per hour for the same work, and one 
worker consistently earned a night premium rate of $25 per hour under 
the CBA while another worker not working at night earned $20 per hour 
for a different contractor and was not covered by the CBA. Under those 
circumstances, the Department could reasonably count both workers as 
earning the $20 per hour base rate for the purposes of determining the 
prevailing wage for the classification. The Department does not believe 
such a clarification is necessary in the text of Sec.  1.3(e) because 
the language of Sec.  1.3(e) already allows for such a determination.
    AGC asked whether the wage rates of various groups of workers on a 
specific California wage determination would be considered functionally 
equivalent. In the example presented, a wage determination lists a 
number of different subclassifications for power equipment operators, 
and all of the subclassifications have base hourly rates within $5 of 
each other. AGC asked whether this differential of approximately 10 
percent is an appropriate ``slight variation'' such that all of these 
wage rates should be considered functionally equivalent and counted as 
the same rate for purposes of determining a prevailing wage rate. The 
focus on the words ``slight variation'' in the NPRM is misplaced, 
because a slight variation between or among wage rates is not alone 
sufficient to render rates functionally equivalent. Rather, there must 
be some explanation in a CBA or written policy that explains why the 
variation exists and supports a conclusion that the variation does not 
represent simply different pay for the same underlying work. Thus, 
although some of the individual wage rates AGC describes might 
reasonably be considered to be slight variations in terms of the 
magnitude of the difference between them, the types of variable wage 
rates they represent generally do not fit within the concept of 
functionally equivalent. Wage differentials between types of power 
equipment operators in the example are associated with sufficiently 
different underlying work--for example, as the comment notes, the 
different groups include ``Cranes, Piledriving & Hoisting,'' ``Tunnel 
Work,'' and ``All Other Work.'' This kind of wage differential is a 
distinct concept from functionally equivalent pay rates received for 
work within the same labor classification.
    As previously discussed, Congress did not intend to create a single 
minimum wage rate with the DBA. Rather, generally speaking, the Act 
requires prevailing wage rates for different types of construction work 
to be calculated separately. The statute explicitly addresses this 
concept in two ways--requiring the Secretary to determine the 
prevailing wage for ``corresponding classes'' of workers, and for 
workers employed on projects of a similar ``character'' in the area. 40 
U.S.C. 3142(b). Thus, when the Department gathers wage information to 
determine the prevailing wages in an area, it attempts to identify the 
appropriate classifications (corresponding class) and construction 
types (projects of a similar character) of work. Through this process, 
the Department can develop wage determinations that allow for different 
prevailing wages to account for the different skills that workers use 
or where there are otherwise material differences in the actual work 
that workers are doing. The Department does not intend for the 
functional equivalence concept to apply to these types of situations 
where wage differentials are attributable to fundamentally different 
underlying work that requires different skills, or to differences in 
construction type.\92\
---------------------------------------------------------------------------

    \92\ In explaining the limits of this concept of functional 
equivalence, the Department does not intend to remove the necessary 
discretion that the Department separately exercises in determining 
classifications and sub-classifications of work in a particular 
area. The Department has long recognized that the appropriate level 
and division of craft specificity can be different in different 
areas, and that the decisions that the Department must make to 
identify the appropriate classifications can be fact specific. See 
Fry Bros. Corp., 1977 WL 24823, at *6-7. An area practice survey in 
tandem with the wage survey can often be helpful in this process.

---------------------------------------------------------------------------

[[Page 57550]]

    AGC also questioned how the Department would decide which rate to 
identify on a wage determination among a set of multiple rates found in 
a survey to be functionally equivalent. AGC stated that the 
identification of the middle rate (or any rate that is less than the 
CBA rate in a wage determination that would otherwise use the CBA rates 
and classifications) could put contractors that are signatories to 
those CBAs at a competitive disadvantage in bidding, since the 
signatory contractors would be contractually obligated to pay the 
higher CBA rate while nonsignatory contractors would be free to pay the 
lower rate.
    The Department agrees with AGC that WHD may need to be sensitive to 
the effects of identifying functionally equivalent wage rates, in 
particular where collectively bargained rates prevail. Where there are 
functionally equivalent wage rates, and only a single rate is 
published, that published wage rate may often be the base hourly rate 
(and not the higher rate including the relevant wage premium). This 
could lead to disadvantages for bidders bound by CBAs on projects that 
may require substantial work at the premium rate, such as substantial 
work that would be at a hazard pay rate or at night premiums. Thus, 
where collectively bargained rates prevail, an analysis of local area 
practice and the wage data received may suggest that WHD should include 
certain wage premiums (such as a project size premium or zone rates) as 
separate lines on a wage determination instead of counting them all as 
the same functionally equivalent underlying base rate.\93\
---------------------------------------------------------------------------

    \93\ This type of flexibility is consistent with the agency's 
current and historical practice. For example, the Department has 
periodically identified zone rates on wage determinations. In the 
Alaska Statewide wage determination for building and heavy 
construction types, the Department recently published separate wage 
lines for Laborers North of the 63rd Parallel & East of Longitude 
138 Degrees and for those South of the 63rd Parallel & West of 
Longitude 138 Degrees. As commenters in favor of the ``functional 
equivalence'' proposal noted, CBAs can be helpful in identifying how 
relevant differences in the work actually performed or the projects 
of a similar ``character'' are divided between classifications of 
workers in areas where collectively bargained rates prevail. See Fry 
Bros. Corp., 1977 WL 24823, at *4, *6; Manual of Operations at 23.
---------------------------------------------------------------------------

    AGC also expressed concern that the concept of functionally 
equivalent wage rates might create incentives for contractors and 
unions to negotiate rates that preserve their competitiveness. As noted 
in the NPRM, some variations within the same CBA may clearly amount to 
different rates, and one example is when a CBA authorizes the use of 
``market recovery rates'' that are lower than the standard rate to win 
a bid. It may not be appropriate to combine market recovery rates 
together with the CBA's standard rate as ``functionally equivalent'' in 
certain circumstances, because frequent use of such a rate could 
suggest (though does not necessarily compel) a conclusion that the 
CBA's regular rate would not be prevailing in the area.
    A few of the commenters in favor of the proposal suggested helpful 
changes to the proposed language of Sec.  1.3(e). NABTU highlighted 
that the Department used the term ``employee'' in proposed Sec.  1.3(e) 
to explain the principle of treating variable rates for ``employees 
within the same classification'' as functionally equivalent. NABTU 
noted that DBRA applies to workers even in the absence of an employment 
relationship, see 40 U.S.C. 3142(c)(1), and suggested revising to refer 
instead to ``laborers and mechanics.'' The Department agrees that the 
use of the term ``employee'' in the proposed language was imprecise 
considering the scope of the Act, and the language of Sec.  1.3(e) in 
the final rule is therefore revised to refer to ``workers'' instead of 
``employees,'' to be consistent with the language used elsewhere in 
Sec.  1.3 and the rule as a whole.
    NABTU, the Laborers' International Union of North America (LIUNA), 
and the Iron Workers commented that the Department appeared to tether 
the ``functional equivalence'' analysis only to single CBAs or to 
written policies maintained by contractors. As the commenters noted, 
there are circumstances in which it may be appropriate to analyze 
multiple CBAs in order to identify whether rates in a survey are 
functionally equivalent. They suggested that the Department amend the 
text of proposed Sec.  1.3(e) to allow a functional equivalence 
determination to be based on ``one or more collective bargaining 
agreements'' or ``written policies'' of a contractor or contractors 
instead of just ``a collective bargaining agreement'' or a ``written 
policy.'' The Department agrees that this change in the language is 
warranted because there are circumstances in which a comparison of 
multiple CBAs or written policies may be helpful to understanding the 
relationship between wage rates. For example, if different locals of 
the same union have parallel collective bargaining units with the same 
base rate and hazard pay rate, and the WHD survey captures rates from 
workers working at the base rate under one of the CBAs and from workers 
working in the same classification but at the hazard pay rate under the 
other CBA, it would be reasonable to consider the rates to be 
functionally equivalent for the purpose of determining the prevailing 
wage. Accordingly, the final rule adopts this change.
    A few other commenters that were largely supportive of the proposal 
made suggestions that the final rule does not adopt. The Iron Workers 
recommended that the Department further codify that combined fringe and 
benefit wage rates must be treated as functionally equivalent wherever 
two workers have the same total overall compensation. The Iron Workers 
provided alternative regulatory text that would reference the statutory 
definition for the term ``wages'' in 40 U.S.C. 3141. That definition 
includes both the basic hourly rate of pay and fringe benefit rate. As 
the Iron Workers noted, the NPRM explained that slightly differing base 
hourly rates can be considered functionally equivalent where workers 
have the same combined hourly and fringe rate. In other words, where 
the combination of hourly and fringe rates are the same, it is 
appropriate for the Department to count the base rate as the ``same 
wage'' for the purpose of determining the prevailing wage. In light of 
this clarification, the Department does not believe it is necessary to 
add the additional text to Sec.  1.3(e) that the Iron Workers 
suggested.
    Finally, LIUNA and NABTU, while supporting the Department's 
proposal, urged that the language of proposed Sec.  1.3(e) be changed 
from allowing the Department to treat functionally equivalent rates the 
same, to requiring it. These commenters noted that in the proposed 
language, the Administrator ``may'' treat variable wage rates as the 
same wage in appropriate circumstances, and they suggested that the 
language be revised to use the term ``shall'' instead. The Department 
declines to adopt this suggestion. During the survey process, 
respondents can assist the Department by identifying when wage 
differentials are due to elements of a CBA or written policy that are 
unrelated to the underlying work. However, as the Department has 
explained in this rulemaking, the wage survey and wage determination 
process can be resource-intensive and time-consuming for WHD, and the 
need for timely completion of surveys and wage determinations has been 
the subject of criticism levied against the current process.
    Thus, while the identification of wage differentials that may be 
functionally

[[Page 57551]]

equivalent can be an important tool for WHD in increasing the use of 
predominant modal wage rates as prevailing in wage determinations, 
LIUNA and NABTU's proposal would not be reasonable or administratively 
feasible, because it would require WHD to review individual CBA wage 
rates as well as request that contractors provide written policies 
about every wage rate submitted during a survey--even where the 
successful identification of wage rates that are functionally 
equivalent might have limited or no effect on the outcome of the wage 
determination.
    The final rule therefore adopts the language at Sec.  1.3(e) as 
proposed, with the limited changes identified above.
(B) Area
    The Department also proposed changes to the definition of the term 
``area'' in Sec.  1.2. The regulations use the term ``area'' to 
describe the relevant geographic units that the Department may use to 
determine the prevailing wage rates that laborers and mechanics must, 
at a minimum, receive on covered projects. See 29 CFR 1.2, 1.3. The 
definition of area therefore has consequences for how the Department 
gathers wage rate information and how the Department calculates 
prevailing wages.
    The core definition of ``area'' in Sec.  1.2 states that the term 
``means the city, town, village, county or other civil subdivision of 
the State in which the work is to be performed.'' This definition 
largely reproduces the specification in the Davis-Bacon Act statute, 
prior to its 2002 re-codification, that the prevailing wage should be 
based on projects of a similar character in the ``city, town, village, 
or other civil subdivision of the State in which the work is to be 
performed.'' See 40 U.S.C. 276a(a) (2002).
    The geography-based definition of ``area'' in Sec.  1.2 applies to 
federally assisted projects covered by the Davis-Bacon Related Acts as 
well as projects covered by the DBA itself. Some of the Related Acts 
have used different terminology to identify the appropriate ``area'' 
for a wage determination, including the terms ``locality'' and 
``immediate locality.'' \94\ However, the Department has long concluded 
that these terms are best interpreted and applied consistent with the 
methodology for determining the area under the original DBA. See 
Virginia Segment C-7, METRO, WAB No. 71-4, 1971 WL 17609, at *3-4 (Dec. 
7, 1971).
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    \94\ See, e.g., National Housing Act, 12 U.S.C. 1715c(a) 
(locality); Housing and Community Development Act of 1974, 42 U.S.C. 
secs. 1440(g), 5310(a) (locality); Federal Water Pollution Control 
Act, 33 U.S.C. 1372 (immediate locality); Federal-Aid Highway Acts, 
23 U.S.C. sec 113(a) (immediate locality).
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    While the definition of ``area'' provides for the use of various 
possible geographic units, the Department has, for several decades now, 
identified the county as the default unit for this purpose. See 29 CFR 
1.7(a). This has a corollary for contracting agencies. In order to 
determine what wages apply to a given construction project, the 
contracting agency will generally need to identify the county (or 
counties) in which the project will be constructed and obtain the 
general wage determination for the correct type of construction for 
that county (or counties) from the System for Award Management (SAM).
    The Department's choice of a geographic ``area'' to use for a wage 
determination has consequences for how the prevailing wage will be 
determined. The regulations, as amended in this rulemaking, explain 
that the Department will carry out a voluntary wage survey to seek wage 
data for a type of construction in an ``area.'' They will then apply 
the three-step process to that data to determine what wage rate in an 
``area'' prevails for a specific labor classification. See III.B.1.ii.A 
and III.B.1.iii.
    Because the Department uses the county as the default area for a 
wage determination, it will normally gather wage survey data for each 
county and carry out the three-step process for each classification of 
worker and construction type in that county. If there is sufficient 
current wage data for a classification of workers in a county, this 
process will result in the prevailing wage that will appear on a wage 
determination. The regulations at Sec.  1.7(b) and (c) describe the 
Department's procedures for making the determination if there is not 
sufficient wage data in a county for a given classification of workers.
    In the NPRM, the Department proposed to maintain the core 
definition of ``area'' in Sec.  1.2 as currently written, with its list 
of possible geographic units that the Administrator may use. As 
discussed in section III.B.1.vii regarding Sec.  1.7 and geographic 
aggregation practices, the Department similarly proposed to maintain 
the use of the county as the default area for most wage determinations. 
The Department also, however, proposed two limited additions to the 
definition of ``area'' in Sec.  1.2 to address projects that span 
multiple counties and to address highway projects specifically.
(1) Multi-County Project Wage Determinations
    Under WHD's current methodology, if a project spans more than one 
county, the contracting officer is instructed to attach wage 
determinations for each county to the contract for the project and 
contractors may be required to pay differing wage rates to the same 
employees when their work crosses county lines. This policy was 
reinforced in 1971 when the Wage Appeals Board (WAB) found that, under 
the terms of the then-applicable regulations, there was no basis to 
provide a single prevailing wage rate for a project occurring in 
Virginia, the District of Columbia, and Maryland. See Virginia Segment 
C-7, METRO, WAB No. 71-4, 1971 WL 17609.
    Critics of this policy have pointed out that this can be 
inconsistent with how workers are paid on projects outside of the 
Davis-Bacon context. In any given non-DBRA project that might be 
completed in multiple counties, workers are very often hired and paid a 
single wage rate for all of their work on the project, and--unless 
there are different city or county minimum wage laws, or zone pay under 
a CBA--workers' pay rates often would not change as they move between 
tasks in different counties. The 2011 report by the GAO, for example, 
quoted a statement from a contractor association representative that 
the requirement of different wage rates for the same workers on the 
same multi-county project is ``illogical.'' See 2011 GAO Report, at 
24.\95\
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    \95\ See note 10, supra.
---------------------------------------------------------------------------

    To address the concerns of these critics, the Department proposed 
adding language in the definition of ``area'' in Sec.  1.2 to expressly 
authorize WHD to issue project wage determinations with a single rate 
for each classification, using data from all of the relevant counties 
in which a project will occur. Under the proposal, the definition of 
``area'' would provide that where a project requires work in multiple 
counties, the ``area'' may include all the counties in which the work 
will be performed. The NPRM also included related language at Sec.  
1.5(b)(i) that authorized contracting agencies to request a project 
wage determination where the project involves work in more than one 
county and will employ workers who may work in more than one county. 
The Department solicited comments on whether this procedure should be 
mandatory for multi-jurisdictional projects or available at the request 
of the contracting agency or an interested party, if WHD determines 
that

[[Page 57552]]

such a project wage determination would be appropriate.
    Several commenters, including three contractor associations, a 
union, the Minnesota Department of Transportation (MnDOT), and the 
Council of State Community Development Agencies (COSCDA), generally 
supported the Department's proposal as written. COSCDA noted that the 
proposal could be helpful for broadband projects and AGC noted that it 
would be helpful for highway projects. According to AGC, the current 
practice can be particularly burdensome where the different county wage 
determinations that are applicable to the same project have differing 
craft classifications and job duties. AGC stated that the Department's 
proposal to allow a single wage determination to apply to an entire 
project is a proposal that ``provides logical relief'' and is ``true 
modernization.'' A Professor of Economics who commented on the proposal 
stated that combining contiguous counties together on ``horizontal 
projects'' such as heavy and highway projects is a ``conceptually 
appropriate way of designing a local labor market'' because all of the 
counties in which the project occurs are counties from which the 
workers are likely to be drawn.
    One commenter, Montana Lines Inc., supported making these single-
rate project wage determinations mandatory for multi-county projects. 
Montana Lines Inc. stated that in Montana, construction workers are 
available across the state and travel to all parts of the state and, 
therefore, the prevailing wage for the whole state should be the same.
    Conversely, NFIB strongly opposed the proposal. NFIB asserted that 
the statutory language referencing ``civil subdivision of a state'' in 
40 U.S.C. 3142(b) requires the establishment of prevailing wages on a 
``subdivision by subdivision'' basis and thus requires a separate 
prevailing wage for each subdivision in which work under the contract 
occurs. NFIB thus recommended regulatory language that would instead 
codify the current practice that, in multi-county projects, ``each such 
civil subdivision in which work will be performed is a separate area.''
    Two commenters, LIUNA and Indiana-Illinois-Iowa Foundation for Fair 
Contracting (III-FFC) supported the Department's proposal, but strongly 
advocated that it be discretionary as opposed to mandatory and that the 
Department ensure that it is used only where appropriate. They 
advocated that the Department should only adopt the proposal if it is 
limited to circumstances where the resulting wage determinations 
reflect local labor markets and do not undermine the highest rates paid 
in any included county under the governing general wage determination. 
LIUNA stated that the Department can maintain deference to established 
labor markets by analyzing available wage data, the jurisdictional 
coverage of CBAs, contractor bidding practices, geography, and/or 
administratively established areas under State law. The two commenters 
explained that these precautions are necessary to ensure that the 
procedure is consistent with the Davis-Bacon Act's purpose of 
preserving a wage floor in each local labor market.
    The Florida Transportation Builder's Association, Inc. (FTBA) 
stated it supported the proposed change along with the proposal for 
using State highway districts as ``areas'' for highway projects. FTBA 
requested clarification regarding the methodology the Department would 
use in setting single rates for each job classification on project wage 
determinations for work that spans multiple counties. They proposed 
that the Department set rates based on the wage determination rates for 
the county where the majority of the work would occur on a covered 
project.
    The Department considered these comments regarding the proposal to 
authorize multi-county ``areas.'' The proposal does not provide, as 
FTBA suggested, for the opportunity to identify the county in which 
most of the construction will occur and then use the wage rates in that 
county for all other counties in which the project would take place. 
Rather, the proposal intersects with the definition of ``prevailing 
wage'' in Sec.  1.2 and the Department's guidelines for obtaining and 
compiling wage rate information in Sec.  1.3. Those regulations, as 
amended in this rulemaking, explain that the Department will carry out 
the three-step process to determine whether any wage rate prevails in a 
given ``area.'' See section III.B.1.iii. Thus, if a multi-county area 
is used, then the wage data from all counties where the project will 
take place would be combined together before the Department determines 
whether there is a modal wage rate that prevails for each 
classification and construction type.
    The Department disagrees with NFIB's argument that this procedure 
is not permissible. Using a project wage determination with a single 
``area'' for multi-county projects is not inconsistent with the text of 
the DBA. The DBA and Related Act statutes themselves do not address 
multi-jurisdictional projects, and ``Congress anticipated that the 
general authorization to the Secretary to set the prevailing wage would 
encompass the power to find a way to do so in the interstitial areas 
not specifically provided for in the statute.'' Donovan, 712 F.2d at 
618. As other commenters noted, providing contractors with the ability 
to pay a single wage rate to workers within the same classification on 
a multi-county project is responsive to concerns that have been raised 
about administrative burdens of the program.
    In addition, as a general matter, the creation of multi-county 
areas for projects covering multiple counties is consistent with the 
purpose of the DBA, which is to protect against the depression of local 
wage rates caused by competition from low-bid contractors from outside 
of the locality. Allowing the use of data from all counties in which 
the project is being carried out means incorporating wage data from 
workers who will generally have been working in the vicinity of some 
portion of the project and thus cannot reasonably be characterized as 
imported labor from outside of the project locality.
    The Department, however, is sensitive to the concerns raised by 
LIUNA and III- FFC. In many circumstances, multi-county projects will 
satisfy these commenters' concerns that the counties involved are 
effectively within the same labor market. But it is certainly possible 
that a multi-county project could take place in counties that are 
particularly dissimilar and represent entirely different labor markets, 
such as may be the case if the project were to span a long string of 
counties across an entire state. In such circumstances, while a multi-
county project wage determination could still be requested, it may not 
be appropriate to combine the county data by using a multi-county area. 
Instead, it could be more appropriate to use general wage 
determinations with separate county wage rates for counties that are in 
wholly different labor markets, or to create a project wage 
determination for certain counties that are part of the same labor 
market and use available general wage determinations for any other 
counties that are not.
    Accordingly, the Department is disinclined to make multi-county 
areas mandatory for any multi-county project wage determination or to 
make them available as a matter of course at the request of interested 
parties other than the contracting agency. Instead, the final rule 
adopts the language as proposed, which allows the Department to use 
multi-county areas for multi-county

[[Page 57553]]

project wage determinations but does not require their use. The 
Department agrees with LIUNA that it will be important for the 
Department to ensure that the multi-county areas do not undermine the 
two important purposes of the statute of identifying actual prevailing 
wage rates where they exist and guarding against the depression of 
local wage standards. See 5 Op. O.L.C. at 176. Thus, as LIUNA noted, a 
multi-county area may be inappropriate for a classification of workers 
on a project wage determination if it would result in the use of an 
average rate where existing individual county wage determinations would 
otherwise identify prevailing wage rates under the Department's 
preferred modal methodology. Similarly, a single multi-county area for 
certain classifications of workers on a project wage determination 
might be inconsistent with the purpose of the statute if the procedure 
results in average wage rates that are substantially lower than the 
prevailing wage rate would be in one of the included counties under the 
default general wage determination.
(2) State Highway Districts
    The Department's other proposed change to the definition of 
``area'' in Sec.  1.2 was to allow the use of State highway districts 
or similar transportation subdivisions as the relevant wage 
determination area for highway projects, where appropriate. Although 
there is significant variation between states, most states maintain 
civil subdivisions responsible for certain aspects of transportation 
planning, financing, and maintenance.\96\ These districts tend to be 
organized within State departments of transportation or otherwise 
through State and County governments.
---------------------------------------------------------------------------

    \96\ See generally Am. Assoc. of State Highway and Transp. 
Offs., ``Transportation Governance and Financing: A 50-State Review 
of State Legislatures and Departments of Transportation'' (2016), 
available at: http://www.financingtransportation.org/pdf/50_state_review_nov16.pdf.
---------------------------------------------------------------------------

    In the NPRM, the Department explained that using State highway 
districts as a geographic unit for wage determinations would be 
consistent with the Davis-Bacon Act's specification that wage 
determinations should be tied to a ``civil subdivision of a State.'' 
State highway districts were considered to be ``subdivisions of a 
State'' at the time the term was used in the original Davis-Bacon Act. 
See Wight v. Police Jury of Par. of Avoyelles, La., 264 F. 705, 709 
(5th Cir. 1919) (describing the creation of highway districts as 
``governmental subdivisions of the [S]tate''). The Department further 
explained that State highway or transportation districts often plan, 
develop, and oversee federally financed highway projects. Accordingly, 
the provision of a single wage determination for each district would 
simplify the procedure for incorporating Federal financing into these 
projects.
    Several commenters that supported the proposal for multi-county 
project wage determinations, such as MnDOT and FTBA, also supported the 
proposal to authorize WHD to adopt State highway districts as areas for 
highway projects. The New Jersey Heavy & Highway Construction Laborers 
District Council (NJHHCL) called the proposal a ``common-sense 
revision'' that will simplify how projects are structured and planned, 
allowing more resources to be devoted to the projects themselves 
instead of their administration. The American Road & Transportation 
Builders Association (ARTBA) supported the proposal because highway 
construction projects often span more than one county, and the use of a 
single area would ensure workers on the project are paid at the same 
rate regardless of the county in which they are working. As noted, AGC 
strongly supported the use of multi-county wage project wage 
determinations for highway projects. Although AGC did not specifically 
mention the use of state Highway districts as ``areas,'' the two 
proposals would work in similar ways and have similar effects. NFIB 
recommended that the Department adopt the proposal, revised slightly to 
apply to highway districts and ``other similar State agency 
geographical units'' instead of the language the Department proposed 
referring to highway districts and ``other similar State 
subdivisions.''
    LIUNA expressed a similar position regarding the State highway 
district proposal as it did for multi-county project wage 
determinations. They advocated that the Department should only adopt 
the proposal if the use is limited to circumstances where the resulting 
wage determinations reflect local labor markets and do not undermine 
the highest rates paid in any individual county under a general wage 
determination. III-FFC stated that they were ``neutral'' on the 
Department's proposal. They stated that the existence of State highway 
districts may be an appropriate consideration when establishing a 
project wage determination on a highway project but that this 
consideration should be secondary to ``local labor market 
considerations.''
    The group of U.S. Senators submitted a comment strongly opposing 
the proposal. They argued that the Department lacks statutory authority 
to interpret the term ``civil subdivision of the State'' in the DBA 
statute as including State highway districts. The comment asserted that 
the separate reference in the statutory text at 42 U.S.C. 3142(b) to 
the District of Columbia should limit the meaning of ``other 
subdivision of the State'' to subdivisions that the District of 
Columbia does not have. The comment also asserted that the Department's 
proposal runs counter to decades of agency practice, faulted it for 
failing to cite any legislative history to support its interpretation, 
and found the Department's citation to the 1919 Wight decision to be 
unconvincing. The Senators stated that not all State highway districts 
are the same, because not all States grant taxing and bonding authority 
or formal subdivision status to their highway districts. They also 
suggested that stakeholders had ``come to rely upon'' the current and 
prior regulations, which did not expressly provide for the use of State 
highway districts.
    The Department generally agrees with the commenters that supported 
the highway districts proposal. The use of State highway districts or 
similar subdivisions as the areas for highway project wage 
determinations has the potential to reduce burdens and streamline 
highway projects that may cross county lines. These projects otherwise 
will require the use of multiple wage determinations for the same 
classification of workers and may often require the same individual 
workers to be paid different rates for doing the same work on different 
parts of the project.
    The Department disagrees with the Senators that asserted the 
proposal is not permitted by the statute. The plain text of the Davis-
Bacon statute supports the Department's interpretation. Congress has 
used the terms political subdivision and civil subdivision 
interchangeably, including with regard to the DBA's ``civil subdivision 
requirement.'' See 1963 Subcommittee Report, at 5 (``There may be 
isolated areas where no rate can be found for the particular kind of 
project in the political subdivision of the State in which the project 
is located.''); see also Political Subdivision, Black's Law Dictionary 
(11th ed. 2019) (defining political subdivision as a ``division of a 
state that exists primarily to discharge some function of a local 
government.''). As the Wight decision explained, during the time period 
leading up to the passage of the DBA, the funding and maintenance of 
roads was a function of subdivisions of State government, and

[[Page 57554]]

``many States'' created subdivisions to exercise those functions. 264 
F. at 709.
    The Senators did not provide any authority to support their 
statement that at the time of the DBA's passage ``there was a widely 
accepted distinction between state highway districts and civil 
subdivisions'' and that ``Congress has always differentiated between 
the two.'' If anything, the history of Federal highway funding statutes 
supports the opposite conclusion. In the Federal-Aid Road Act of 1916, 
Congress directly linked highway funding to ``civil subdivisions'' that 
were required to maintain the funded roads or else forfeit future 
Federal funding. Public Law 64-156, Sec. 7, 39 Stat. 355, 358 (1916). 
The current version of the Federal highway aid statute reinforces this 
understanding, as it ties funding to State highway districts or 
``other'' political or administrative subdivisions of a State. 23 
U.S.C. 116.\97\
---------------------------------------------------------------------------

    \97\ Similarly, in 1927 Congress enacted the Longshore and 
Harbor Workers Compensation Act (LHWCA), where it limited the 
workers compensation liability under the Act for ``political 
subdivisions'' of a State. See Public Law 69-803, Sec. 3, 44 Stat. 
1424, 1426 (1927). As used in the LHWCA, ``political subdivision'' 
includes State-authorized transportation districts such as the 
Golden Gate Bridge, Highway & Transportation District. See Wheaton 
v. Golden Gate Bridge, Highway & Transp. Dist., 559 F.3d 979, 984-85 
(9th Cir. 2009).
---------------------------------------------------------------------------

    The Department also disagrees that the meaning of the term 
``subdivision'' in the DBA is constrained by the subsequent statutory 
reference to the District of Columbia. See 40 U.S.C. 3142(b). The Act 
provides for the determination of rates for the various potential 
``civil subdivisions of a State in which the work is to be performed,'' 
followed by ``or in the District of Columbia if the work is to be 
performed there.'' The Department interprets this language as 
suggesting only that the District of Columbia may be the appropriate 
``area'' to use for projects occurring there, and that for such 
projects it should not be necessary to further subdivide the District 
of Columbia into smaller areas.
    The Department disagrees with the U.S. Senators' suggestion that 
the final rule should not adopt the revised definition of ``area'' 
because stakeholders have come to rely on the prior definition. Any 
such reliance interests would not weigh strongly against adopting the 
multi-county and State highway district area proposals, because these 
area subdefinitions would only factor into the development of wage 
determinations that are finalized after this rule becomes effective. 
Any resulting new wage determinations would themselves generally have 
effect once they have been incorporated into future contracts, allowing 
contractors to take any new rates into consideration as they develop 
their bids or negotiate contract pricing.\98\
---------------------------------------------------------------------------

    \98\ As explained in Sec.  1.6(c), whenever a new wage 
determination is issued (either after the completion of a new wage 
survey or through the new periodic adjustment mechanism), that 
revision as a general matter does not and will not apply to 
contracts which have already been awarded, with three exceptions. 
These exceptions are explained in Sec.  1.6(c)(2)(iii), and they 
include where a contract or order is changed to include substantial 
covered work that was not within the original scope of work, where 
an option is exercised, and also certain ongoing contracts that are 
not for specific construction, for which new wage determinations 
must be incorporated on an annual basis under Sec.  
1.6(c)(2)(iii)(B) of the final rule. The final rule instructs 
contracting agencies to apply the terms of Sec.  1.6(c)(2)(iii) to 
all existing contracts, without regard to the date of contract 
award, if practicable and consistent with applicable law. The 
Department does not anticipate that the application of the amended 
wage determination methodologies in these situations will result in 
unfair harm to reliance interests in a manner sufficient to outweigh 
the benefits of the final rule implementation as planned. See also 
section III.C. (``Applicability Date'') below.
---------------------------------------------------------------------------

    The legislative history of the DBA, while it does not expressly 
address highway districts, is helpful because the text of the statute 
should be interpreted in a manner consistent with its purpose. Given 
that the purpose of the Act is to protect locally prevailing wage 
rates, the term ``civil subdivision'' necessarily must have a 
geographical component. Cf. Jones v. Conway Cnty, 143 F.3d 417, 418-19 
(8th Cir. 1998) (noting that the enumerated examples of ``political 
subdivisions,'' such as counties, municipal corporations, and school 
districts, can help to interpret that the term is meant to be limited 
to subdivisions that involve a ``physical division of the state'').\99\ 
The Department agrees with NFIB's comment that a slight revision to the 
proposed language would be appropriate to communicate this 
understanding. The final rule therefore provides that, for highway 
projects, the ``area'' for wage determinations may be State department 
of transportation highway districts or other similar State 
``geographic'' subdivisions.
---------------------------------------------------------------------------

    \99\ For the same reason, there is no particular reason to 
interpret the term as requiring some element of exercise of 
particular State powers such as taxing and bonding authority. These 
factors may be helpful where the use of the term ``political 
subdivision'' implicates questions regarding the rights or duties of 
the governmental entity in charge of such a subdivision, but those 
characteristics are not particularly relevant to the economic and 
geographical context in which the term is used in the DBA.
---------------------------------------------------------------------------

    The Department also agrees with LIUNA and III-FFC that while the 
use of State highway districts may at times be consistent with the 
purpose of the DBRA, they will not necessarily always be so. For this 
reason, the proposed language does not make it mandatory for the 
Department to use State highway districts as ``areas'' for highway 
projects, and instead gives the Department discretion to use them where 
they are appropriate. Relevant here, the Federal-Aid Highway Act of 
1956 (FAHA), one of the Related Acts, uses the term ``immediate 
locality'' instead of ``civil subdivision'' for identifying the 
appropriate geographic area of a wage determination. 23 U.S.C. 113. The 
FAHA requires the application of prevailing wage rates in the immediate 
locality to be ``in accordance with'' the DBA, id., and, as noted 
above, WHD has long applied these alternative definitions of area in 
the Related Acts in a manner consistent with the ``civil subdivision'' 
language in the original Act. The FAHA ``locality'' language, however, 
is helpful guidance for determining whether certain State highway 
districts, while within the broadest meaning of ``civil subdivision of 
a State,'' may be too large to be used as the default areas for general 
wage determinations.
    Similarly, it would not be consistent with the purpose of the DBRA 
to use State highway districts as ``areas'' in a State where doing so 
would result in a significant increase in the use of average rates 
instead of modal prevailing wage rates on wage determinations. The 
Department therefore will need to take similar precautions with regard 
to the use of State highway districts as with multi-county project wage 
determinations.
    Having considered the comments regarding the State highway district 
proposal, the final rule adopts the proposal with the addition of the 
word ``geographic'' to better describe the type of State agency 
transportation subdivisions that may be used.
(C) Type of Construction (or Construction Type)
    The Department proposed to define ``type of construction'' or 
``construction type'' to mean the general category of construction as 
established by the Administrator for the publication of general wage 
determinations. The proposed language also provided examples of types 
of construction, including building, residential, heavy, and highway, 
consistent with the four construction types the Department currently 
uses in general wage determinations, but did not exclude the 
possibility of other types. The terms ``type of construction'' or 
``construction type'' are already used elsewhere in part 1 to refer to 
these general categories of construction, as well as in wage

[[Page 57555]]

determinations themselves. As used in this part, the terms ``type of 
construction'' and ``construction type'' are synonymous and 
interchangeable. The Department believes that including this definition 
will provide additional clarity for these references, particularly for 
members of the regulated community who might be less familiar with the 
terms.
    The Department received no comments specifically addressing this 
proposal. However, the Department received several comments relating to 
the definitions provided in AAM 130 (Mar. 17, 1978) for the residential 
and building construction categories. AAM 130 provides a description of 
the four types of construction with an illustrative listing of the 
kinds of projects that are generally included within each type for DBRA 
purposes. Under AAM 130, apartment buildings of no more than four 
stories in height are classified as residential and apartment buildings 
of five or more stories are classified as building construction.
    MBA, AWHA, and NAHB urged the Department to adopt in the final rule 
an expanded definition of residential construction that would include 
all multifamily structures regardless of their story level. On the 
other hand, SMART and SMACNA argued AAM 130's categorization of 
apartment buildings based on the story level has resulted in the 
misclassification of ``mixed-use'' buildings as residential and called 
for the reexamination of the classifications.
    The Department believes the definition of what falls under each 
type of construction is best addressed through subregulatory guidance 
and intends to continue with that approach. The final rule therefore 
adopts the proposal without any changes.
(D) Other Definitions
    The Department proposed additional conforming edits to 29 CFR 1.2 
in light of proposed changes to 29 CFR 5.2. As part of these conforming 
edits, the Department proposed to revise the definition of ``agency'' 
(and add a sub-definition of ``Federal agency'') to mirror the 
definition proposed and discussed in the preamble regarding Sec.  5.2. 
The Department also proposed to add new defined terms to Sec.  1.2 that 
were proposed in parts 3 and 5, including ``employed,'' ``type of 
construction (or construction type),'' and ``United States or the 
District of Columbia.'' As discussed in the preamble regarding Sec.  
5.2, the Department did not receive any comments on the proposed 
changes to the definition of ``agency'' or the addition of the 
definition of ``United States or the District of Columbia,'' and 
therefore the final rule adopts these changes as proposed. The proposed 
addition of the terms ``employed'' and ``type of construction (or 
construction type),'' and comments associated with them, are discussed 
in the preamble sections III.B.1.ii.C (Sec.  1.2) and III.B.3.xxii 
(Sec.  5.2).
(E) Paragraph Designations
    The Department also proposed to amend Sec. Sec.  1.2, 3.2, and 5.2 
to remove paragraph designations of defined terms and instead to list 
defined terms in alphabetical order. The Department proposed to make 
conforming edits throughout parts 1, 3, and 5 in any provisions that 
currently reference lettered paragraph definitions.
    The Department received no comments on this proposal. The final 
rule therefore adopts this change as proposed.
iii. Section 1.3 Obtaining and Compiling Wage Rate Information
(A) 29 CFR 1.3(b)
    The Department proposed to switch the order of Sec.  1.3(b)(4) and 
(5) for clarity. This non-substantive change would simply group 
together the paragraphs in Sec.  1.3(b) that apply to wage 
determinations generally and follow those paragraphs with one that 
applies only to Federal-aid highway projects under 23 U.S.C. 113.
    The Department received no comments on this specific proposal. The 
final rule therefore adopts this change as proposed.
    However, the Department received one comment in response to its 
proposed revision to Sec.  1.3(b). Although the Department only 
proposed revisions to Sec.  1.3(b)(4) and (5), the Iron Workers noted 
that Sec.  1.3(b) provides guidelines concerning the types of 
information that WHD may consider when making prevailing wage 
determinations and suggested that the Department also amend Sec.  
1.3(b)(2) to further safeguard against the fragmentation of job 
classifications. Specifically, this commenter suggested the Department 
codify Fry Brothers in Sec.  1.3(b)(2).
    The Department appreciates the recommendation and notes that 
classification decisions are made in accordance with relevant legal 
precedent and subregulatory guidance, including the decision in Fry 
Brothers and subregulatory guidance such as AAM 213 (Mar. 22, 2013). 
Because the Department did not propose changes to Sec.  1.3(b)(2), it 
declines to adopt the Iron Workers' recommendation.
(B) 29 CFR 1.3(d)
    The Department noted in the NPRM that it was considering whether to 
revise Sec.  1.3(d), which addresses when survey data from Federal or 
federally assisted projects subject to Davis-Bacon prevailing wage 
requirements (hereinafter ``Federal project data'') may be used in 
determining prevailing wages for building and residential construction 
wage determinations. The Department did not propose any specific 
revisions to Sec.  1.3(d) in the NPRM, but rather sought comment on 
whether Sec.  1.3(d)--particularly its limitation on the use of Federal 
project data in determining wage rates for building and residential 
construction projects--should be revised.
    As the Department observed in the NPRM, for approximately 50 years 
(beginning shortly after the DBA was enacted in 1931 and continuing 
until the 1981-1982 rulemaking), the Department used Federal project 
data in determining prevailing wage rates for all categories of 
construction, including building and residential construction. The 
final rule promulgated in May 1982 codified this practice with respect 
to heavy and highway construction, providing in new Sec.  1.3(d) that 
``[d]ata from Federal or federally assisted projects will be used in 
compiling wage rate data for heavy and highway wage determinations.'' 
\100\ The Department explained that ``it would not be practical to 
determine prevailing wages for `heavy' and `highway' construction 
projects if Davis-Bacon covered projects are excluded in making wage 
surveys because such a large portion of those types of construction 
receive Federal financing.'' \101\
---------------------------------------------------------------------------

    \100\ 47 FR 23652.
    \101\ Id. at 23645.
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    With respect to building and residential construction, however, the 
1982 final rule concluded that such construction often occurred without 
Federal financial assistance subject to Davis-Bacon prevailing wage 
requirements, and that to invariably include Federal project data in 
calculating prevailing wage rates applicable to building and 
residential construction projects therefore would ``skew[] the results 
upward,'' contrary to congressional intent.\102\ The final rule 
therefore provided in Sec.  1.3(d) that ``in compiling wage rate data 
for building and residential wage determinations, the Administrator 
will not use data from Federal or federally assisted projects subject 
to Davis-Bacon prevailing wage requirements unless it is determined 
that there is insufficient wage data to

[[Page 57556]]

determine the prevailing wages in the absence of such data.'' 29 CFR 
1.3(d). In subsequent litigation, the D.C. Circuit upheld Sec.  
1.3(d)'s limitation on the use of Federal project data as consistent 
with the DBA's purpose and legislative history--if not necessarily its 
plain text--and therefore a valid exercise of the Administrator's broad 
discretion to administer the Act.\103\
---------------------------------------------------------------------------

    \102\ See Donovan, 712 F.2d at 620.
    \103\ Id. at 621-22.
---------------------------------------------------------------------------

    As a result of Sec.  1.3(d)'s limitation on the use of Federal 
project data in calculating prevailing wage rates applicable to 
building and residential construction, WHD first attempts to calculate 
a prevailing wage based on non-Federal project survey data at the 
county level--i.e., survey data that includes data from private 
projects or projects funded by State and local governments without 
assistance under the DBRA, but that excludes data from Federal or 
federally assisted projects subject to Davis-Bacon prevailing wage 
requirements. See 29 CFR 1.3(d), 1.7(a); Manual of Operations at 38; 
Coal. for Chesapeake Hous. Dev., ARB No. 12-010, 2013 WL 5872049, at *4 
(Sept. 25, 2013) (Chesapeake Housing). If there is insufficient non-
Federal project survey data for a particular classification in that 
county, then WHD considers survey data from Federal projects in the 
county if such data is available.
    Under the current regulations, WHD expands the geographic scope of 
the data that it considers when it is making a county wage 
determination when data is insufficient at the county level. This 
procedure is described below in the discussion of the ``scope of 
consideration'' regulation at Sec.  1.7. For wage determinations for 
building and residential construction projects, WHD currently 
integrates Federal project data into this procedure at each level of 
geographic aggregation in the same manner it is integrated at the 
county level: If the combined Federal and non-Federal survey data 
received from a particular county is insufficient to establish a 
prevailing wage rate for a classification in a county, then WHD 
attempts to calculate a prevailing wage rate for that county based on 
non-Federal wage data from a group of surrounding counties. See 29 CFR 
1.7(a), (b). If non-Federal project survey data from the surrounding-
counties group is insufficient, then WHD includes Federal project data 
from all the counties in that group. If both non-Federal project and 
Federal project data for a surrounding-counties group is still 
insufficient to determine a prevailing wage rate, then WHD may expand 
to a ``super group'' of counties or even to the statewide level. See 
Chesapeake Housing, ARB No. 12-010, 2013 WL 5872049, at *6; PWRB, 
Davis-Bacon Surveys, at 6.\104\ At each stage of data expansion for 
building and residential wage determinations, WHD first attempts to 
determine prevailing wages based on non-Federal project data; however, 
if there is insufficient non-Federal data, WHD will consider Federal 
project data.
---------------------------------------------------------------------------

    \104\ See note 19, supra.
---------------------------------------------------------------------------

    As reflected in the plain language of Sec.  1.3(d) as well as WHD's 
implementation of that regulatory provision, the current formulation of 
Sec.  1.3(d) does not prohibit the use of Federal project data in 
establishing prevailing wage rates for building and residential 
construction projects subject to Davis-Bacon requirements; rather, it 
limits the use of such data to circumstances in which ``there is 
insufficient wage data to determine the prevailing wages in the absence 
of such data.'' 29 CFR 1.3(d). As the Department explained in the NPRM, 
WHD often uses Federal project data in calculating prevailing wage 
rates applicable to residential construction due to insufficient non-
Federal data. By contrast, because WHD's surveys of building 
construction typically have a higher participation rate than 
residential surveys, WHD uses Federal project data less frequently in 
calculating prevailing wage rates applicable to building construction 
projects covered by the DBRA. For example, the 2011 GAO Report analyzed 
4 DBA surveys and found that over two-thirds of the residential rates 
for 16 key job classifications (such as carpenter and common laborer) 
included Federal project data because there was insufficient non-
Federal project data, while only about one-quarter of the building wage 
rates for key classifications included Federal project data. 2011 GAO 
Report, at 26.\105\
---------------------------------------------------------------------------

    \105\ See note 10, supra.
---------------------------------------------------------------------------

    Notwithstanding the use of Federal project data in calculating 
prevailing wage rates for building and residential construction, the 
Department noted in the NPRM that some interested parties may believe 
that Sec.  1.3(d) imposes an absolute barrier to the use of Federal 
project data in determining prevailing wage rates. As a result, survey 
participants may not submit Federal project data in connection with 
WHD's surveys of building and residential construction, thereby 
reducing the amount of data that WHD receives in response to its 
building and residential surveys. The Department therefore strongly 
encouraged robust participation in Davis-Bacon prevailing wage surveys, 
including building and residential surveys, and it urged interested 
parties to submit Federal project data in connection with building and 
residential surveys with the understanding that such data will be used 
in calculating prevailing wage rates if insufficient non-Federal 
project data is received. The Department specifically observed that in 
the absence of such Federal project data, for example, a prevailing 
wage rate may be calculated at the surrounding-counties group or even 
statewide level when it would have been calculated based on a smaller 
geographic area if more Federal project data had been submitted.
    Although increased submission of such Federal project data thus 
could be expected to contribute to more robust wage determinations even 
without any change to Sec.  1.3(d), the Department recognized in the 
NPRM that revisions to Sec.  1.3(d) might nonetheless be warranted. The 
Department therefore solicited comments regarding whether to revise 
Sec.  1.3(d) in a way that would permit WHD to use Federal project data 
more frequently when it calculates building and residential prevailing 
wages. For example, particularly given the challenges that WHD has 
faced in achieving high levels of participation in residential wage 
surveys--and given the number of residential projects that are subject 
to Davis-Bacon labor standards under Related Acts administered by HUD--
the Department noted in the NPRM that it might be appropriate to expand 
the amount of Federal project data that is available to use in setting 
prevailing wage rates for residential construction.
    The Department also observed that there might be other specific 
circumstances that particularly warrant greater use of Federal project 
data and that, more generally, if the existing limitation on the use of 
Federal project data were removed from Sec.  1.3(d), WHD could in all 
circumstances establish Davis-Bacon prevailing wage rates for building 
and residential construction based on all usable wage data in the 
relevant county or other geographic area, without regard to whether 
particular wage data was ``Federal'' and whether there was 
``insufficient'' non-Federal project data. The Department also noted in 
the alternative that Sec.  1.3(d) could be revised in order to provide 
a definition of ``insufficient wage data,'' thereby providing increased 
clarity regarding when Federal project data may and may not be used in 
establishing prevailing wage rates for building or residential 
construction. The Department specifically invited

[[Page 57557]]

comments on these and any other issues regarding the use of Federal 
project data in developing building and residential wage 
determinations.
    Numerous commenters expressed support for a regulatory change that 
would result in increased use of Federal project data to establish 
prevailing wage rates for building and residential construction. LIUNA, 
the International Union of Operating Engineers (IUOE), UBC, CEA, 
SMACNA, NABTU, and III-FFC expressed support for returning to the 
Department's approach prior to the 1981-1982 rulemaking, when the 
Department used Federal project data in all instances in determining 
prevailing wage rates for building and residential construction. MCAA 
similarly supported allowing and perhaps even routinely using Federal 
project data in building and residential wage determinations. LIUNA, 
NABTU, and UBC, in particular, criticized the limitation on the use of 
Federal project data that was imposed by the 1981-1982 rulemaking and 
contended that the limitation has resulted in the exclusion of a 
significant amount of data on worker compensation in Davis-Bacon wage 
surveys. LIUNA and other commenters recognized that Sec.  1.3(d) 
permits use of Federal project data in determining prevailing wage 
rates for building and residential construction when private project 
data is insufficient, but contended that the WHD Administrator's 
reliance on various sufficiency standards over the years to determine 
when Federal project data may be used has often caused large swaths of 
local wage data to be excluded based solely on a disproportionately de 
minimis amount of private data. LIUNA, NABTU, and III-FFC posited that 
using Federal project data in all circumstances would increase the 
amount of usable data and thereby increase the likelihood that wage 
rates could be calculated based on a substantial amount of wage data 
and/or at the county level.
    The IUOE and III-FFC similarly commented that allowing greater use 
of Federal project data would promote clarity and efficiency and 
resolve some of the challenges associated with insufficient data. 
Relatedly, LIUNA and III-FFC observed that the current exclusion of 
Federal project data discourages the submission of such data in the 
first place, particularly since some interested parties believe that 
Sec.  1.3(d) imposes an absolute barrier to the consideration of 
Federal project data, and that removing the limitation set forth in 
Sec.  1.3(d) therefore would promote greater survey participation. The 
UBC, the IUOE, and MCAA further commented that revising Sec.  1.3(d) to 
provide for broader use of Federal project data would be consistent 
with the purpose of the DBA. The IUOE and III-FFC also commented that 
building projects that are likely to be subject to DBRA requirements 
include detention facilities, institutional buildings, museums, post 
offices, and schools, and that it is essential that data from such 
projects are included in Davis-Bacon wage surveys as such data reflects 
the wages paid by skilled and experienced contractors on these types of 
projects.
    Finally, NABTU encouraged the Department, should it decide to 
retain the current restriction on the use of Federal project data in 
residential and building construction wage determinations, to expressly 
state in Sec.  1.3(d) that when the Department receives insufficient 
data for an individual county, it will first look to Federal and 
federally assisted projects before expanding its search to nearby 
counties. In proposing this regulatory revision, NABTU recognized that 
this has been a longstanding policy of WHD, but that it is not codified 
in the regulations and therefore, NABTU asserted, is not always 
uniformly applied in Davis-Bacon wage surveys.
    SMART and SMACNA included a lengthy discussion of Sec.  1.3(d) and 
noted that they support unrestricted use of Federal project data in 
building surveys but that, to be responsive to the NPRM's requests for 
specific information, they were also identifying ``specific 
circumstances that particularly warrant greater use of Federal project 
data'' and discussed the possibility of including a definition of 
``insufficient wage data'' in Sec.  1.3(d). They noted that the Federal 
government plays a significant role in building and residential 
construction in local labor markets and that ``[s]ince the goal of the 
DBA is to prevent use of the federal government's purchasing power to 
depress labor standards, it makes little sense to ignore the federal 
government's impact on local markets in determining prevailing rates.'' 
SMART and SMACNA further commented that if the Department ``decides not 
to rescind Sec.  1.3(d),'' the Department should, at minimum, define 
the term ``insufficient wage data'' in the regulation so that it takes 
into account the total value of Davis-Bacon projects in a county 
relative to the total value of the private projects in the county.'' 
SMART and SMACNA also noted that ``a dearth of private data in two-
thirds of residential surveys and in building surveys in isolated, 
sparsely-populated rural counties necessitates the use of federal and 
federally funded data in these surveys.''
    In contrast to these comments in favor of revising Sec.  1.3(d), 
numerous commenters opposed any change to Sec.  1.3(d). Citing the 
DBA's legislative history, IEC contended that the DBA was intended to 
reflect prevailing rates established by private industry, and that to 
revise Sec.  1.3(d) to allow for broader use of Federal project data in 
establishing prevailing wage rates for building and residential 
construction would violate the DBA's purpose and established case law. 
MBA (in comments submitted jointly with 10 other organizations) and 
NAHRO posited that the use of Federal project data in establishing 
prevailing wage rates for building and residential construction in all 
instances would skew prevailing wages upward and result in rates that 
would not reflect actual prevailing wages for residential and/or 
building construction. The NAHB, in addition to joining the comment 
submitted by the MBA, recommended that the Department maintain its 
policy of not factoring Davis-Bacon wages from covered projects in its 
initial calculation of prevailing wages. AGC similarly commented that 
they were not aware of any significant deficiencies in the sources of 
private data for building and residential construction that would 
necessitate a change in the current practice or regulation. Finally, 
the Small Business Administration (SBA) Office of Advocacy expressed 
opposition to greater use of Federal project data, though they (like 
certain other commenters) misinterpreted the NPRM as expressly 
proposing a regulatory change, when in fact the Department simply 
solicited comments in the NPRM as to whether a regulatory change was 
warranted.
    After considering the comments supporting and opposing a regulatory 
change, the Department has decided not to revise Sec.  1.3(d) and to 
continue to consider submitted Federal project data in all instances 
when calculating prevailing wage rates for heavy and highway 
construction and, in calculating prevailing wage rates for building and 
residential construction, to consider Federal project data whenever 
``it is determined that there is insufficient wage data to determine 
the prevailing wages in the absence of such data.'' 29 CFR 1.3(d). As 
the current regulatory text reflects, Sec.  1.3(d) does not erect an 
absolute barrier to considering Federal project data when determining 
prevailing wage rates for building and residential construction, but 
rather provides that Federal project data will be used whenever the 
Department has

[[Page 57558]]

determined that there is insufficient private data to determine such 
prevailing rates. The Department therefore will continue to solicit and 
receive Federal project data in all Davis-Bacon wage surveys of 
building and residential construction, and, consistent with Sec.  
1.3(d) and existing practice, will use such data in determining 
prevailing wage rates for those categories of construction whenever 
insufficient private data has been received. Moreover, in light of 
certain comments confirming that some stakeholders apparently believe 
that Sec.  1.3(d) imposes an absolute barrier to the consideration of 
Federal project data, the Department will ensure that guidance 
materials and communications specific to Davis-Bacon wage surveys 
properly emphasize that the Department seeks the submission of Federal 
project data in all instances and that it will use such data to 
determine prevailing wage rates whenever appropriate under Sec.  
1.3(d).
    In deciding not to revise Sec.  1.3(d) to permit the use of Federal 
project data in all instances, the Department considers it significant 
that current Sec.  1.3(d) does not prohibit in all circumstances the 
use of Federal project data in calculating prevailing wage rates for 
building and residential construction, but rather requires the use of 
such data whenever there is insufficient private data. In interpreting 
Sec.  1.3(d), the Department's ARB has held repeatedly that the 
determination of whether or not there is ``insufficient'' private 
project data for purposes of Sec.  1.3(d) depends on the circumstances, 
and that Federal project data should not be disregarded simply because 
the quantum of private data received minimally satisfied WHD's 
subregulatory sufficiency threshold for determining a prevailing wage 
rate (currently wage data for six workers employed on three projects). 
See Road Sprinkler Fitters Local Union No. 669, ARB No. 10-123, 2012 WL 
2588591, at *7 (June 20, 2012) (``[I]it seems illogical to conclude 
that data from merely three workers in a metropolitan county for a 
common job is `sufficient data' to eliminate the need to . . . include 
data from federal jobs, as permitted by the DBA and its implementing 
regulations.''); Plumbers Local Union No. 27, ARB No. 97-106, 1998 WL 
440909, at *5 (July 30, 1998) (under Sec.  1.3(d), WHD could not 
establish a prevailing wage for the plumber classification by solely 
considering data reflecting the wages paid to six plumbers on private 
projects when the record indicated that WHD had received wage data for 
hundreds of plumbers on federally funded projects). The Department 
agrees with this interpretation and believes that this precedent 
supports retaining Sec.  1.3(d) as presently drafted rather than 
revising the provision to mandate the use of Federal project data in 
determining all prevailing wage rates.
    The Department likewise has concluded that it is unnecessary to 
adopt the specific proposals, short of a complete rescission of the 
limitation on the use of Federal project data in determining prevailing 
wage rates for building and residential conduction, that commenters 
identified. In response to NABTU's alternative recommendation that 
Sec.  1.3(d) be revised to codify WHD's longstanding policy of looking 
to Federal project data before expanding its search to nearby counties 
when the Department receives insufficient data for an individual 
county, the Department believes that codifying the order of operations 
in determining prevailing wage rates for building and residential 
construction at this level of detail is not necessary. The existing 
text of Sec.  1.3(d), which directs the use of Federal project data 
whenever there is insufficient private data, already provides for the 
consideration of Federal project data at the county level whenever 
there is insufficient county-level private data. Moreover, established 
WHD policies and procedures expressly provide that if there is 
insufficient non-Federal project survey data for a particular 
classification in a county, then WHD will consider available survey 
data from Federal projects in the county and will likewise integrate 
Federal project data at each level of geographic aggregation to the 
same extent and in the same manner it is integrated at the county 
level. Manual of Operations at 38; Chesapeake Housing, ARB No. 12-010, 
2013 WL 5872049, at *4. The Department appreciates the importance of 
adhering to this order of operations in all circumstances, however, and 
it will therefore continue to emphasize, through subregulatory guidance 
such as the Manual of Operations and internal and external 
communications, that, for building and residential construction wage 
surveys, Federal project data must always be considered when there is 
insufficient private data at the county level, and that a similar 
process of considering Federal project data must be followed each time 
the geographic area is expanded in accordance with the governing 
regulations and WHD's policies and procedures.
    The Department also declines to adopt SMART and SMACNA's 
alternative proposal that the Department define the term ``insufficient 
wage data'' in the regulation so that it takes into account the total 
value of Davis-Bacon projects in a county relative to the total value 
of the private projects in the county. WHD has long determined 
prevailing wages based on the wage data for workers on ``projects of a 
character similar'' that WHD receives through its wage survey program 
40 U.S.C. 3142(b). As a general matter, projects of significantly 
greater value will employ more workers than smaller projects, and the 
size or value of a particular project for which wage data is submitted 
thus can be expected to influence the calculation of prevailing wages. 
To determine sufficiency based on general data regarding aggregate 
project values in a county without regard to the specific wage data 
received in a particular Davis-Bacon wage survey would represent a 
significant and complex shift away from WHD's current method of 
determining prevailing wage rates. The Department therefore believes 
that the sufficiency or insufficiency of private project data should 
continue to be determined based on WHD's ``compiling of wage data,'' 
Sec.  1.3(d), rather than on distinct, extra-survey information 
regarding relative project values. The current regulatory text, 
particularly as interpreted by the ARB, thus provides sufficient and 
appropriate direction to the Department in determining when Federal 
project data may be used to determine prevailing wage rates on building 
and residential construction. See Road Sprinkler Fitters, ARB No. 10-
123, 2012 WL 2588591, at *7; Plumbers Local Union No. 27, ARB No. 97-
106, 1998 WL 440909, at *5.
(C) 29 CFR 1.3(f)--Frequently Conformed Rates
    The Department is also proposing changes relating to the 
publication of rates for labor classifications for which conformance 
requests are regularly submitted when such classifications are missing 
from wage determinations. The Department's proposed changes to this 
paragraph are discussed below in section III.B.1.xii (``Frequently 
conformed rates''), together with proposed changes to Sec.  5.5(a)(1).
(D) 29 CFR 1.3(g)-(j)--Adoption of State/Local Prevailing Wage Rates
    In the NPRM, the Department proposed to add new paragraphs (g), 
(h), (i), and (j) to Sec.  1.3 to permit the Administrator, under 
specified circumstances, to determine Davis-Bacon wage rates by 
adopting prevailing wage rates set by State and local governments. The 
Department explained that this proposal was intended to reduce reliance 
on outdated

[[Page 57559]]

Davis-Bacon wage rates while enabling the WHD to avoid performing 
costly and duplicative prevailing wage surveys when a State or locality 
has already performed similar work.
    About half of the States, as well as many localities, have their 
own prevailing wage laws (sometimes called ``little'' Davis-Bacon 
laws).\106\ Additionally, a few states have processes for determining 
prevailing wages in public construction even in the absence of such 
State laws.\107\ Accordingly, the Administrator has long taken 
prevailing wage rates set by States and localities into account when 
making wage determinations. Under the current regulations, one type of 
information that the Administrator may ``consider[ ]'' in determining 
wage rates is ``[w]age rates determined for public construction by 
State and local officials pursuant to State and local prevailing wage 
legislation.'' 29 CFR 1.3(b)(3). Additionally, for wage determinations 
on federally funded highway construction projects, the Administrator is 
required by the FAHA statute to ``consult'' with ``the highway 
department of the State'' in which the work is to be performed, and to 
``giv[e] due regard to the information thus obtained.'' 23 U.S.C. 
113(b); see 29 CFR 1.3(b)(4).
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    \106\ A list of such states, and the thresholds for coverage, 
can be found here: ``Dollar Threshold Amount for Contract 
Coverage,'' U.S. Dep't of Lab., Wage and Hour Div., https://www.dol.gov/agencies/whd/state/prevailing-wages.
    \107\ These states include Iowa, North Dakota, and South Dakota.
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    In reliance on these provisions, WHD has sometimes adopted and 
published certain states' highway wage determinations in lieu of 
conducting wage surveys in certain areas. According to a 2019 report by 
the OIG, WHD used highway wage determinations from 15 states between 
fiscal years 2013 and 2017. See 2019 OIG Report, at 10.
    This same OIG report expressed concern about the high number of 
out-of-date Davis-Bacon wage rates, particularly non-union rates, 
noting, for example, that some published wage rates were as many as 40 
years old. Id. at 5. The OIG report further noted that at the time, 26 
states and the District of Columbia had their own prevailing wage laws, 
and it recommended that WHD ``should determine whether it would be 
statutorily permissible and programmatically appropriate to adopt 
[S]tate or local wage rates other than those for highway 
construction.'' Id. at 10-11. WHD indicated to OIG that in the absence 
of a regulatory revision, it viewed adoption of State rates for non-
highway construction as in tension with the definition of prevailing 
wage in Sec.  1.2(a) and the ARB's Mistick decision. Id. at 10.
    In the NPRM, the Department explained that it shared OIG's concerns 
regarding out-of-date rates, and that a regulatory revision would best 
ensure that WHD can incorporate State and local wage determinations 
when doing so would further the purposes of the Davis-Bacon labor 
standards. As noted above, the current regulations permit WHD to 
``consider'' State or local prevailing wage rates among a variety of 
sources of information used to make wage determinations and require WHD 
to give ``due regard'' to information obtained from State highway 
departments for highway wage determinations. See 29 CFR 1.3(b)(3)-(4). 
However, they also provide that any information WHD considers when 
making wage determinations must ``be evaluated in the light of [the 
prevailing wage definition set forth in] Sec.  1.2(a).'' 29 CFR 1.3(c). 
While some States and localities' definitions of prevailing wage mirror 
the Department's regulatory definition, many others' do not. Likewise, 
because the current regulations at Sec. Sec.  1.2(a) and 1.3(c), as 
well as the ARB's decision in Mistick, suggest that any information 
(such as State or local wage rates) that WHD obtains and 
``consider[s]'' under Sec.  1.3(b) must be filtered through the 
definition of ``prevailing wage'' in Sec.  1.2, the Department proposed 
a regulatory change to clarify that WHD may adopt State or local 
prevailing wage determinations under certain circumstances even where 
the State or locality's definition of prevailing wage differs from the 
Department's.
    Under the Department's proposal, WHD would only be permitted to 
adopt State or local prevailing wage rates if the Administrator, after 
reviewing the rate and the processes used to derive the rate, concludes 
that they meet certain listed criteria. The criteria the Department 
proposed, which were included in proposed new Sec.  1.3(h), were as 
follows:
    First, the Department proposed that the State or local government 
must set prevailing wage rates, and collect relevant data, using a 
survey or other process that generally is open to full participation by 
all interested parties. This proposed requirement was intended to 
ensure that WHD will not adopt a prevailing wage rate where the process 
to set the rate unduly favors certain entities, such as union or non-
union contractors. Rather, the State or local process must reflect a 
good-faith effort to derive a wage that prevails for similar workers on 
similar projects within the relevant geographic area within the meaning 
of the Davis-Bacon Act statutory provisions. The phrase ``survey or 
other process'' in the proposed regulatory text was intended to permit 
the Administrator to incorporate wage determinations from States or 
localities that do not necessarily engage in surveys but instead use a 
different process for gathering information and setting prevailing wage 
rates, provided that this process meets the required criteria.
    Second, the Department proposed requiring that a State or local 
wage rate must reflect both a basic hourly rate of pay as well as any 
locally prevailing bona fide fringe benefits, and that each of these 
can be calculated separately. Thus, the Department explained that WHD 
must be able to confirm during its review process that both figures are 
prevailing for the relevant classification(s) and list each figure 
separately on its wage determinations. This reflects the statutory 
requirement that a prevailing wage rate under the Davis-Bacon Act must 
include fringe benefits, 40 U.S.C. 3141(2)(B); 29 CFR 5.20, and that 
``the Secretary is obligated to make a separate finding of the rate of 
contribution or cost of fringe benefits.'' 29 CFR 5.25(a). This 
requirement also would ensure that WHD could determine the basic or 
regular rate of pay to determine compliance with the CWHSSA and the 
Fair Labor Standards Act (FLSA).
    Third, the Department proposed that the State or local government 
must classify laborers and mechanics in a manner that is recognized 
within the field of construction.\108\ The proposed rule explained that 
this standard is intended to ensure that the classification system does 
not result in lower wages than are appropriate by, for example, 
assigning duties associated with skilled classifications to a 
classification for a general laborer.
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    \108\ In the NPRM, the Department explained that it recognizes 
that differences in industry practices mean that the precise types 
of work done and tools used by workers in particular classifications 
may not be uniform across states and localities. For example, in 
some areas, a significant portion of work involving the installation 
of heating, ventilation, and air conditioning (HVAC) duct work may 
be done by an HVAC Technician, whereas in other areas such work may 
be more typically performed by a Sheet Metal Worker. Unlike in the 
case of the SCA, WHD does not maintain a directory of occupations 
for the Davis-Bacon Act. However, under this proposed rule, in order 
for WHD to adopt a State or locality's wage rate, the State or 
locality's classification system must be in a manner recognized 
within the field of construction.
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    Finally, the Department proposed that the State or local 
government's criteria for setting prevailing wage rates must be

[[Page 57560]]

substantially similar to those the Administrator uses in making wage 
determinations under 29 CFR part 1. The proposed regulation provided a 
non-exclusive list of factors to guide this determination, including, 
but not limited to, the State or local government's definition of 
prevailing wage; the types of fringe benefits it accepts; the 
information it solicits from interested parties; its classification of 
construction projects, laborers, and mechanics; and its method for 
determining the appropriate geographic area(s). Thus, the more similar 
a State or local government's methods are to those used by WHD, the 
greater likelihood that its corresponding wage rate(s) will be adopted. 
While the proposed regulation listed the above factors as guidelines, 
it ultimately directed that the Administrator's determination in this 
regard will be based on the totality of the circumstances. The 
reservation of such discretion in the Administrator was intended to 
preserve the Administrator's ability to make an overall determination 
regarding whether adoption of a State or local wage rate is consistent 
with both the language and purpose of the DBA, and thereby is 
consistent with the statutory directive for the Secretary (in this 
case, via delegation to the Administrator), to determine the prevailing 
wage. See 40 U.S.C. 3142(b).
    The Department proposed in Sec.  1.3(g) to permit the Administrator 
to adopt State or local wage rates with or without modification. The 
Department explained that this was intended to encompass situations 
where the Administrator reviews a State or local wage determination and 
determines that although the State or local wage determination might 
not satisfy the above criteria as initially submitted, it would satisfy 
those criteria with certain modifications. For example, the 
Administrator may obtain from the State or local government the State 
or locality's wage determinations and the wage data underlying those 
determinations, and, provided the data was collected in accordance with 
the criteria set forth earlier (such as that the survey was fully open 
to all participants), may determine, after review and analysis, that it 
would be appropriate to use the underlying data to adjust or modify 
certain classifications or construction types, or to adjust the wage 
rate for certain classifications. Consistent with the Secretary's 
authority to make wage determinations, the regulation permits the 
Administrator to modify a State or local wage rate as appropriate while 
still generally relying on it as the primary source for a wage 
determination. For instance, before using State or local government 
wage data to calculate prevailing wage rates under the DBA, the 
Administrator could regroup counties, apply the definition of 
``prevailing wage'' set forth in Sec.  1.2, disregard data for workers 
who do not qualify as laborers or mechanics under the DBA, and/or 
segregate data based on the type of construction involved. The 
Department explained that the Administrator would cooperate with the 
State or locality to make the appropriate modifications to any wage 
rates.
    In proposed Sec.  1.3(i), the Department proposed requiring the 
Administrator to obtain the wage rates and any relevant supporting 
documentation and data from the State or local entity before adopting a 
State or local government prevailing wage rate.
    Finally, Sec.  1.3(j) of the proposed rule explained that nothing 
in proposed Sec.  1.3(g), (h), or (i) precludes the Administrator from 
considering State or local prevailing wage rates in a more holistic 
fashion, consistent with Sec.  1.3(b)(3), or from giving due regard to 
information obtained from State highway departments, consistent with 
Sec.  1.3(b)(4), as part of the Administrator's process of making 
prevailing wage determinations under 29 CFR part 1. For example, under 
the proposed rule, as under the current regulations, if a State or 
locality were to provide the Department with the underlying data that 
it uses to determine wage rates, even if the Administrator determines 
not to adopt the wage rates themselves, the Administrator may consider 
or use the data as part of the process to determine the prevailing wage 
within the meaning of 29 CFR 1.2, provided that the data is timely 
received and otherwise appropriate. The purpose of proposed Sec.  
1.3(j) was to clarify that the Administrator may, under certain 
circumstances, adopt State or local wage rates, and use them in wage 
determinations, even if the process and rules for State or local wage 
determinations differs from the Administrator's.
    A diverse array of commenters--including labor unions, worker 
advocacy organizations, contractors, contractor associations, State 
government officials, and various members of Congress--expressed 
support for the Department's proposals to expand WHD's authority to 
adopt State or local prevailing wage rates. The most common reason 
offered for such support was that the adoption of State or local rates 
could help ensure that Davis-Bacon rates remain up to date. For 
example, FFC and NCDCL stated in their comments that wage 
determinations by the State of California are updated with 
``significantly greater frequency'' than WHD's. These commenters and 
others, such as NABTU, asserted that incorporation of more current 
State and local wage rates would help attract workers to the 
construction industry, which they viewed as an important policy 
priority in light of the increased number of construction projects 
financed by IIJA.
    Other commenters expressed support for an expanded incorporation of 
State and local prevailing wage rates for efficiency reasons. For 
example, COSCDA said that the proposals may ``avoid delays in 
identifying certain federal prevailing wages,'' \109\ while 
Pennsylvania government officials commented that ``the proposal would 
streamline the wage determination process . . . and align DBRA wages 
with State and local rates for projects covered by both sets of laws.'' 
CEA, NECA, and SMACNA identified this proposal as among those from the 
Department's proposed rule that would greatly improve the overall 
efficiency of the Act. IUOE, MCAA, and UBC asserted that the proposals 
would allow WHD to conserve its resources for improved administration 
and enforcement of the DBA, with MCAA characterizing the proposals as 
``sound good-government policy.'' MBA remarked that ``[t]he added 
flexibility afforded to the Administrator in the proposed rule is a 
positive step in getting a deeper understanding of the relevant 
wages,'' and urged the Department to ``go a step further'' by 
``[e]xpanding the use of the data, not just when WHD does not have 
sufficient data to determine a wage, but in all circumstances . . . 
[to] provide a comparative wage and help gain a greater understanding 
whenever there are material discrepancies or when the overall 
respondent rate is low for a wage determined through the Davis-Bacon 
survey.''
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    \109\ While opposing the Department's proposals for other 
reasons, FTBA acknowledged that ``[the] adoption of prevailing rates 
set by state or local officials has some appeal given the time 
intensive survey process which has resulted in delays in surveys and 
consequently delays in the issuance of new wage determinations based 
on updated wages and benefits data.''
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    Several commenters expressed more qualified support for the 
Department's proposals regarding the incorporation of State and local 
prevailing wage rates. For example, the UA acknowledged that it ``makes 
sense to use state and local rates . . . as a fall-back option for 
combatting stale rates,'' but

[[Page 57561]]

``encourage[d] [the Department] to continue to prioritize its own wage 
surveys as the first and best option.'' Similarly, Contractor 
Compliance & Monitoring, Inc. (CC&M) ``agree[d] with using state or 
local prevailing wage rate for wage rates, but only where there is 
otherwise insufficient information from BLS.'' AGC stated that 
``[a]dopting state and local wage rates could improve the accuracy and 
timeliness of rates if done properly,'' but opined that ``[t]he 
viability and practicality of this proposal depends almost entirely on 
how much confidence one has in state procedures for collecting wage 
rate data and calculating prevailing wages.'' NABTU cautioned that 
``[the Department] must . . . conduct meaningful independent review of 
local rates to avoid engaging in an impermissible delegation of 
authority,'' \110\ and ``[a]bove all . . . retain the final decision-
making authority over rates.''
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    \110\ III-FFC similarly cautioned that ``DOL . . . must include 
an independent review process that ensures these [State and local] 
wage determination programs are methodologically sound and 
consistent with the requirements of Davis-Bacon labor standards,'' 
but expressed its view that the NPRM ``contain[s] a solid framework 
with relevant criteria to help DOL review state and local processes 
for setting prevailing wage rates.''
---------------------------------------------------------------------------

    While some commenters specifically approved of the limiting 
criteria specified in proposed Sec.  1.3(h), see, e.g., Fair 
Contracting Foundation of Minnesota and MCAA, others asked the 
Department to codify additional limitations on WHD's discretion to 
adopt State or local prevailing wage rates. For example, several labor 
unions and worker advocacy organizations, including III-FFC, LCCHR, and 
UBC, requested the final rule to prohibit the use of State or local 
rates lower than an alternative Federal rate.\111\ In support of this 
proposal, III-FFC asserted that ``[a]dopting rates that are lower than 
those derived from the Department's own methodology would run counter 
to the purpose of the Davis-Bacon Act to establish rates `for the 
benefit of construction workers.' Binghamton Constr. Co., 347 U.S. at 
178.'' Other commenters expressed concern about the risks of low State 
or local prevailing wage rates but stopped short of requesting the 
Department to categorically reject the adoption of lower State or local 
rates. For example, IUOE requested the Department to ``add a clause to 
the final rule that the Administrator shall closely scrutinize a 
state's submissions if the state cannot demonstrate a 5-year history of 
successfully administering such a prevailing wage program,'' explaining 
that such scrutiny would ``allow the Administrator to not accept such 
wages if they significantly lower the wages already listed on the WD.''
---------------------------------------------------------------------------

    \111\ LIUNA supported this proposed restriction, and 
additionally requested the Department to prohibit ``replac[ing] a 
federal wage determination based on a collective bargaining 
agreement subject to annual updating with one that cannot be so 
escalated.''
---------------------------------------------------------------------------

    Other commenters suggested methodological modifications. NABTU and 
the UA requested the Department to limit its adoption of State or local 
rates to communities where WHD has not completed a wage survey in the 
area for the applicable type of construction in more than 3 years.\112\ 
NAHB urged the Department not to adopt wage rates from State and local 
governments that use a methodology that permits the cross-consideration 
of rural and metropolitan wage rates, asserting that wages resulting 
from such a methodology are not appropriately representative of a given 
area. And ABC requested that the Department modify proposed Sec.  
1.3(h)(1) to require that the State or local government ``use 
appropriate statistical methods, such as sampling, weighting, or 
imputation, to obtain statistically representative results,'' or, in 
the alternative, ``clarify that statistically representative sampling, 
where all respondents have a proportionate likelihood of inclusion in 
the sample, qualifies as `full participation by all interested parties' 
within the meaning of the regulation.''
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    \112\ NABTU specifically requested the Department to ``limit its 
adoption of local rates to communities where the SU rates are more 
than three years old and where such local rates are established 
through a data collection process that: (1) prioritizes the modal 
wage rate and utilizes weighed averages, means or medians as a last 
resort; (2) is carried out no less frequently than every three 
years; (3) is open to participation by, at least, those interested 
parties listed in 29 CFR 1.3(a); and (4) accepts the types of fringe 
benefits that DOL accepts.''
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    The Department identified at least five comments which opposed an 
expanded use of State or local prevailing wage rates, submitted by 
AWHA, FTBA, IEC, NAHB, and the group of U.S. Senators, respectively. 
Unlike some of the commenters that voiced concern about the potential 
adoption of lower State or local wage rates, FTBA, IEC, and the group 
of U.S. Senators were chiefly concerned that the proposal could result 
in the adoption of State or local wage rates that are inappropriately 
high. For example, the group of U.S. Senators cited research asserting 
that New York's prevailing wage law has inflated state and local 
construction costs by 13 to 25 percent, depending on the region. The 
group of U.S. Senators elaborated that ``[m]any state prevailing wage 
laws, such as New York's, base their definition of prevailing rate of 
wage directly on compensation levels set in [a] CBA, rather than 
voluntary surveys, allowing contract administrative costs and union 
work rules to further inflate wages, at great detriment to the 
taxpayer.''
    AWHA and FTBA expressed a different concern that expanding the use 
of State and local prevailing wage rates might inappropriately reduce 
WHD's need or desire to regularly perform Federal wage surveys.\113\ 
AWHA asserted that State and local governments ``face similar, if not 
more pronounced, capacity and outreach challenges in conducting 
methodologically rigorous wage and hour surveys,'' and further objected 
that the Department's proposal to use local prevailing wage rates even 
in cases where the definitions and methods are different than the 
Federal standard was ``at odds with the given rationale to return to 
the three-step process.'' Highlighting the requirement in proposed 
Sec.  1.3(h)(4) that State or local rates must be derived from 
``substantially similar'' criteria to those the Administrator uses in 
making wage determinations under part 1, IEC asserted that ``the 
ability to merely adopt--rather than consider--state and local wage 
determinations converts key provisions of the regulations governing 
wage determinations into mere suggestions.'' And, as previously 
discussed, NAHB relayed concerns about incorporation of State or local 
rates to the extent that those rates are derived from methodologies 
that permit cross-consideration of rural and metropolitan areas.
---------------------------------------------------------------------------

    \113\ FTBA additionally asserted that the proposal might reduce 
WHD's need to consult with the highway department of the State in 
which a project in the Federal-aid highway system is to be 
performed.
---------------------------------------------------------------------------

    Having considered the feedback in response to the proposed 
expansion of the use of State and local prevailing wage rates, the 
Department agrees with the 2019 OIG report and the overwhelming 
majority of the commenters that addressed these proposals that 
expanding WHD's ability to incorporate State and local wage rates would 
be a significant improvement to the current regulations. Specifically, 
the Department believes that the provisions in proposed Sec.  1.3(g)-
(j) will give the Department an important tool to keep DBRA prevailing 
wage rates accurate and up to date, with appropriate safeguards to 
guard against the adoption of excessively high or low State or local 
rates. Accordingly, the final rule adopts new paragraphs (g), (h), (i), 
and (j) in Sec.  1.3 as proposed in the NPRM.

[[Page 57562]]

    The Department declines to adopt additional limitations on its 
discretion to adopt State or local prevailing wage rates beyond those 
specified in the proposed rule. The final rule provides the 
Administrator with the ultimate responsibility to make an affirmative 
determination to adopt a State or local wage rate. This contemplates 
that WHD will engage in a careful and individualized review of State 
and local prevailing wages, and the criteria specified in proposed 
Sec.  1.3(h) accomplish that objective while also providing appropriate 
safeguards. For example, the Department disagrees with NABTU and the 
UA's suggestion to prohibit the adoption of State or local prevailing 
wage rates where an applicable Federal rate exists that was determined 
from the prior 3 years. Although the Department agrees that in general, 
it will be less likely to adopt a State or local rate if the applicable 
wage determination is derived from more recent data, the Department 
believes that individual decisions whether or not to adopt particular 
rates are best left to the Administrator to determine on a case-by-case 
basis.
    Similarly, the Department declines to adopt a categorical 
prohibition on the adoption of State or local prevailing wage rates 
that are lower than those provided in the most recent Federal wage 
determination. First, the Department expects that this outcome will be 
exceedingly rare, because one of the primary purposes of the new 
adoption provision is to fill in gaps in areas where WHD is unable to 
conduct regular surveys due to resource constraints. Thus, in most or 
all cases in which a State or local wage determination is adopted, WHD 
will not have a recent wage rate to use for comparison. Moreover, the 
purpose of a wage determination is to accurately reflect wages that 
prevail in the locality. As such, if the Administrator determines that 
a State or local rate is the most appropriate or accurate rate to use, 
it would not be appropriate to reject the State or local rate simply 
because it happens to be lower than the analogous rate in the most 
recent (and potentially outdated) WHD survey. In any event, as noted 
above, the Department anticipates that the regulatory criteria for 
adoption will prevent the adoption of rates that would deviate 
significantly from those that would apply if the Department were to 
conduct a wage survey itself.
    The Department declines ABC's request to restrict the pool of State 
and local prevailing wages eligible for incorporation to those that 
``use appropriate statistical methods, such as sampling, weighting, or 
imputation, to obtain statistically representative results.'' This 
restriction does not apply to WHD's own wage determination process, and 
the Department declines to impose it on State and local wage 
determinations. In response to ABC's concern that the language in 
proposed Sec.  1.3(h)(1) referring to ``full participation by all 
interested parties'' could be read to only permit a process in which 
participants self-select into a survey, as noted above, the phrase 
``survey or other process'' is specifically intended to permit the 
Administrator, where otherwise appropriate, to adopt not only wage 
rates that are set using surveys, but also rates set using a different 
process. The Department reaffirms that the intent of Sec.  1.3(h)(1) is 
to ensure that WHD will not adopt a State or local rate where the 
process that the State or locality uses to determine the rate unduly 
favors certain entities.
    The Department declines NAHB's request to require that State and 
local governments bar the cross-consideration of rural and metropolitan 
wage data. As explained in greater detail in section III.B.1.vii.A, the 
Department is eliminating this prohibition in connection with its own 
wage determination process, and likewise does not believe that imposing 
such a ban in new Sec.  1.3(h) to limit the pool of State and local 
rates eligible for adoption would be necessary or helpful. As explained 
in section III.B.1.vii, the removal of the prohibition on cross-
consideration of rural and metropolitan data in the context of WHD's 
own Davis-Bacon surveys provides for such cross-consideration in 
limited and appropriate circumstances, as described in that section, 
and will not lead to the widespread mixing of metropolitan and rural 
data in determining prevailing wages. Similarly, the extent to which 
State or local prevailing wage rates reflect the combining of 
metropolitan and rural data in limited circumstances of the type 
contemplated in Sec.  1.7(b), as opposed to a significantly broader 
combining of metropolitan and rural data, would be a factor that the 
Administrator could consider in determining whether it would be 
appropriate to adopt or not adopt the State or local rates, or, 
alternatively, to obtain the underlying State or local data and 
reconfigure the data based on county groupings that are similar or 
identical to those used by the Administrator in analogous contexts. The 
Department also notes that consistent with Sec.  1.3(d), the 
Administrator will also review the extent to which a State or local 
building or residential prevailing rate is derived using Federal 
project data, but that a State or locality's use of such data to a 
greater or lesser extent than WHD uses such data in its own wage 
determinations will not categorically preclude adoption of the State or 
locality's rates. The Department also declines CC&M's suggestion to 
adopt State or local rates only when there is insufficient data from 
BLS. For the reasons explained at length above, the Department does not 
believe that the use of BLS data to set DBRA wage rates is generally 
appropriate. The Department notes that to the extent that a State or 
locality's system for making wage determinations raises similar 
concerns, such concerns would weigh significantly against the 
Department's adoption of such rates.
    The Department appreciates commenter concerns about the adoption of 
inappropriately high State or local prevailing wage rates but believes 
that the criteria specified in new Sec.  1.3(h) will serve as a 
safeguard against such outcomes. Moreover, WHD's expanded authority to 
adopt State and local rates under new Sec.  1.3(g) is wholly 
discretionary, and may be done ``with or without modification'' of an 
underlying rate. While the Department acknowledges that the adoption of 
State or local rates will in many cases result in increases to the 
applicable Davis-Bacon prevailing wage rates due to the replacement of 
outdated and artificially low rates with more current State or local 
rates, such increases are entirely appropriate and result in rates that 
better reflect wages that actually prevail in the relevant locality. As 
a general matter, states and localities that conduct wage surveys more 
frequently than WHD may have stronger relationships with local 
stakeholders, enabling those bodies to determine prevailing wage rates 
with greater participation.\114\ A wide swath of commenters--including 
contractors, contractor associations, and contracting agencies--agreed 
that with that reasoning, and asserted that the proposals would benefit 
the construction industry as a whole.
---------------------------------------------------------------------------

    \114\ The Department explained this in the NPRM, see 87 FR 
15699-700, and several comments, including from III-FFC and the 
LCCHR and other civil rights and worker advocacy organizations, made 
similar arguments in support of the Department's proposals.
---------------------------------------------------------------------------

    The Department disagrees that expanding WHD's ability to adopt 
State or local prevailing wage rates will hamper its ability or 
willingness to conduct Federal wage surveys. To the contrary, 
empowering WHD to adopt State and local rates in appropriate cases will 
give WHD the flexibility to better allocate its limited resources to

[[Page 57563]]

the classifications and localities most in need of attention.\115\ As 
other commenters noted, an expanded use of State and local prevailing 
wages may achieve efficiencies that improve WHD's overall 
administration and enforcement of the DBRA.
---------------------------------------------------------------------------

    \115\ Fair Contracting Foundation of Minnesota opined that the 
Department's proposals would ``free[ ] up precious agency resources 
to focus on states that lack the requisite public infrastructure to 
conduct their own surveys.''
---------------------------------------------------------------------------

    The Department also disagrees that increased flexibility to adopt 
State and local rates is inconsistent with the final rule's restoration 
of the ``three-step process'' when WHD conducts its own wage surveys. 
Both regulatory revisions seek to further the same goal: the adoption 
of prevailing wage determinations that better reflect wages that are 
currently prevailing in a locality. Moreover, the final rule requires 
WHD to consider the extent to which a state's methodology is similar 
to, or deviates from, WHD's when determining whether to adopt a State 
or local rate, and whether to do so with or without modification. As 
the Department emphasized in the NPRM, the new provisions require the 
Administrator to make an affirmative determination that the criteria 
enumerated in Sec.  1.3(h) have been met in order to adopt a State or 
local wage rate, and to do so only after careful review of both the 
rate and the process used to derive the rate. The criteria are intended 
to allow WHD to adopt State and local prevailing wage rates where 
appropriate while also ensuring that adoption of such rates is 
consistent with the statutory requirements of the Davis-Bacon Act and 
does not create arbitrary distinctions between jurisdictions where WHD 
makes wage determinations by using its own surveys and jurisdictions 
where WHD makes wage determinations by adopting State or local 
rates.\116\ Thus, under the final rule, the Department may not simply 
accept State or local data with little or no review. Such actions would 
be inconsistent with the Secretary's statutory responsibility to 
``determine[ ]'' the wages that are prevailing. 40 U.S.C. 3142(b). 
Adoption of State or local rates after appropriate review, however, is 
consistent with the authority Congress granted to the Department in the 
Davis-Bacon Act. The DBA ``does not prescribe a method for determining 
prevailing wages.'' Chesapeake Housing, ARB No. 12-010, 2013 WL 
5872049, at *4. Rather, the statute ``delegates to the Secretary, in 
the broadest terms imaginable, the authority to determine which wages 
are prevailing.'' Donovan, 712 F.2d at 616. The D.C. Circuit has 
explained that the DBA's legislative history reflects that Congress 
``envisioned that the Secretary could establish the method to be used'' 
to determine DBA prevailing wage rates. Id. (citing 74 Cong. Rec. 6516 
(1931) (remarks of Rep. Kopp) (``A method for determining the 
prevailing wage rate might have been incorporated in the bill, but the 
Secretary of Labor can establish the method and make it known to the 
bidders.'')).
---------------------------------------------------------------------------

    \116\ For example, in response to AWHA's expressed concern about 
the adoption of ``wage rates that have substantively different 
methods than those mandated at the federal level,'' the Department 
notes that Sec.  1.3(h) requires that a State or local government's 
criteria for setting prevailing wage rates must be ``substantially 
similar'' to that used by the Administrator in order for the State 
or local wage rate to be adopted.
---------------------------------------------------------------------------

    Reliance on prevailing wage rates calculated by State or local 
authorities for similar purposes is a permissible exercise of this 
broad statutory discretion. In areas where states or localities are 
already gathering reliable information about prevailing wages in 
construction, it may be inefficient for the Department to use its 
limited resources to perform the same tasks. As a result, the 
Department is finalizing its proposal to use State and local wage 
determinations under specified circumstances where, based on a review 
and analysis of the processes used in those wage determinations, the 
Administrator determines that such use would be appropriate and 
consistent with the DBA. Such resource-driven decisions by Federal 
agencies are permissible. See, e.g., Hisp. Affs. Project v. Acosta, 901 
F.3d 378, 392 (D.C. Cir. 2018) (upholding Department's decision not to 
collect its own data but instead to rely on a ``necessarily . . . 
imprecise'' estimate given that data collection under the circumstances 
would have been ``very difficult and resource-intensive''); Dist. Hosp. 
Partners, L.P. v. Burwell, 786 F.3d 46, 61-62 (D.C. Cir. 2015) 
(concluding that an agency's use of an ``imperfect[ ]'' data set was 
permissible under the Administrative Procedure Act).\117\
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    \117\ The Federal Highway Administration's (FHWA) independent 
statutory obligation for the Department to consider and give ``due 
regard'' to information obtained from State highway agencies for 
highway wage determinations does not prohibit WHD from adopting 
State or local determinations, either for highway construction or 
for other types of construction, where appropriate. Rather, this 
language imposes a minimum requirement for the Secretary to consult 
with states and consider their wage determinations for highway 
construction. See Virginia, ex rel., Comm'r, Virginia Dep't of 
Highways and Transp. v. Marshall, 599 F.2d 588, 594 (4th Cir. 1979) 
(``Section 113(b) requires that the Secretary `consult' and give 
`due regard' to the information thus obtained.'').
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    For the above reasons, the final rule adopts these revisions as 
proposed.
iv. Section 1.4 Report of Agency Construction Programs
    Section 1.4 currently provides that, to the extent practicable, 
agencies that use wage determinations under the DBRA shall submit an 
annual report to the Department outlining proposed construction 
programs for the coming year. The reports described in Sec.  1.4 assist 
WHD in its multiyear planning efforts by providing information that may 
guide WHD's decisions regarding when to survey wages for particular 
types of construction in a particular locality. These reports are an 
effective way for the Department to know where Federal and federally 
assisted construction will be taking place, and therefore where updated 
wage determinations will be of most use.
    Notwithstanding the importance of these reports to the program, 
contracting agencies have not regularly provided them to the 
Department. As a result, after consideration, the Department proposed 
to remove the language in the regulation that currently allows agencies 
to submit reports only ``to the extent practicable.'' Instead, proposed 
Sec.  1.4 would require Federal agencies to submit the construction 
reports.
    The Department also proposed to adopt certain elements of two prior 
AAMs addressing these reports. In 1985, WHD updated its guidance 
regarding the agency construction reports, including by directing that 
Federal agencies submit the annual report by April 10 each year and 
providing a recommended format for such agencies to submit the report. 
See AAM 144 (Dec. 27, 1985). In 2017, WHD requested that Federal 
agencies include in the reports proposed construction programs for an 
additional 2 fiscal years beyond the upcoming year. See AAM 224 (Jan. 
17, 2017). The proposed changes to Sec.  1.4 would codify these 
guidelines in the regulations.
    The Department also proposed new language requiring Federal 
agencies to include notification of any expected options to extend the 
terms of current construction contracts. The Department proposed this 
change because--like a new contract--the exercise of an option requires 
the incorporation of the most current wage determination. See AAM 157 
(Dec. 9, 1992); see also 48 CFR 22.404-12(a). Receiving information 
concerning expected options to extend the terms of current construction 
contracts therefore will help the Department assess where updated wage 
determinations are needed for Federal and federally assisted 
construction,

[[Page 57564]]

which will in turn contribute to the effectiveness of the Davis-Bacon 
wage survey program. The Department also proposed that Federal agencies 
include the estimated cost of construction in their reports, as this 
information also will help the Department prioritize areas where 
updated wage determinations will have the broadest effects.
    In addition, the Department proposed to require that Federal 
agencies include in the annual report a notification of any significant 
changes to previously reported construction programs. In turn, the 
Department proposed eliminating the current directive that agencies 
notify the Administrator mid-year of any significant changes in their 
proposed construction programs. Such notification would instead be 
provided in Federal agencies' annual reports.
    Finally, the Department proposed deleting the reference to the 
Interagency Reports Management Program because the requirements of that 
program were terminated by the General Services Administration (GSA) in 
2005. See 70 FR 3132 (Jan. 19, 2005).
    The Department explained that these proposed changes would not 
result in significant burdens on contracting agencies, as the proposed 
provisions request only information already on hand. Furthermore, any 
burden resulting from the new proposal should be offset by the proposed 
elimination of the current directive that agencies notify the 
Administrator of any significant changes in a separate mid-year report. 
The Department also sought comment on any alternative methods through 
which the Department may obtain the information and eliminate the need 
to require the agency reports.
    A number of contractors, unions, and industry associations that 
submitted comments expressed general support for the Department's 
proposed change to require that reports include construction program 
information for an additional 2 fiscal years beyond the upcoming year 
and include notification of options to extend terms of current 
construction contracts or any significant changes to construction 
programs. See, e.g., Minnesota State Building and Construction Trades 
Council; SMACNA; and Smith-Boughan, Inc. NECA supported the changes as 
necessary for ensuring that the Department is informed of where Federal 
and federally assisted construction will take place.
    The UA supported the proposed change and further suggested that the 
reports be posted online to improve transparency or that the Department 
``provide a streamlined mechanism for interested parties to request the 
reports.'' While appreciating the UA's interest in transparency, the 
Department does not believe codification of such a procedure is 
necessary, particularly given the amount of information regarding 
agency construction programs that is already in the public domain and 
available through resources such as USAspending.gov and agency 
operating plans.
    The Department of the Army's Labor Advisor supported the proposal 
to change agency construction reports' due date to April 10, stating 
that the April date is ``considerably more practicable than October 
1,'' as contracting agency activity ``is especially busy at the start 
of each fiscal year.'' This commenter, however, noted that the proposed 
language is confusing because it characterizes the requirement as one 
that is ``[a]t the beginning of each fiscal year,'' even though fiscal 
years for the Federal government run from October 1 through September 
30. The Department agrees that the proposed language may lead to 
confusion and has changed the description to require the reports ``[o]n 
an annual basis.''
    The Department received a few comments expressing concerns about 
additional burdens from the proposal to remove the language in the 
regulation that currently allows agencies to submit reports only ``to 
the extent practicable.'' NAHRO expressed concern that if agencies are 
required to submit reports, additional burdens will be placed on public 
housing authorities and other housing and community development 
organizations that provide information to HUD. The National Community 
Development Association was also concerned that the Department's 
proposal would result in HUD needing to impose additional information 
collection requirements on grantees and recommended that agencies only 
be required to report on projects ``of such a scale as to be relevant 
to the stated goal of assisting [the Department] decide where updated 
wage determinations are needed or would be of most use.'' The 
Department of the Army's Labor Advisor recommended the Department add 
clarifying language that construction reports be ``based on information 
already on hand.'' In response to comments received, and specifically 
in order to address the stated concerns about imposing potentially 
burdensome information collection requirements on recipients of Federal 
financial assistance, the Department has added language at the end of 
the opening sentence in Sec.  1.4 of the regulatory text to clarify 
that a Federal agency's report should be based on information in the 
Federal agency's possession at the time it furnishes its report. This 
language is intended to clarify that a Federal agency is not required 
to impose additional information collection requirements on grantees in 
order to fulfill the Federal agency's duty to submit construction 
program reports to the Department.\118\
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    \118\ While this rule change does not require Federal agencies 
to impose additional information collection requirements on grantees 
or other recipients of federal assistance, this language does not 
prevent them from doing so to the extent that additional or modified 
information requests may be helpful. The details of such information 
collection requests, however, are outside of the scope of this 
rulemaking.
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    Having considered the comments both supporting and opposing the 
proposed changes to the agency construction reporting requirements, the 
Department continues to believe it is appropriate to remove the 
language allowing the reporting to occur only ``to the extent 
practicable.'' Accordingly, the final rule adopts the proposed 
revisions to Sec.  1.4, with the limited changes specified above.
v. Section 1.5 Publication of General Wage Determinations and Procedure 
for Requesting Project Wage Determinations
    The Department proposed a number of revisions to Sec.  1.5 to 
clarify the applicability of general wage determinations and project 
wage determinations. Except as noted below, these revisions are 
consistent with longstanding Department practice and subregulatory 
guidance.
    First, the Department proposed to re-title Sec.  1.5, currently 
titled ``Procedure for requesting wage determinations,'' as 
``Publication of general wage determinations and procedure for 
requesting project wage determinations.'' The proposed revision better 
reflects the content of the section as well as the distinction between 
general wage determinations, which the Department publishes for broad 
use, and project wage determinations, which are requested by 
contracting agencies on a project-specific basis. The Department also 
proposed to add titles to each paragraph in Sec.  1.5 to improve 
readability.
    Additionally, the Department proposed to add language to Sec.  
1.5(a) to explain that a general wage determination contains, among 
other information, a list of wage rates determined to be prevailing for 
various classifications of laborers and mechanics for specified type(s) 
of construction in a given area. Likewise, the Department proposed to 
add language to Sec.  1.5(b) to explain circumstances under which an 
agency

[[Page 57565]]

may request a project wage determination, namely, where (1) the project 
involves work in more than one county and will employ workers who may 
work in more than one county; (2) there is no general wage 
determination in effect for the relevant area and type of construction 
for an upcoming project; or (3) all or virtually all of the work on a 
contract will be performed by one or more classifications that are not 
listed in the general wage determination that would otherwise apply, 
and contract award or bid opening has not yet taken place. The first of 
these three circumstances conforms to the proposed revision to the 
definition of ``area'' in Sec.  1.2 that would permit the issuance of 
project wage determinations for multicounty projects where appropriate. 
The latter two circumstances reflect the Department's existing 
practice. See PWRB, Davis-Bacon Wage Determinations, at 4-5.
    The Department also proposed to add language to Sec.  1.5(b) 
clarifying that requests for project wage determinations may be sent by 
means other than the mail, such as email or online submission, as 
directed by the Administrator. Additionally, consistent with the 
Department's current practice, the Department proposed to add language 
to Sec.  1.5(b) requiring that when requesting a project wage 
determination for a project that involves multiple types of 
construction, the requesting agency must attach information indicating 
the expected cost breakdown by type of construction. See PWRB, Davis-
Bacon Wage Determinations, at 5. The Department also proposed to 
clarify that in addition to submitting the information specified in the 
regulation, a party requesting a project wage determination must submit 
all other information requested in the Standard Form (SF) 308. The 
Department proposed to discuss the time required for processing 
requests for project wage determinations in Sec.  1.5(b)(5).
    Finally, the Department proposed to clarify the term ``agency'' in 
Sec.  1.5. In proposed Sec.  1.5(b)(2) (renumbered, currently Sec.  
1.5(b)(1)), which describes the process for requesting a project wage 
determination, the Department proposed to delete the word ``Federal'' 
that precedes ``agency.'' This proposed deletion, and the resulting 
incorporation of the definition of ``agency'' from Sec.  1.2, clarifies 
that, as already implied elsewhere in Sec.  1.5, non-Federal agencies 
may request project wage determinations. See, e.g., Sec.  1.5(b)(3) 
(proposed Sec.  1.5(b)(4)) (explaining that a State highway department 
under the Federal-Aid Highway Acts may be a requesting agency).
    The Department received no substantive comments on these proposals 
other than comments regarding the availability of project wage 
determinations for multicounty projects; these comments were discussed 
above in the review of comments on the definition of ``area'' in Sec.  
1.2. The final rule adopts these changes as proposed, with one non-
substantive change. The proposed language in Sec.  1.5(b)(5), to 
address processing times for requests for project wage determinations, 
inadvertently duplicated language already found in Sec.  1.5(c). 
Therefore, the final rule removes existing Sec.  1.5(c) to avoid 
duplication.
vi. Section 1.6 Use and Effectiveness of Wage Determinations
(A) Organizational, Technical and Clarifying Revisions
(1) Terminology and Organization
    The Department proposed to reorganize, rephrase, and/or renumber 
several regulatory provisions and text in Sec.  1.6. These proposed 
revisions included adding headings to paragraphs for clarity; changing 
the order of some of the paragraphs so that discussions of general wage 
determinations precede discussions of project wage determinations, 
reflecting the fact that general wage determinations are (and have been 
for many years) the norm, whereas project wage determinations are the 
exception; adding the word ``project'' before ``wage determinations'' 
in locations where the text refers to project wage determinations but 
could otherwise be read as referring to both general and project wage 
determinations; using the term ``revised'' wage determination to refer 
both to cases where a wage determination is modified, such as due to 
updated CBA rates, and cases where a wage determination is reissued 
entirely (referred to in the current regulatory text as a 
``supersedeas'' wage determination), such as after a new wage survey; 
consolidating certain paragraphs that discuss revisions to wage 
determinations to eliminate redundancy and improve clarity; revising 
the regulation so that it references the publication of a general wage 
determination (consistent with the Department's current practice of 
publishing wage determinations online), rather than publication of 
notice of the wage determination (which the Department previously did 
in the Federal Register); and using the term ``issued'' to refer, 
collectively, to the publication of a general wage determination or 
WHD's provision of a project wage determination.
    The Department did not receive any comments on these proposed 
changes to terminology and the organization of the section. The final 
rule therefore adopts these changes as proposed.
(2) Use of Inactive Wage Determinations
    The Department also proposed minor revisions regarding wage 
determinations that are no longer current, referred to in current 
regulatory text as ``archived'' wage determinations. First, the 
Department proposed to revise the regulatory text to instead refer to 
such wage determinations as ``inactive'' to conform to the terminology 
currently used on SAM. Second, the Department proposed to clarify that 
there is only one appropriate use for inactive wage determinations, 
namely, when the contracting agency initially failed to incorporate the 
correct wage determination into the contract and subsequently must 
incorporate the correct wage determination after contract award or the 
start of construction (a procedure that is discussed in Sec.  1.6(f)). 
In that circumstance, even if the wage determination that should have 
been incorporated at the time of the contract award has since become 
inactive, it is still the correct wage determination to incorporate 
into the contract. Third, the Department also proposed that agencies 
should notify WHD prior to engaging in incorporation of an inactive 
wage determination, and that agencies may not incorporate the inactive 
wage determination if WHD instructs otherwise. While the existing 
regulation requires the Department to ``approv[e]'' the use of an 
inactive wage determination, the proposed change would permit the 
contracting agency to use an inactive wage determination under these 
limited circumstances as long as it has notified the Administrator and 
has not been instructed otherwise. The proposed change was intended to 
ensure that contracting agencies incorporate omitted wage 
determinations promptly rather than waiting for approval.
    The Department did not receive any comments on the proposed 
revisions relating to inactive wage determinations. Accordingly, the 
final rule adopts these changes as proposed.
(3) Incorporation of Multiple Wage Determinations Into a Contract
    The Department also proposed revisions to Sec.  1.6(b) to clarify 
when contracting agencies must incorporate multiple wage determinations 
into a contract. The proposed language stated

[[Page 57566]]

that when a construction contract includes work in more than one 
``area'' (as the term is defined in Sec.  1.2), and no multi-county 
project wage determination has been obtained (as contemplated by the 
proposed revisions to Sec.  1.2), the applicable wage determination for 
each area must be incorporated into the contract so that all workers on 
the project are paid the wages that prevail in their respective areas, 
consistent with the DBA. The Department also proposed language stating 
that when a construction contract includes work in more than one ``type 
of construction'' (as the Department has proposed to define the term in 
Sec.  1.2), the contracting agency must incorporate the applicable wage 
determination for each type of construction where the total work in 
that type of construction is substantial. This corresponds with the 
Department's longstanding guidance published in AAM 130 (Mar. 17, 1978) 
and AAM 131 (July 14, 1978).\119\ The Department also proposed to 
continue interpreting the meaning of ``substantial'' in subregulatory 
guidance.\120\ The Department requested comments on the above 
proposals, including potential ways to improve the standards for when 
and how to incorporate multiple wage determinations into a contract.
---------------------------------------------------------------------------

    \119\ AAM 130 states that where a project ``includes 
construction items that in themselves would be otherwise classified, 
a multiple classification may be justified if such construction 
items are a substantial part of the project . . . . [But] a separate 
classification would not apply if such construction items are merely 
incidental to the total project to which they are closely related in 
function,'' and construction is incidental to the overall project. 
AAM 130, at 2 n.1. AAM 131 similarly states that multiple schedules 
are issued if ``the construction items are substantial in relation 
to project cost[s].'' However, it further explains that ``[o]nly one 
schedule is issued if construction items are `incidental' in 
function to the overall character of a project . . . and if there is 
not a substantial amount of construction in the second category.'' 
AAM 131, at 2 (emphasis omitted).
    \120\ Most recently, on Dec. 14, 2020, the Administrator issued 
AAM 236 (Dec. 14, 2020), which states that ``[w]hen a project has 
construction items in a different category of construction, 
contracting agencies should generally apply multiple wage 
determinations when the cost of the construction exceeds either $2.5 
million or 20% of the total project costs,'' but that WHD will 
consider ``exceptional situations'' on a case-by-case basis. AAM 
236, at 1-2.
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    The Department did not receive any comments on the proposed 
language relating to the incorporation of multiple general wage 
determinations when the construction contract includes work in more 
than one area, other than those comments regarding the use of multi-
county areas that are addressed above in the discussion of the 
definition of area in Sec.  1.2, and therefore the final rule adopts 
that language as proposed.
    In contrast, the Department received comments related to the 
proposed language on the incorporation of multiple wage determinations 
when a construction contract includes work in more than one type of 
construction. CC&M expressed support for the Department's position 
reflected in AAM 236 (Dec. 14, 2020) that work in another category of 
construction is generally considered substantial when it exceeds either 
$2.5 million or 20 percent of total project costs. See supra note 118. 
While not explicitly taking a position on the proposed language or the 
existing subregulatory guidance, the UA recommended that the Department 
provide either regulatory or subregulatory guidance clarifying when it 
is appropriate for work to be classified as heavy or building in 
multiple wage determination situations.
    MBA and National Council of State Housing Agencies (NCSHA) 
expressed opposition to the proposed language's application to 
multifamily housing projects, recommending that the regulations instead 
specify that only a single residential wage determination should apply 
to such projects. These commenters asserted that HUD policy has long 
been that only a single residential wage determination need be applied 
to residential projects and that application of multiple wage 
determinations would be unnecessarily complex because it would require 
contractors to track when workers are performing work in different 
categories of construction and pay different rates accordingly. MBA 
further asserted that the use of a single residential rate in these 
scenarios would also be consistent with the Department's own guidance 
and that work in other categories of construction on residential 
projects is actually of a character similar to residential work because 
wage rates for such work are more similar to residential wage rates, 
and are therefore more likely to be included in residential wage 
determinations. In the alternative, MBA argued that if multiple wage 
determinations are applied to multifamily housing projects, the 
threshold for substantiality should be increased to $15 million, 
because current HUD standards consider Federal Housing Administration-
insured loans to be large loans when the loan exceeds $75 million ($15 
million is 20 percent of $75 million). MBA also suggested $5 million as 
a potential threshold. Finally, MBA requested that the Department 
provide more details as to the process that will be used to re-evaluate 
annually whether an update to the substantiality threshold is 
warranted, as provided for in AAM 236.
    The final rule adopts the language relating to the application of 
multiple categories of wage determinations as proposed. As an initial 
matter, the Department has decided to continue to interpret the meaning 
of ``substantial'' in its subregulatory guidance in accordance with its 
longstanding practice. With respect to the monetary threshold in 
particular, WHD anticipates issuing an AAM or other guidance containing 
additional information regarding both the methodology and frequency of 
updates to the threshold.
    The Department appreciates the UA's suggestion that the 
distinctions between building and heavy construction should be more 
precisely delineated and MBA's suggestion that the Department should 
more precisely describe the methods used to update the dollar 
threshold, and will consider these suggestions when developing further 
guidance on this issue and when updating the threshold in the future. 
The Department also notes that stakeholders are always welcome to 
provide input as to data and methods that should be used in 
interpreting the meaning of ``substantial'' and updating the dollar 
threshold.
    While the Department appreciates MBA's and NCSHA's goal of 
encouraging the development of multifamily housing projects, the 
Department declines the suggestion to exempt such projects from the 
requirement to incorporate wage determinations from multiple categories 
when a project has a substantial amount of work in another category of 
construction. Although HUD previously suggested that a single 
residential wage determination could be used in such circumstances, it 
has since issued guidance clarifying that multiple wage determinations 
should be incorporated into construction contracts for multifamily 
housing when there is a substantial amount of work in another category 
of construction, consistent with longstanding Department policy and 
this rulemaking. See U.S. Dep't of Hous. & Urb. Dev., Labor Relations 
Letter on Applicability of Department of Labor Guidance Concerning 
`Projects of a Similar Character' (Jan. 15, 2021).\121\
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    \121\ https://www.hud.gov/sites/dfiles/OCHCO/documents/LR_21-01.pdf.
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    Moreover, the Department's existing guidance does not support an 
exception; rather, AAM 130 and 131 apply the substantiality standard to 
residential projects to the same extent as other types of projects. 
While MBA contends in its comment that language in AAM

[[Page 57567]]

130 stating that residential construction includes ``all incidental 
items, such as site work, parking areas, utilities, streets and 
sidewalks'' indicates that a single residential wage determination may 
be applied to any such work related to a residential project, AAM 130 
similarly describes ``incidental grading, utilities, and paving'' in 
building construction projects and states that highway construction 
excludes projects ``incidental to residential or building 
construction.'' These references to ``incidental'' work in AAM 130 (and 
similar references in AAM 131 and the Manual of Operations) reflect the 
policy explained in those documents that a single wage determination 
for a project involving more than one type of construction is only 
appropriate when construction items in the non-primary category are `` 
`incidental' in function,'' ``and . . . there is not a substantial 
amount of construction in the second category.'' AAM 131, at 2; see 
also AAM 130, at 2 n.1; Manual of Operations, at 29. Thus, although, as 
AAM 130 and the Manual of Operations suggest, site work and the 
construction of parking areas, utilities, streets, and sidewalks are 
often incidental in function to residential construction, these 
construction items may or may not be substantial in relation to a 
particular project's overall cost. Nothing in those guidance documents 
suggests that residential projects are to be treated any differently 
from other types of projects in this regard or that substantial work in 
other categories should be assigned a residential wage 
determination.\122\
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    \122\ Similarly, the absence of a specific example of a 
residential project in the examples of projects with multiple wage 
determinations in AAM 130 and AAM 131 in no way indicates that 
residential construction projects cannot have a substantial amount 
of work in another category of construction. The examples listed in 
AAM 130 and 131 were not intended to be an exclusive list of all 
possible situations in which a project might require the application 
of multiple wage determinations. AAM 131 plainly states that beyond 
the listed examples, ``the same principles are applied to other 
categories.''
---------------------------------------------------------------------------

    The Department also does not agree with MBA's contention that the 
data on the rates paid to workers who perform work in another category 
of construction, where work in that other category of construction is 
substantial, are likely to be included in the applicable residential 
wage determination. To the contrary, when wage data submitted to the 
Department in connection with a Davis-Bacon wage survey reflects that a 
project in one category includes substantial construction in another 
category, the Department excludes the wage data for the work in the 
second category from the dataset that will be used to establish 
prevailing wage rates for the primary category of construction, 
including in surveys for residential construction. Moreover, MBA has 
not provided any data to support its assertion that workers who perform 
the types of work in other categories of construction commonly found on 
residential projects are typically paid residential wage rates rather 
than the wage rates generally applicable to those categories of 
construction. Similarly, MBA has not provided any data suggesting that 
the local wages in other categories of construction are somehow more 
shielded from the potential impact on wages of a substantial amount of 
work in that category of construction on residential projects than on 
other types of projects.
    Finally, the Department disagrees that any added complexity from 
the application of multiple wage determinations to multifamily housing 
projects justifies an exception. Davis-Bacon contractors across all 
types of projects are required to track the hours worked and to pay the 
corresponding prevailing wage rates due. These rates necessarily vary 
depending on the work performed, because workers work in different 
classifications and sometimes in different construction categories. The 
``substantiality'' threshold for work in a second category of 
construction seeks to balance the benefits of applying the appropriate 
wage determinations--including the preservation of locally prevailing 
wages--against any associated administrative burden, by requiring that 
additional wage determinations be incorporated only where the work in 
the non-primary category is of a sufficient magnitude. There is no 
indication that this balance should be any different for multifamily 
housing projects.
    For these reasons, the final rule adopts the language relating to 
the application of multiple categories of wage determinations as 
proposed and declines to create an exception for multifamily housing 
contractors.
(4) Clarification of Responsibilities of Contracting Agencies, 
Contractors, and Subcontractors
    The Department also proposed to add language to Sec.  1.6(b) 
clarifying and reinforcing the responsibilities of contracting 
agencies, contractors, and subcontractors with regard to wage 
determinations. Specifically, the Department proposed to clarify in 
Sec.  1.6(b)(1) that contracting agencies are responsible for making 
the initial determination of the appropriate wage determination(s) for 
a project. In Sec.  1.6(b)(2), the Department proposed to clarify that 
contractors and subcontractors have an affirmative obligation to ensure 
that wages are paid to laborers and mechanics in compliance with the 
DBRA labor standards.
    The Department did not receive any comments on these proposed 
revisions, and therefore the final rule adopts these changes as 
proposed.
(5) Consideration of Area Practice
    The Department also proposed to revise language in Sec.  1.6(b) 
that currently states that the Administrator ``shall give foremost 
consideration to area practice'' in resolving questions about ``wage 
rate schedules.'' In the Department's experience, this language has 
created unnecessary confusion because stakeholders have at times 
interpreted it as precluding the Administrator from considering factors 
other than area practice when resolving questions about wage 
determinations. Specifically, the Department has long recognized that 
when ``it is clear from the nature of the project itself in a 
construction sense that it is to be categorized'' as either building, 
residential, heavy, or highway construction, ``it is not necessary to 
resort to an area practice survey'' to determine the proper category of 
construction. AAM 130, at 2; see also AAM 131, at 1 (``[A]rea practice 
regarding wages paid will be taken into consideration together with 
other factors,'' when ``the nature of the project in a construction 
sense is not clear.''); Chastleton Apartments, WAB No. 84-09, 1984 WL 
161751, at *4 (Dec. 11, 1984) (because the ``character of the structure 
in a construction sense dictates its characterization for Davis-Bacon 
wage purposes,'' where there was a substantial amount of rehabilitation 
work being done on a project similar to a commercial building in a 
construction sense, it was ``not necessary to determine whether there 
[was] an industry practice to recognize'' the work as residential 
construction). The proposed rule explained that the regulatory 
directive to give ``foremost consideration to area practice'' in 
determining which wage determination to apply to a project arguably is 
in tension with the Department's longstanding position and has resulted 
in stakeholders contending on occasion that WHD or a contracting agency 
must in every instance conduct an exhaustive review of local area 
practice as to how work is classified, even if the nature of the 
project in a construction sense is clear. The proposed language would 
resolve this perceived inconsistency and would streamline 
determinations

[[Page 57568]]

regarding construction types by making clear that while the 
Administrator should continue considering area practice, the 
Administrator may consider other relevant factors, particularly the 
nature of the project in a construction sense. This proposed regulatory 
revision also would better align the Department's regulations with the 
FAR, which does not call for ``foremost consideration'' to be given to 
area practice in all circumstances, but rather provides, consistent 
with AAMs 130 and 131, that ``[w]hen the nature of a project is not 
clear, it is necessary to look at additional factors, with primary 
consideration given to locally established area practices.'' 48 CFR 
22.404-2(c)(5).
    The Department received one comment on this proposal. VDOT 
recommended that the Department retain the language in the existing 
regulation, expressing concern that if area practice is not the primary 
factor to be considered when determining what wage determinations are 
to be applied to a project, the Department could determine that a 
project is one type of construction even if area practice is to pay 
wage rates from another category of construction. VDOT opined that this 
would be contrary to the purpose of the DBA, which is to establish 
prevailing wage rates based on actual wage rates that contractors pay 
for a type of construction project.
    While the Department recognizes VDOT's concerns, it does not 
believe they warrant deviating from the proposed rule. The Davis-Bacon 
labor standards require that covered workers receive at least the 
locally prevailing wages that are paid on projects of a similar 
character. As explained above, where the character of a project in a 
construction sense is clear, it is not necessary or appropriate to 
survey area practice to determine what category of construction 
applies; the applicable category is based on the nature of construction 
even if area practice is to pay wage rates associated with a different 
category. See 2900 Van Ness Street, WAB No. 76-11, 1977 WL 24827, at *2 
(Jan. 27, 1977) (``The test of whether a project is of a character 
similar to another project refers to the nature of the project itself 
in a construction sense, not to whether union or non-union wages are 
paid or whether union or non-union workers are employed.''); Lower 
Potomac Pollution Control Plant, WAB No. 77-20, 1977 WL 24840, at *1 
(Sept. 30, 1977) (``When it is clear from the nature of the project 
itself in a construction sense that it is to be categorized as either 
building, heavy or highway construction . . . [t]he area practice with 
respect to wages could not convert what is clearly one category of 
construction into another category.''). A highway cannot be a building, 
for example, regardless of how similar the wages paid on highway 
projects in a locality may be to the wages paid on building projects. 
The Department believes that the revision to the ``area practice'' 
language better reflects that principle by eliminating any implication 
that area practice could somehow outweigh the clear character of a 
project.
    In contrast, the revision reflects that when it is unclear how a 
project should be categorized, while the Department considers area 
practice as to wage rates to assist in determining that project's 
category, area practice is not the only relevant information. As 
indicated in AAM 131, ``area practice regarding wages paid will be 
taken into consideration together with other factors'' when there is a 
genuine question as to the correct category of construction for a 
project (emphasis added). See also Tex. Heavy-Highway Branch, WAB No. 
77-23, 1977 WL 24841, at *4 (Dec. 30, 1977) (``Wages, however, are only 
one indication. It is also necessary to look at other characteristics 
of the project, including the construction techniques, the material and 
equipment being used on the project, the type of skills called for on 
the project work and other similar factors which would indicate the 
proper category of construction.''). The proposed language is 
consistent with these principles and simply clarifies that area 
practice information is relevant to determining the type of 
construction project involved only when there is a genuine question as 
to the applicable category of construction, and that other relevant 
information is not excluded from consideration when making such a 
determination. The final rule therefore adopts the language as 
proposed.
(6) Section 1.6(e) and (g)
    In Sec.  1.6(e), the Department proposed to clarify that if, prior 
to contract award (or, as appropriate, prior to the start of 
construction), the Administrator provides written notice that the 
bidding documents or solicitation included the wrong wage determination 
or schedule, or that an included wage determination was withdrawn by 
the Department as a result of an ARB decision, the wage determination 
may not be used for the contract, regardless of whether bid opening (or 
initial endorsement or the signing of a housing assistance payments 
contract) has occurred. Current regulatory text states that under such 
circumstances, notice of such errors is ``effective immediately'' but 
does not explain the consequences of such effect. The proposed language 
is consistent with the Department's current practice and guidance. See 
Manual of Operations, at 35.
    The Department did not receive any comments on these proposed 
revisions, and therefore the final rule adopts the changes as proposed, 
except that in a technical correction, the Department has moved certain 
language from Sec.  1.6(e)(2) into Sec.  1.6(e), as the language was 
intended to encompass the entire paragraph.
    In Sec.  1.6(g), the Department proposed a number of additional 
clarifying revisions. It proposed to clarify that under the Related 
Acts, if Federal funding or assistance is not approved prior to 
contract award (or the beginning of construction where there is no 
contract award), the applicable wage determination must be incorporated 
retroactive to the date of the contract award or the beginning of 
construction. The Department also proposed to delete language 
indicating that a wage determination must be ``requested,'' as such 
language appears to contemplate a project wage determination, which in 
most situations will not be necessary as a general wage determination 
will apply. The Department also proposed to revise Sec.  1.6(g) to 
clarify that it is the head of the applicable Federal agency who must 
request any waiver of the requirement that a wage determination 
provided under such circumstances be retroactive to the date of the 
contract award or the beginning of construction. The current version of 
Sec.  1.6(g) uses the term ``agency'' and is therefore ambiguous as to 
whether it refers to the Federal agency providing the funding or 
assistance or the state or local agency receiving it. The proposed 
clarification that this term refers to Federal agencies was intended to 
reflect both the Department's current practice and its belief that it 
is most appropriate for the relevant Federal agency, rather than a 
State or local agency, to bear these responsibilities, including 
assessing, as part of the waiver request, whether non-retroactivity 
would be necessary and proper in the public interest based on all 
relevant considerations.
    The Department did not receive any comments on these proposed 
revisions, and therefore the final rule adopts these changes as 
proposed.
(B) Requirement To Incorporate Most Recent Wage Determinations Into 
Certain Ongoing Contracts
    The Department's longstanding position has been to require that

[[Page 57569]]

contracts and bid solicitations contain the most recently issued 
revision to the applicable wage determination(s) to the extent that 
such a requirement does not cause undue disruption to the contracting 
process. See 47 FR 23644, 23646 (May 28, 1982); U.S. Army, ARB No. 96-
133, 1997 WL 399373, at *6 (July 17, 1997) (``The only legitimate 
reason for not including the most recently issued wage determination in 
a contract is based upon disruption of the procurement process.''). 
Under the current regulations, a wage determination is generally 
applicable for the duration of a contract once incorporated. See 29 CFR 
1.6(c)(2)(ii), 1.6(c)(3)(vi). For clarity, the NPRM proposed to add 
language to Sec.  1.6(a) to state this affirmative principle.
    The Department also proposed to add a new paragraph, Sec.  
1.6(c)(2)(iii), to clarify two circumstances where the principle that 
an incorporated wage determination remains applicable for the life of a 
contract does not apply. First, the Department proposed to explain that 
the most recent version of any applicable wage determination(s) must be 
incorporated when a contract or order is changed to include additional, 
substantial construction, alteration, and/or repair work not within the 
scope of work of the original contract or order or to require the 
contractor to perform work for an additional time period not originally 
obligated, including where an agency exercises an option provision to 
unilaterally extend the term of a contract. The proposed change was 
consistent with the Department's guidance, case law, and historical 
practice, under which such modifications are considered new contracts. 
See U.S. Army, 1997 WL 399373, at *6 (noting that the Department has 
consistently ``required that new DBA wage determinations be 
incorporated . . . when contracts are modified beyond the obligations 
of the original contract''); Iowa Dep't of Transp., WAB No. 94-11, 1994 
WL 764106, at *5 (Oct. 7, 1994) (``A contract that has been 
`substantially' modified must be treated as a `new' contract in which 
the most recently issued wage determination is applied.''); AAM 157 
(explaining that exercising an option ``requires a contractor to 
perform work for a period of time for which it would not have been 
obligated . . . under the terms of the original contract,'' and as 
such, ``once the option . . . is exercised, the additional period of 
performance becomes a new contract''). The Department proposed that 
under these circumstances, the most recent version of any wage 
determination(s) must be incorporated as of the date of the change or, 
where applicable, the date the agency exercises its option to extend 
the contract's term. These circumstances do not include situations 
where the contractor is simply given additional time to complete its 
original commitment or where the additional construction, alteration, 
and/or repair work in the modification is merely incidental.
    Additionally, the Department proposed a revision to address modern 
contracting methods that frequently involve a contractor agreeing to 
perform construction as the need arises over an extended time period, 
with the quantity and timing of the construction not known when the 
contract is awarded.\123\ Examples of such contracts would include, but 
are not limited to: a multiyear indefinite-delivery-indefinite-quantity 
(IDIQ) contract to perform repairs to a Federal facility when needed; a 
long-term contract to operate and maintain part or all of a facility, 
including repairs and renovations as needed; \124\ or a schedule 
contract or BPA whereby a contractor enters into an agreement with a 
Federal agency to provide certain products or services (either of which 
may involve work subject to Davis-Bacon coverage, such as installation) 
or construction at agreed-upon prices to various agencies or other 
government entities, who can order from the schedule at any time during 
the contract. The extent of the required construction, the time, and 
even the place where the work will be performed may be unclear at the 
time such contracts are awarded.
---------------------------------------------------------------------------

    \123\ Depending on the circumstances, these types of contracts 
may be principally for services and therefore are subject to the 
SCA, but contain substantial segregable work that is covered by the 
DBA. See 29 CFR 4.116(c)(2).
    \124\ The Department of Defense, for example, enters into such 
arrangements pursuant to the Military Housing Privatization 
Initiative, 10 U.S.C. 2871 et seq.
---------------------------------------------------------------------------

    Particularly when such contracts are lengthy, using an outdated 
wage determination from the time of the underlying contract award 
instead of the most current wage determination is a departure from the 
intent of the Davis-Bacon labor standards because it does not 
sufficiently ensure that workers are paid prevailing wages. 
Additionally, in the Department's experience, agencies are sometimes 
inconsistent as to how they incorporate wage determination revisions 
into these types of contracts. Some agencies do so every time 
additional Davis-Bacon work is obligated, others do so annually, others 
only incorporate applicable wage determinations at the time the 
original, underlying contract is awarded, and sometimes no wage 
determination is incorporated at all. This inconsistency can prevent 
the payment of prevailing wages to workers and can disrupt the 
contracting process.
    Accordingly, the Department proposed to require, for these types of 
contracts, that contracting agencies incorporate the most up-to-date 
applicable wage determination(s) annually on each anniversary date of a 
contract award or, where there is no contract, on each anniversary date 
of the start of construction, or another similar anniversary date where 
the agency has sought and received prior approval from the Department 
for the alternative date. This proposal was consistent with the rules 
governing wage determinations under the SCA, which require that the 
contracting agency obtain a wage determination prior to the ``[a]nnual 
anniversary date of a multiyear contract subject to annual fiscal 
appropriations of the Congress.'' See 29 CFR 4.4(a)(1)(v). The 
Department further proposed that when any construction work under such 
a contract is obligated, the most up-to-date wage determination(s) 
incorporated into the underlying contract be included in each task 
order, purchase order, or any other method used to direct performance. 
Once the applicable wage determination revision is included in such an 
order, that revision would generally apply to the order until the 
construction items called for by that order are completed. With this 
proposal, the Department intended that a wage determination correctly 
incorporated into such an order would not need to be updated even if 
the duration of the order extends past the next anniversary date of the 
master contract (when the wage determination in the master contract is 
updated), unless the order itself involves the exercise of an option or 
is changed to include additional, substantial construction, alteration, 
and/or repair work not within the original scope of work, in accordance 
with proposed Sec.  1.6(c)(2)(iii)(A). The NPRM explained that 
consistent with this discussion, if an option is exercised for one of 
these types of contracts, the most recent version of any wage 
determination(s) would still need to be incorporated as of the date the 
agency exercises its option to extend the contract's term (subject to 
the exceptions set forth in proposed Sec.  1.6(c)(2)(ii)), even if that 
date did not coincide with the anniversary date of the contract.
    By proposing these revisions, the Department sought to ensure that 
workers are being paid prevailing wages

[[Page 57570]]

within the meaning of the Act; provide certainty and predictability to 
agencies and contractors as to when, and how frequently, wage rates in 
these types of contracts can be expected to change; and bring 
consistency to agencies' application of the Davis-Bacon labor 
standards. The Department also proposed to include language noting that 
contracting and ordering agencies remain responsible for ensuring that 
the applicable updated wage determination(s) are included in task 
orders, purchase orders, or other similar contract instruments issued 
under the master contract.
    After consideration of the comments received, for the reasons 
detailed below, the final rule adopts these revisions as proposed with 
minor revisions and clarifications. The Department received several 
comments generally supporting the proposed changes. The Minnesota State 
Building and Construction Trades Council stated that these changes 
would improve the efficiency of enforcement and help make sure that 
prevailing wages paid to workers remain current. III-FFC stated that 
the proposed changes reflected existing guidance, case law, and 
historical practice, were consistent with the SCA requirements, and 
would better ensure workers are paid current prevailing wage rates on 
Davis-Bacon projects, consistent with the statutory purpose. The UA 
indicated that it strongly supported regulatory language that would 
ensure that wage determinations in such contracts remain up-to-date, 
but suggested a slight change to the proposed language to clarify that 
the requirement applies to both the unilateral exercise of options and 
the mutual exercise of options. The Department appreciates the UA 
raising this issue, as the intent was not to exclude mutually exercised 
options from the obligation to update wage determinations, but rather 
to make clear that the obligation applies even when the contracting 
agency exercises a unilateral option. The proposed language has 
therefore been adjusted to clarify that the requirement applies 
whenever an option is exercised generally.
    A few commenters opposed the proposed change or alternatively 
suggested revisions. FTBA stated that contracting agencies and 
contractors generally cannot know at the bidding stage whether a 
contract is going to be extended or amended or what the prevailing wage 
rates will be when and if the contract is amended, further noting that 
many contracts are now being extended due to global supply issues 
beyond either the contracting agency or the contractor's control. FTBA 
stated that if the proposed change is retained, the Department should 
add a price adjustment clause to require that contractors are 
reimbursed for additional costs resulting from the incorporation of 
updated wage determinations into their contracts or funding agreements. 
CC&M suggested that the price adjustment should be a 150 percent 
increase change order. MnDOT argued that the proposed changes would 
place an additional administrative burden on contracting agencies, 
requiring change orders, changes to contract terms, and increases or 
decreases in contract funding, and would probably impact contractors' 
bids. MnDOT suggested that rather than requiring an annual update of 
wage determinations for multiyear IDIQ contracts, the Department 
instead require contracting agencies to annually increase the 
applicable prevailing wage rates for each classification by a 
percentage (e.g., 2 percent of base and fringe rates) to allow 
contractors and contracting agencies to predict the potential increases 
at the time of bidding.
    As an initial matter, the Department does not believe that these 
changes will affect contracts that are simply extended due to supply 
chain issues or other circumstances that interfere with the timely 
completion of a contract. Such circumstances expressly fall within the 
events described in the rule that do not require the incorporation of a 
new wage determination, namely, situations where the contractor is 
simply given additional time to complete the construction that the 
contractor committed to perform at the time of the initial award.
    Regarding the comments on how the proposed changes will affect 
pricing and cost, the Department recognizes that contracting agencies 
and contractors may not know at the bidding stage or even at initial 
contract award whether that contract will be extended or amended, or, 
in the case of IDIQ and other similar contracts, how much work will 
ultimately be requested by the agency and performed by the contractor. 
However, the Department believes that issues related to budgeting, 
pricing, and costs associated with these types of contracts can be 
addressed between the contractor and the agency as part of the 
contracting process. For example, where a contract is amended to 
require the contractor to perform additional construction work or to 
perform work for an additional time period not originally obligated, 
agencies and contractors can come to an agreement about what additional 
compensation the contractor will receive for this additional work and 
will be able to take the updated wage determination into account during 
such negotiations. Where a contract includes option clauses or involves 
construction of an unknown amount and at unknown times over an extended 
period, this will be clear when the contract is solicited and at the 
time of contract award, allowing for the inclusion of contractual 
provisions for any increases to the compensation due to the contractor 
to reflect updated wage determinations. See, e.g., 48 CFR 52.222-32 
(price adjustment clause applicable to FAR-based DBA-covered contracts, 
providing that the contracting officer will ``adjust the contract price 
or contract unit price labor rates to reflect'' the contractor's 
``actual increase . . . in wages and fringe benefits to the extent that 
the increase is made to comply with . . . [i]ncorporation of the 
Department of Labor's Construction Wage Rate Requirements wage 
determination applicable at the exercise of an option to extend the 
term of the contract'').\125\
---------------------------------------------------------------------------

    \125\ While the Department does not have information as to the 
universe of existing contracts to which this revision will apply, 
many such contracts may well have mechanisms requiring the 
contracting agency to compensate the contractor for increases in 
labor costs over time generally. See, e.g., id. Where outdated wage 
determination rates have been applied, it is similarly difficult to 
quantify the cost differential between updated prevailing wage wages 
and wage rate increases that contractors have already made due to 
labor market factors.
---------------------------------------------------------------------------

    The Department similarly appreciates MnDOT's concern about the 
logistics of inserting wage determinations in multiyear IDIQ contracts 
annually. However, the Department declines to adopt MnDOT's alternative 
approach of an across-the-board percentage increase. While the 
Department has provided in this rule for the periodic adjustment of 
out-of-date non-collectively bargained wage rates during the interval 
between wage surveys, the Department does not believe that creating a 
separate mechanism for wage rate increases of the type proposed by 
MnDOT would be necessary or appropriate given that the Department will 
have already published revised wage determinations that are available 
to be incorporated into such contracts. Additionally, the Department's 
position is that contracting agencies can include language in agency 
procurement policies, bid documents, and contract specifications that 
would give both contractors and contracting agencies notice, and an 
expectation from the time of bid solicitation planning, about the 
anticipated timing of updated wage determinations in multiyear IDIQ 
contracts and the likely potential for DBRA prevailing wage increases, 
even

[[Page 57571]]

though the precise amount of those increases will not be known at the 
outset. Finally, contracting agencies have long administered a similar 
requirement for SCA contracts, see 29 CFR 4.4(c)(5), and the Department 
believes that it will be similarly feasible to do so for DBRA-covered 
construction contracts.
    Naval Facilities Engineering Command Southwest (NAVFAC SW) did not 
comment on the proposed changes to Sec.  1.6(c)(2)(iii) but proposed an 
additional related change to Sec.  1.6(c)(2)(ii). Specifically, NAVFAC 
SW suggested that the provision applicable to sealed \126\ bidding 
procedures, Sec.  1.6(c)(2)(ii)(D) --which permits contracting agencies 
to decline to incorporate modifications published fewer than 10 
calendar days before the opening of bids when there is not sufficient 
time available before bid opening to notify bidders of the 
modification--should be expanded to include negotiated contracts, which 
do not involve sealed bidding. While negotiated contracts are currently 
required to include the most recent applicable wage determination 
modifications up to the date of contract award, NAVFAC SW proposed 
permitting agencies to not include a wage determination modification 
issued fewer than 10 days prior to award date, where the agency finds 
that there is not a reasonable time still available before contract 
award to notify all offerors that have not been eliminated from the 
competition and provide them a reasonable opportunity to amend their 
proposals. NAVFAC SW argued that incorporating wage determination 
modifications shortly before the award date is administratively 
difficult, takes additional time and resources, and may delay award of 
the contract, and that these costs outweigh the benefits of what may be 
only minimal changes to wage rates in the updated wage determination. 
An individual commenter also made a similar request.
---------------------------------------------------------------------------

    \126\ The current regulation refers to ``competitive'' bidding 
procedures in this provision; in a non-substantive change, this rule 
changes the term to ``sealed.''
---------------------------------------------------------------------------

    The Department appreciates that the incorporation of an updated 
wage determination within a few days of contract award may be 
challenging. However, as the Department did not propose a change to the 
provisions relating to the required timeline for the pre-award 
incorporation of applicable wage determinations into contracts, the 
Department believes that such a change would be beyond the scope of 
this rulemaking. The Department will, however, consider these comments 
in future rulemakings, and welcomes the opportunity to discuss the 
points raised by NAVFAC SW with other stakeholders.
    MBA proposed a different change to Sec.  1.6(c)(2)(ii). This 
provision currently located at Sec.  1.6(c)(3)(ii), states that for 
projects assisted under the National Housing Act, a revised wage 
determination must be applied to the project if it is issued prior to 
the beginning of construction or the date the mortgage is initially 
endorsed, whichever occurs first. MBA suggested that this provision 
should be changed to instead only require the incorporation of a 
revised wage determination when it is published before the date that 
the developer submits an application for a firm commitment, or the 
start of construction, whichever comes first. MBA stated that such 
updates can trigger a need to revisit previously completed procedural 
steps, both for the developer and for HUD, resulting in potential 
disruption for the affected multifamily housing project. MBA stated 
that this proposed change would reduce the risk that the need to 
incorporate a revised wage determination would inhibit the successful 
completion of multifamily housing projects, though it also acknowledged 
that changes in the applicable wage determination would still be 
disruptive prior to the submission of an application. NAHB and NCHSA 
also critiqued what they described as disruptive cost changes due to 
revised wage determinations that are assigned late in the application 
process.
    The Department finds that a change to the provisions in Sec.  
1.6(c)(2)(ii) for the initial incorporation of wage determinations into 
contracts would be beyond the scope of this rulemaking and does not 
believe such a change would be appropriate. It is well established that 
a prevailing wage should be a current wage. As a result, the 
regulations specifying the circumstances under which the most current 
wage determination need not be applied generally reflect the principle 
that only disruption of the contracting process justifies a failure to 
include the most recent prevailing wages as of, typically, the date of 
contract award or bid opening. See, e.g., Modernization of the John F. 
Kennedy Fed. Bldg, WAB No. 94-09, 1994 WL 574115 (Aug. 19, 1994); Iowa 
Dep't of Transp., WAB No. 94-11, 1994 WL 764106. As such, in both the 
current and proposed regulations, the Department has sought to strike a 
balance between requiring the payment of current, prevailing wages to 
the extent feasible while also minimizing disruption in the contracting 
process. To that end, the regulations' use of the initial endorsement 
date for certain housing contracts already reflects an earlier lock-in 
date for the application of wage determination modifications than the 
date of contract award or the bid opening date, which are the lock-in 
dates that apply to most other types of contracts. Pushing this date 
back even further to the time when the housing developer first applies 
for Related Act funding would undermine worker protections by using 
even more outdated wage rates for DBRA-covered laborers and mechanics 
on these projects. In addition, it would not be administratively 
practical to use so early a date. Initial endorsement occurs when all 
parties have agreed upon the design and costs. Prior to initial 
endorsement, and certainly at so early a point as the developer's 
application for a firm commitment to funding, the project design and 
costs may undergo significant alterations, resulting in changes to the 
classifications and potentially even to the categories of wage 
determinations that may be applicable.
    It would be impractical to lock in the modification of a wage 
determination at a time when the applicable wage determination itself 
may yet be subject to change. It would also be inappropriate to lock in 
a particular wage determination before it is even clear whether the 
project will entail substantial construction in multiple categories of 
construction, and hence require the application of multiple wage 
determinations.
    The Department also made additional minor revisions to the proposed 
regulatory text. After further consideration, the Department has 
decided to revise the scope of the potential exceptions to this process 
that contracting agencies may request. As proposed, the regulatory 
language would only permit agencies to request the Department's 
approval for an alternative anniversary date for the updating of wage 
determinations. However, the requirement that wage determinations be 
updated annually for certain contracts applies to a wide variety of 
contracting mechanisms, and input from Federal contracting agencies 
suggests that it would be helpful to allow the updating process to be 
tailored in appropriate circumstances to the specific contracting 
mechanisms. Accordingly, the Department has revised this language to 
permit agencies to request the Department's prior written approval for 
alternative updating processes, where such an

[[Page 57572]]

exception is necessary and proper in the public interest or to prevent 
injustice and undue hardship. After further consideration, the 
Department also clarified the language stating that the contracting and 
ordering agencies must include the updated wage determination revision 
into any task orders, purchase orders, or other similar contract 
instruments issued under these master contracts. To prevent any 
confusion, the revised language now clearly states that the contracting 
agency is responsible for ensuring that the master contract directs the 
ordering agency to include the applicable updated wage determination in 
such task orders, purchase orders, or other similar contract instrument 
while the ordering agency must accordingly incorporate the applicable 
update wage determinations into such orders.
    In addition, the Department added language further clarifying 
whether wage determination revisions, once properly incorporated into a 
task order, purchase order, or similar contract instrument from the 
master contract, must be further updated. Once a wage determination 
revision has been properly incorporated into such an order, it will 
generally remain applicable for the duration of the order without 
requiring further updates, in accordance with the proposed language 
stating that the annually updated wage determination revision will 
apply to any construction work that begins or is obligated under such a 
contract during the 12 months following that anniversary date until 
such construction work is completed, even if the completion of that 
work extends beyond the 12-month period. The revised language notes 
this general principle, as well as two exceptions. The first exception 
notes that if such an order is changed to include additional, 
substantial construction, alteration, and/or repair work not within the 
scope of work, the wage determination must be updated as set forth in 
paragraph (c)(2)(iii)(A). The second exception states that if the task 
order, purchase order, or similar contract instrument itself includes 
the exercise of options, the updated applicable wage determination 
revision, as incorporated into the master contract, must be included 
when an option is exercised on such an order.
    The Department also provided additional clarification regarding 
master contracts that both call for construction, alteration, and/or 
repair work over a period of time that is not tied to the completion of 
any particular project and also include the exercise of options. As 
explained in the NPRM and discussed above in this section, contracts 
calling for construction, alteration, and/or repair work over a period 
of time that is not tied to the completion of any particular project 
may also include the exercise of options, and if so, the wage 
determination must be updated when the option is exercised. The 
Department revised the regulatory text to also include this 
requirement, while also clarifying that where this type of contract has 
extended base or option periods, wage determinations must still be 
incorporated on an annual basis in years where an option is not 
exercised.
    Accordingly, for the foregoing reasons, the final rule adopts the 
changes to Sec.  1.6(c)(2) as proposed with the two minor 
clarifications discussed.
(C) 29 CFR 1.6(c)(1)--Periodic Adjustments
    The Department proposed to add a provision to 29 CFR 1.6(c)(1) to 
expressly provide a mechanism to regularly update certain non-
collectively bargained prevailing wage rates. The Department proposed 
that such rates (both base hourly wages and fringe benefits) would be 
updated between surveys so that they do not become out-of-date and fall 
behind wage rates in the area.
(1) Background
    Based on the data that it receives through its prevailing wage 
survey program, WHD generally publishes two types of prevailing wage 
rates in the Davis-Bacon wage determinations that it issues: (1) modal 
rates, which under the current regulations must be paid to a majority 
of workers in a particular classification, and (2) weighted average 
rates, which under the current regulations are published whenever the 
wage data received by WHD reflects that no single wage rate was paid to 
a majority of workers in the classification. See 29 CFR 1.2(a)(1).
    Under the current regulations, modal wage rates often reflect 
collectively bargained wage rates. When a CBA rate prevails on a 
general wage determination, WHD updates that prevailing wage rate based 
on periodic wage and fringe benefit increases in the CBA. Manual of 
Operations at 74-75; see also Mistick Constr., ARB No. 04-051, 2006 WL 
861357, at *7 n.4.\127\ However, when the prevailing wage is set 
through the weighted average method based on non-collectively bargained 
rates or a mix of collectively bargained rates and non-collectively 
bargained rates, or when a non-collectively bargained rate prevails, 
such wage rates (currently designated as ``SU'' rates) on general wage 
determinations are not updated between surveys and therefore can become 
out-of-date. The Department's proposal would expand WHD's current 
practice of updating collectively bargained prevailing wage rates 
between surveys to include updating non-collectively bargained 
prevailing wage rates.
---------------------------------------------------------------------------

    \127\ WHD similarly updates weighted average rates based 
entirely on collectively bargained rates (currently designated as 
``UAVG'' rates) using periodic wage and fringe benefit increases in 
the CBAs.
---------------------------------------------------------------------------

    In the NPRM, the Department emphasized that WHD's goal is to 
conduct surveys in each area every 3 years in order to avoid prevailing 
wage rates becoming out-of-date. WHD also noted that because of the 
resource-intensive nature of the wage survey process and the vast 
number of survey areas, many years can pass between surveys conducted 
in any particular area. The 2011 GAO Report found that, as of 2010, 
while 36 percent of ``nonunion-prevailing rates'' \128\ were 3 years 
old or less, almost 46 percent of these rates were 10 or more years 
old. 2011 GAO Report, at 18.\129\ As a result of lengthy intervals 
between Davis-Bacon surveys, the real value of the effectively frozen 
rates erodes as compensation in the construction industry and the cost-
of-living rise. The resulting decline in the real value of prevailing 
wage rates may adversely affect construction workers whom the DBA was 
intended to protect. See Coutu, 450 U.S. at 771 (``The Court's previous 
opinions have recognized that `[o]n its face, the Act is a minimum wage 
law designed for the benefit of construction workers.' '' (citations 
omitted)).
---------------------------------------------------------------------------

    \128\ ``Nonunion-prevailing rates,'' as used in the GAO report, 
is a misnomer, as it refers to weighted average rates that, as 
noted, are published whenever the same wage rate is not paid to a 
majority of workers in the classification, including when much or 
even most of the data reflects union wages, just not that the same 
union wage was paid to a majority of workers in the classification.
    \129\ See note 10, supra.
---------------------------------------------------------------------------

    Program stakeholders have previously raised this issue with the 
GAO. According to several union and contractor officials interviewed in 
connection with the GAO's 2011 report, the age of the Davis-Bacon 
``nonunion-prevailing rates'' means they often do not reflect actual 
prevailing wages in a particular area. 2011 GAO Report, at 18.\130\ As 
a result, the stakeholders said it is ``more difficult for both union 
and nonunion contractors to successfully bid on federal projects 
because they cannot recruit workers with artificially low wages but 
risk losing contracts if their bids reflect more realistic wages.''

[[Page 57573]]

Id. Regularly updating these rates would alleviate this situation and 
better protect workers' wage rates. The Department anticipates that 
updated rates would also better reflect construction industry 
compensation in communities where federally funded construction is 
occurring.
---------------------------------------------------------------------------

    \130\ See note 10, supra.
---------------------------------------------------------------------------

    The Department explained in the NPRM that the proposal to update 
non-collectively bargained rates is consistent with, and builds upon, 
the current regulatory text at 29 CFR 1.6(c)(1), which provides that 
wage determinations ``may be modified from time to time to keep them 
current.'' This regulatory provision provides legal authority for 
updating wage rates, and has been used as a basis for updating 
collectively bargained prevailing wage rates based on CBA submissions 
between surveys. See Manual of Operations at 74-75. The Department 
proposed to extend the practice of updating prevailing wage rates to 
include non-collectively bargained rates based on ECI data. The 
Department stated its belief that ``chang[ed] circumstances''--
including an increase in the use of weighted average rates--and the 
lack of an express mechanism to update non-collectively bargained rates 
between surveys under the existing regulations support this proposed 
``extension of current regulation[s]'' to better effectuate the DBRA's 
purpose. State Farm, 463 U.S. at 42; see also In re Permian Basin Area 
Rate Cases, 390 U.S. 747, 780 (1968) (explaining the Court was 
``unwilling to prohibit administrative action imperative for the 
achievement of an agency's ultimate purposes'' absent ``compelling 
evidence that such was Congress' intention'').
    The proposal also is consistent with the Department's broad 
authority under the Act to ``establish the method to be used'' to 
determine DBA prevailing wage rates. Donovan, 712 F.2d at 616. The 
Department stated its belief that the new periodic adjustment proposal 
will ``on balance result in a closer approximation of the prevailing 
wage'' for these rates and therefore is an appropriate extension of the 
current regulation. Id. at 630 (citing Am. Trucking Ass'ns v. Atchison, 
T. & S.F. Ry., 387 U.S. 397, 416 (1967)).
    The Department emphasized that this proposed new provision is 
particularly appropriate because it seeks to curb a practice the DBA 
and Related Acts were enacted to prevent: payment of ``substandard'' 
wages (here, out-of-date non-collectively bargained prevailing wage 
rates) on covered construction projects that are less than current 
wages paid for similar work in the locality. Regularly increasing non-
collectively bargained prevailing wage rates that are more than 3 years 
old would be consistent with the DBA's purpose of protecting local wage 
standards by updating significantly out-of-date non-collectively 
bargained prevailing wage rates that have fallen behind currently 
prevailing local rates. The Department emphasized that updating such 
out-of-date construction wages would better align with the DBRA's main 
objective.
    The Department further explained that periodically updating 
existing non-collectively bargained prevailing wage rates is intended 
to keep such rates more current in the interim period between surveys. 
The Department asserted that it is reasonable to assume that non-
collectively bargained rates, like other rates that the Secretary has 
determined to prevail, generally increase over time like other 
construction compensation measures. See, e.g., Table A (showing recent 
annual rates of union and non-union construction wage increases in the 
United States); Table B (showing ECI changes from 2001 to 2020).

               Table A--Current Population Survey (CPS) Wage Growth by Union Status--Construction
----------------------------------------------------------------------------------------------------------------
                                                      Median weekly earnings        Percentage of differential
                                                 ---------------------------------------------------------------
                      Year                          Members of                      Members of
                                                      unions         Non-union      unions (%)     Non-Union (%)
----------------------------------------------------------------------------------------------------------------
2015............................................          $1,099            $743  ..............  ..............
2016............................................           1,168             780               6               5
2017............................................           1,163             797               0               2
2018............................................           1,220             819               5               3
2019............................................           1,257             868               3               6
2020............................................           1,254             920               0               6
2021............................................           1,344             922               7               0
                                                 ---------------------------------------------------------------
    Average.....................................  ..............  ..............               3               4
----------------------------------------------------------------------------------------------------------------
Source: Current Population Survey, Table 43: Median weekly earnings of full-time wage and salary workers by
  union affiliation, occupation, and industry, BLS, https://www.bls.gov/cps/cpsaat43.htm (last modified Jan. 20,
  2022).
Note: Limited to workers in the construction industry.


    Table B--ECI, 2001-2020, Total Compensation of Private Workers in
Construction, and Extraction, Farming, Fishing, and Forestry Occupations
    [Average 12-month percent changes (rounded to the nearest tenth)]
------------------------------------------------------------------------
                                                    Average annual total
                       Year                          compensation, 12-
                                                       month % change
------------------------------------------------------------------------
2001.............................................                    4.5
2002.............................................                    3.5
2003.............................................                    3.9
2004.............................................                    4.5
2005.............................................                    3.1
2006.............................................                    3.5
2007.............................................                    3.5
2008.............................................                    3.6
2009.............................................                    1.7

[[Page 57574]]

 
2010.............................................                    1.9
2011.............................................                    1.6
2012.............................................                    1.4
2013.............................................                    1.8
2014.............................................                    2.0
2015.............................................                    2.0
2016.............................................                    2.4
2017.............................................                    2.7
2018.............................................                    2.2
2019.............................................                    2.8
2020.............................................                    2.4
2021.............................................                    3.0
------------------------------------------------------------------------
Source: ECI Historical Listing Volume III, Table 5: ECI for total
  compensation, for private industry workers, by occupational group and
  industry, BLS, https://www.bls.gov/web/eci/eci-current-nominal-dollar.pdf (updated Mar. 2022).

(2) Periodic Adjustment Proposal
    In the NPRM, the Department noted that the proposal sought to 
update non-collectively bargained prevailing wage rates that are 3 or 
more years old by adjusting them regularly based on total compensation 
data to keep pace with current construction wages and fringe benefits. 
Specifically, the Department proposed to add language to Sec.  
1.6(c)(1) to expressly permit adjustments to non-collectively bargained 
prevailing rates on general wage determinations based on BLS ECI data 
or its successor data. The Department's proposal provided that non-
collectively bargained rates may be adjusted based on ECI data no more 
frequently than once every 3 years, and no sooner than 3 years after 
the date of the rate's publication, continuing until the next survey 
results in a new general wage determination. This proposed interval 
would be consistent with WHD's goal to increase the percentage of 
Davis-Bacon wage rates that are 3 years old or less. Under the 
proposal, non-collectively bargained prevailing wage rates (wages and 
fringe benefits) would be adjusted from the date the rate was 
originally published and brought up to their present value. Going 
forward, any non-collectively bargained prevailing wage rates published 
after this rule becomes effective may be updated if they are not re-
surveyed within 3 years after publication. The Department anticipates 
implementing this new regulatory provision by issuing modifications to 
general wage determinations.
    The Department stated its belief that ECI data is appropriate for 
these rate adjustments because the ECI tracks both wages and fringe 
benefits and may be used as a proxy for changes in construction 
compensation over time. Therefore, the Department proposed to use a 
compensation growth rate based on the change in the ECI total 
compensation index for construction, extraction, farming, fishing, and 
forestry occupations to adjust non-collectively bargained prevailing 
wage rates (both base hourly and fringe benefit rates) published in 
2001 or after.\131\
---------------------------------------------------------------------------

    \131\ Because this particular index is unavailable prior to 
2001, the Department proposed to use the compensation growth rate 
based on the change in the ECI total compensation index for the 
goods-producing industries (which includes the construction 
industry) to bring the relatively small percentage of non-
collectively bargained prevailing wage rates published before 2001 
up to their 2000 value. The Department would then adjust the rates 
up to the present value using the ECI total compensation index for 
construction, extraction, farming, fishing, and forestry 
occupations.
---------------------------------------------------------------------------

    In addition, because updating non-collectively bargained prevailing 
wage rates would be resource-intensive, the Department did not 
anticipate making all initial adjustments to such rates that are 3 or 
more years old simultaneously, but rather considered it more likely 
that such adjustments would be made over a period of time (though as 
quickly as is reasonably possible). Similarly, the Department stated 
that particularly due to the effort involved, the process of adjusting 
non-collectively bargained rates that are 3 or more years old was 
unlikely to begin until approximately 6-12 months after a final rule 
implementing the proposal became effective.
    The Department sought comments on the proposal and invited comments 
on alternative data sources to adjust non-collectively bargained 
prevailing wage rates. The Department considered proposing to use the 
Consumer Price Index (CPI) but noted that the CPI is less appropriate 
to use to update non-collectively bargained prevailing wage rates 
because the CPI measures movement of consumer prices as experienced by 
day-to-day living expenses, unlike the ECI, which measures changes in 
the costs of labor in particular. The CPI does not track changes in 
wages or benefits, nor does it reflect the costs of construction 
workers nationwide. The Department nonetheless invited comments on use 
of the CPI to adjust non-collectively bargained rates.
    The Department received many comments about the proposal. Most of 
the commenters expressed general support for the proposal, and many of 
them supported the proposal in its entirety. Other commenters 
recommended modifications to the Department's proposal, and several 
commenters opposed the proposal entirely. In general, there was an 
overarching consensus about the need to regularly update out-of-date 
non-collectively bargained prevailing wage rates. For example, NABTU 
and WA BCTC gave examples of outdated non-collectively bargained wage 
rates, including some that reflected amounts less than the local 
minimum wage. AGC noted that periodic adjustments can improve the 
accuracy of ``woefully out-of-date open shop rates.'' FTBA stated that 
updating non-collectively bargained rates would help eliminate the 
widening compensation gap between collectively bargained prevailing 
wage rates that are updated at least annually, and non-collectively 
bargained rates that are frozen in time, sometimes for a decade or 
longer.
    The Economic Policy Institute (EPI) noted that this proposal is 
critical to ensure that DBRA prevailing wage rates

[[Page 57575]]

contribute to stabilizing rather than eroding workers' wages, which EPI 
stated have been lower in inflation-adjusted terms than they were in 
1970 despite decades of economic growth and a higher national income. 
LIUNA stated that weighted averages are susceptible to annual wage 
erosion as inflation eats away at worker earnings. The IUOE made a 
similar point, noting that the lengthy stagnation and lack of 
escalation of non-collectively bargained prevailing wage rates dilute 
the value of such rates. IUOE pointed to the 2019 OIG Report's 
identification of decades-old rates that were applicable to particular 
DBRA projects, highlighted the OIG's recommendation that WHD use a wage 
escalator (like the CPI) to bring non-collectively bargained rates 
current, and applauded the Department for proposing to do so.
    A number of supporting commenters concurred that periodic updates 
would appropriately implement the Department's broad authority to curb 
a practice the DBA and Related Acts were enacted to prevent: payment of 
``substandard'' wages (here, out-of-date non-collectively bargained 
rates). Such commenters noted that while it is preferable for Davis-
Bacon prevailing wage rates to reflect actual wages paid to workers in 
their communities and not weighted averages, where the Department's 
wage determination is based on weighted averages it is critical that 
the Department not allow those rates to become stagnant. See Brick and 
Allied Craftworkers Local4 INKY, Building and Construction Trades 
Council of Northern Nevada (BAC NNV), III-FFC, and WA BCTC. DMCA 
commented that prevailing rates in North and South Dakota are often 
very old and not reflective of actual wages being paid--a problem that 
the updates should help fix by providing rates more reflective of the 
marketplace. Similarly, the North Dakota State Building and 
Construction Trade Union supported this ``critical'' proposal so rates 
do not become stagnant and gave examples of North Dakota non-
collectively bargained rates that are over 22 years old. The joint 
SMART and SMACNA comment identified some non-collectively bargained 
rates that were roughly equivalent to collectively bargained rates that 
prevailed for similar classifications at the time these rates were 
published. SMART and SMACNA then observed that whereas the non-
collectively bargained rates became stale during the long intervals 
between Davis-Bacon surveys, the collectively bargained rates increased 
during that time, resulting in a growing disparity between the two 
types of prevailing wage rates.
    Various commenters provided additional justification for the 
proposal, including benefits for the regulated community. COSCDA 
asserted that workers, contractors, and program administrators would 
all benefit from the proposal. LIUNA similarly noted that the proposal 
should reduce uncertainty for contracting agencies and contractors who 
rely upon published wage determinations for bidding and awarding 
contracts under DBRA. UBC likewise supported the proposal's anticipated 
relief for workers and improved competitiveness for contractor-bidders 
who had already been granting increases in wages and benefits. MCAA 
remarked that among member mechanical contractor firms that do not 
currently compete for prevailing wage work, low and out-of-date wage 
determinations were part of the reason they did not bid on these 
projects.
    Supporters and opponents agreed about the need to address the 
construction labor shortage, particularly in light of the IIJA, which 
is expected to further increase demand for construction workers. See, 
e.g., BAC NNV, NABTU, ABC. Supporters asserted that updating non-
collectively bargained rates under the proposal would reflect labor 
market changes and improve contractors' ability to attract, develop, 
and retain skilled workers. See, e.g., III-FFC. Brick and Allied 
Craftworkers Local #15 MO-KS-NE commented that it is critical that 
survey rates are not allowed to become stagnant because stagnant rates 
both undermine the purpose of the DBA to protect local area wages and 
discourage new workers from considering a career in the trades. Several 
other union commenters likewise emphasized the importance of keeping 
non-collectively bargained prevailing wage rates up-to-date because 
outdated and artificially low wages could discourage workers from 
entering the construction workforce. These organizations commented that 
this circumstance is particularly problematic in an industry in which 
workers' average age, 61, is approaching retirement age.
    Various union, labor-management, and contractor group commenters 
such as LIUNA, III-FFC, and IEC supported using BLS ECI to update non-
collectively bargained rates. LIUNA noted the ECI's suitability because 
it captures both wage and benefit data. AGC observed that the ECI has a 
large sample size, is calculated using ``scientifically sound 
principles,'' and is publicly released quarterly.
    In response to the Department's NPRM request for comments about 
using data sources other than the ECI, such as the CPI, MCAA opposed 
using the CPI and III-FFC preferred ECI to the CPI for urban consumers 
because the ECI reflects labor market trends and includes fringe 
benefits. LIUNA also preferred the ECI instead of a consumer-based 
index. The MBA, et al., on the other hand, opposed the Department's 
proposal to adopt the ECI, stating that the ECI's participation rate 
over the past 10 years had dropped. They also noted that it is unclear 
whether the ECI's Construction industry category covers residential 
construction and whether the index includes both CBA and non-CBA wages.
    Several commenters that supported the proposal also recommended 
additional regulatory provisions. NABTU and LIUNA recommended that the 
ECI should be used only to increase, not decrease, non-collectively 
bargained rates, and III-FFC and UBC suggested changing the proposed 
regulation to require more frequent periodic updates--at least every 3 
years, instead of no sooner than every 3 years. These two commenters 
explained that more frequent adjustments would help ensure that DBA 
rates do not stagnate.
    Other commenters recommended using ECI data to update non-
collectively bargained rates only as a method of last resort, noting 
that the ECI does not capture actual wages paid to workers in their 
home communities. See NABTU, NCDCL, and UA. These commenters instead 
recommended replacing out-of-date non-collectively bargained prevailing 
wage rates with existing state and local prevailing wage rates derived 
through methods that closely resemble the Department's method. The UA 
also emphasized that the Department's proposal is no substitute for 
greater efforts to conduct surveys within 3 years and encouraged the 
Department to continue to prioritize its own wage surveys as the first 
and best option. The UA recognized the Department's improvements in the 
survey process--citing the 2019 OIG report's finding that the 
Department's ``time to complete a wage survey decreased from an average 
of five-to-seven years in 2002 to 2.6 years in 2015''--but also 
welcomed the fallback option of using ECI data to update rates when 
necessary since surveys are time consuming and the Department's 
resources are limited.
    A number of commenters--both that supported and opposed the 
proposal--expressed concerns about using ECI data. NABTU, AGC, FTBA, 
and ABC took exception to using nationwide data

[[Page 57576]]

such as the ECI data the Department anticipated using. FTBA preferred 
that the Department use county-specific data that is the ``legal 
lynchpin for the setting of prevailing wages under the [DBA].'' FTBA 
and AGC expressed concern that the ECI includes certain payments that 
are statutorily excluded from Davis-Bacon fringe benefits, such as 
disability insurance, unemployment insurance, employer taxes, workers 
compensation, overtime, and non-production bonuses. The group of U.S. 
Senators criticized the ECI for merely accounting for the net increase 
or decrease in the cost of labor, but for not ``as the DBRA commands, 
account[ing] for prevailing wages paid to `corresponding classes of 
laborers and mechanics.' '' The MBA, et al. cautioned that ``indexing a 
wage rate that is potentially forty years old is problematic as the 
validity of that wage is unknown.''
    Several commenters, some of whom did not expressly oppose the 
proposal, asserted that it was inconsistent or arbitrary of the 
Department to update certain non-collectively bargained prevailing wage 
rates with ECI data from BLS while not also using BLS data to determine 
the underlying prevailing wages. For example, while NAHB did not 
endorse using BLS data to set prevailing wages, NAHB stated that it 
would be inconsistent to use BLS data for periodic updates but not to 
calculate the underlying prevailing wage rates using BLS data. NAHB 
also criticized the Department's Davis-Bacon wage methodology as being 
greatly flawed and argued that the proposed periodic updates would only 
allow WHD's flawed survey methodology to persist. AFP-I4AW opposed the 
proposal, which they asserted would mix two different methodologies for 
determining prevailing wages and use an unrelated BLS escalator to 
unjustifiably inflate what they claimed to be unreliable and inaccurate 
rates.
    Among the commenters opposing the proposal in its entirety, AFP-
I4AW, ABC, the group of U.S. Senators, a group of members of the U.S. 
House of Representatives Committee on Labor & Employment, and a few 
individuals objected to the proposal in the context of an overall 
criticism of WHD's survey method, which they recommended replacing with 
BLS data to determine prevailing wages. ABC, for example, suggested 
using BLS data to determine prevailing wages because it asserted BLS 
data is more timely and accurate. ABC stated that BLS surveys are 
conducted scientifically, have high response rates from large sample 
sizes, and therefore are superior to WHD's wage survey process. By 
comparison, ABC contended the Department's proposal to adjust certain 
non-collectively bargained prevailing wage rates on a rolling basis no 
more frequently than every 3 years would be less effective and less 
accurate than using BLS data to determine prevailing wages in the first 
place. ABC also argued, along with the group of U.S. Senators and the 
group of members of the U.S. House of Representatives Committee on 
Labor & Employment, that this periodic adjustment proposal would only 
serve to perpetuate the status quo with inaccurate wage determinations 
remaining after the updates. See section III.B.1.ii.A.(1) for a 
discussion of why the Department has declined to replace WHD's Davis-
Bacon wage survey program with data from the BLS.
    Commenters raised other general concerns about the proposal. While 
NAHB agreed that a mechanism is needed to update ``grossly outdated 
wage rates,'' they thought the proposal implied less incentive for WHD 
to conduct wage surveys more often moving forward. The Construction 
Industry Roundtable (CIRT) said that the proposal could work but would 
``require constant updates across dozens if not hundreds of individual 
salary scales'' to keep up with the proposed cycles.
    After considering the comments received on the proposed new 
periodic updates to certain non-collectively bargained prevailing 
rates, the Department adopts without modification the proposed new 
language in Sec.  1.6(c)(1). By expressly authorizing the Department to 
periodically adjust non-collectively bargained prevailing wage rates 
between surveys under specified circumstances in order to maintain the 
currency of those rates, this section plays an important role in WHD's 
efforts to improve the Davis-Bacon prevailing wage program. As the 
Department emphasized in the NPRM, this new provision advances the 
DBA's purpose of maintaining local wage standards and protecting 
construction workers--in this case by safeguarding against a decline in 
the real value of prevailing wage rates over time. This periodic 
adjustment rule implements a concrete and incremental mechanism to 
address the criticism, noted by various commenters, that as non-
collectively bargained prevailing rates become out-of-date, they 
decreasingly reflect the prevailing rates currently paid. The periodic 
adjustment of non-collectively bargained wage rates is particularly 
important given that the change to the definition of ``prevailing 
wage'' in the 1981-1982 rulemaking has resulted in the increasing 
overuse of weighted average wage rates, most of which are the very type 
of rates that are not adjusted under the Department's current 
procedures. This change warrants extending the express regulatory 
authority under which WHD updates collectively bargained prevailing 
wage rates between surveys based on CBA submissions to non-collectively 
bargained rates updated based on ECI data. The Department anticipates 
that periodic adjustments will occur less often over time, as it 
conducts surveys more frequently and adopts more state or local 
prevailing wage rates.
    While the Department has considered the suggested changes to its 
proposal, the Department declines to adopt the suggestions. 
Specifically, the Department declines to adopt the recommendation to 
limit periodic updates to increases only. The ECI historically has 
increased over time, and it appears unlikely that the compensation 
growth index would result in a decrease over a 3-year interval. 
Moreover, the purpose of this provision is to periodically adjust 
otherwise out-of-date non-collectively bargained prevailing wage rates. 
In the unlikely event that a downward adjustment of an otherwise 
stagnant rate were warranted based on a 3-year period of ECI data on 
which the Department would be relying, making such an adjustment would 
be appropriate and consistent with wage rate changes resulting from an 
entirely new prevailing wage survey, which can result in both increases 
and decreases in published prevailing wage rates.
    The Department also declines to require that the periodic updates 
occur more frequently than every 3 years and maintains that this 
provision of the final rule will not reduce WHD's incentive to conduct 
Davis-Bacon wage surveys. This provision to periodically update out-of-
date non-collectively bargained prevailing wage rates that are 3 or 
more years old enables the Department to adjust such rates between 
surveys based on total compensation data, allowing prevailing wage 
rates to better keep pace with construction wage and benefit growth and 
remain more in line with local prevailing rates. The proposed 3-year 
minimum interval is consistent with WHD's goal to increase--primarily 
through the wage survey program--the percentage of Davis-Bacon wage 
rates that are 3 years old or less and therefore would not need to be 
periodically updated. The periodic adjustments will be effectuated in 
conjunction with WHD's other efforts to increase the frequency with 
which the results of new wage surveys are published, including

[[Page 57577]]

surveys conducted under State or local law and adopted by the 
Department under the circumstances specified in section III.B.1.iii.D. 
The Department, therefore, has calibrated the frequency of periodic 
updates so that they better align with these other changes to the 
Davis-Bacon wage survey program. In addition, more frequent updating 
might disincentivize stakeholders from participating in the Davis-Bacon 
survey process.
    The Department agrees with LIUNA that ECI data should only be used 
for the narrow purpose specified in this proposed rule. The new 
periodic adjustment rule will ``on balance result in a closer 
approximation of the prevailing wage,'' Donovan, 712 F.2d at 630, for 
these out-of-date non-collectively bargained rates and, therefore, is 
an appropriate extension of the authority reflected in current Sec.  
1.6(c)(1) to modify wage determinations ``from time to time to keep 
them current.'' The periodic adjustments will update certain existing 
non-collectively bargained prevailing rates, supplementing, but not 
replacing, the Department's survey-based wage determination process 
which the Department is committed to continuing and striving to improve 
as discussed in this section below and in section III.B.1.ii.A.
    The Department notes that various commenters, such as ABC, the 
group of U.S. Senators, and the group of members of the U.S. House of 
Representatives Committee on Education & Labor, opposed the proposal 
and urged the Department to use BLS data instead of WHD's wage survey 
program to determine prevailing wages. The Department declines to adopt 
the suggestion of such commenters that WHD should have chosen to, or is 
required to, use BLS data for its wage survey process in its entirety, 
instead of using ECI data for the limited purpose of periodic 
adjustments. For the reasons discussed below and in section 
III.B.1.ii.A.1, the Department's decision to use the rule's periodic 
adjustment mechanism to incrementally improve the quality of certain 
underlying prevailing wage rates is reasonable and within its broad 
statutory discretion, and it does not require that WHD adopt BLS data 
as the sole method of determining prevailing wage rates to begin with.
    The DBA authorizes the Administrator to choose the method for 
determining prevailing wage rates. As a threshold matter, the DBA does 
not prescribe a method that the Administrator must or should use for 
determining prevailing wages, but rather ``delegates to the Secretary, 
in the broadest terms imaginable, the authority to determine which 
wages are prevailing.'' 712 F.2d at 616. The Secretary, thus, has broad 
discretion to determine the prevailing wage. Even though there may be 
multiple methods of determining prevailing wages under the DBA, WHD may 
choose which method to use to do so.
    The Department disagrees with the premise underlying the claims of 
the group of U.S. Senators, ABC, and the MBA, et al. that it is 
inappropriate to adjust an underlying wage rate that is allegedly 
flawed, as the Department's wage survey methodology operates 
comfortably within the authority granted by the DBA and constitutes a 
reasonable method of determining prevailing wage rates for laborers and 
mechanics on covered construction projects.
    WHD has used and may continue to use various regulatory and 
subregulatory tools intended to refine and improve its prevailing wage 
survey process. Such tools include this rule's periodic adjustments of 
certain non-collectively bargained rates with ECI data. WHD's survey 
method for determining prevailing wages is not static. The agency 
consistently strives to improve its Davis-Bacon wage survey program and 
has made improvements over the years. For example, as of March 2019, 
WHD had successfully reduced the amount of time it takes to complete a 
wage survey by more than 50 percent since 2002 and was continuing to 
implement process improvements to reduce the time it takes to complete 
a survey. See 2019 OIG Report, at 34 app. B.
    Other efforts to improve WHD's DBRA wage survey program include 
this rule's use of a modal prevailing wage rate when 30 percent or more 
of the wages are the same, and the provision regarding variable rates 
that are functionally equivalent, both of which seek to more closely 
reflect the prevailing (i.e., predominant) wages paid to workers in an 
area and to decrease the prevalence of weighted average rates. Another 
recent endeavor is the June 2022 and March 2023 solicitations of 
comments about the proposed revision of the wage survey form (WD-10 
form), which WHD uses to solicit information that is used to determine 
locally prevailing wages. See 87 FR 36152-53; 88 FR 17629 (Mar. 23, 
2023) (Notice of availability; request for comments). Outside this 
rulemaking, the Department's proposed changes to the WD-10 form would 
improve the overall efficiency of the DBA survey process and aim to 
streamline the collection of data required for the survey and make the 
collection less burdensome for respondents. 87 FR 36153. The Department 
also proposed to add a new WD-10A collection instrument to be used pre-
survey to identify potential respondents that performed construction 
work within the survey period in the survey area. Id.; see also 88 FR 
17629-30.
    The Department acknowledges that the ECI data it has selected 
includes wages and fringe benefit information for construction-related 
occupations nationwide, and that ECI benefits include some employer 
costs that are not bona fide fringe benefits under the DBA. 
Nevertheless, these ECI data characteristics, while not identical, are 
consistent with the DBA's statutory requirements. As discussed in this 
section and section III.B.1.ii.A, the Department has developed its 
underlying methodology for determining prevailing wages to be 
consistent with the Act's directive to determine prevailing wages for 
``corresponding classes'' of workers on ``projects of a character 
similar'' within ``civil subdivision[s] of the State'' in which the 
work is to be performed. 40 U.S.C. 3142(b). This rule supplements WHD's 
methodology. The ECI will be used to adjust prevailing wage rates only 
after WHD has determined the underlying rates for specific 
classifications of workers on projects of a similar character within 
the relevant locality. Moreover, the ECI simply reflects the rate of 
change in employer labor costs over time. Given the Department's 
statutory and regulatory authority, the Department's use of the ECI is 
reasonable even though the ECI may not mirror in every respect changes 
to certain labor costs on a classification-by-classification, project-
by-project, and location-by-location basis.
    The Department disagrees with the commenters who suggested that the 
index used for periodic updates must have the same level of detail that 
the Department uses to make its wage determinations in the first place. 
The ECI data that the Department has selected, while not perfect, is a 
reasonable option for the task. ECI contains data for construction-
related occupations and includes both wages and fringe benefits. While 
the data is not delineated by county and the mix of fringe benefits is 
different than that required to be considered by the DBRA, the ECI's 
general data characteristics are sufficient for the purpose of keeping 
certain non-collectively bargained rates better aligned with 
compensation changes over time, and better than any other index that 
the Department has

[[Page 57578]]

considered or commenters have suggested for periodic adjustments under 
the DBRA.
    The Department's broad discretion about how to determine prevailing 
wages comfortably encompasses this mechanism to periodically update 
certain out-of-date survey-based prevailing wages pending completion of 
the next wage survey. Further, the DBA's legislative history supports 
this manner of trying to keep certain prevailing wage rates more 
current. Congress recognized that ``[a] method for determining the 
prevailing wage rate might have been incorporated in the bill, but the 
Secretary of Labor can establish the method and make it known to the 
bidders.'' 74 Cong. Rec. 6516 (Feb. 28, 1931) (remarks of Rep. Kopp).
    The Department also disagrees that using ECI or its successor data 
to periodically update certain non-collectively bargained wages while 
continuing to use the Department's longstanding survey process is 
arbitrary. The periodic adjustments are tethered to existing prevailing 
wage rates and seek to better approximate current prevailing rates. As 
stated in the NPRM, ECI data is appropriate for these proposed rate 
adjustments because the ECI tracks both wages and benefits and may be 
used to approximate the changes in construction compensation over time.
    The Department notes in response to comments that the ECI data to 
be used includes private industry union and non-union workers, 
residential and non-residential construction, and is not seasonally 
adjusted. ECI data is a reasonable proxy for construction compensation 
growth to first bring non-collectively bargained rates that are more 
than 3 years old up to their present value, and then to update these 
rates no more often than every 3 years going forward. For these and the 
other reasons explained in this section, the final rule adopts this 
proposal without modification.
(D) 29 CFR 1.6(f)
    Section 1.6(f) addresses post-award determinations that a wage 
determination has been wrongly omitted from a contract. The 
Department's proposed changes to this paragraph are discussed below in 
section III.B.3.xx (``Post-award determinations and operation-of-
law''), together with proposed changes to Sec. Sec.  5.5 and 5.6.
vii. Section 1.7 Scope of Consideration
    The Department's regulations in Sec.  1.7 address two related 
concepts. The first is the level of geographic aggregation of wage data 
that should be the default ``area'' for making a wage determination. 
The second is how the Department should expand that level of geographic 
aggregation when it does not have sufficient wage survey data to make a 
wage determination at the default level. In the NPRM, the Department 
proposed changes to this paragraph to more clearly describe WHD's 
process for expanding the geographic scope of survey data and to modify 
the regulations by eliminating the current bar on combining wage data 
from ``metropolitan'' and ``rural'' counties when the geographic scope 
is expanded.
    In the 1981-1982 rulemaking, the Department codified its practice 
of using the county as the default area for making a wage 
determination. 47 FR 23644, 23647 (May 28, 1982). Thus, while the 
definition of the term ``area'' in Sec.  1.2 allows the Administrator 
to use other civil subdivisions of a State for this purpose, Sec.  
1.7(a) specifies that the area for a wage determination will ``normally 
be the county.'' 29 CFR 1.7(a).
    The use of the county as the default ``area'' means that in making 
a wage determination the WHD first considers the wage survey data that 
WHD has received from projects of a similar character in a given 
county. The Department typically collects the county-level data by 
construction type (e.g., building, residential, highway, heavy) to 
account for the statutory requirement to determine prevailing wages on 
projects of a similar ``character.'' 40 U.S.C. 3142(b); see also AAM 
130 (Mar. 17, 1978) (discussing construction types). If there is 
sufficient county-level data for a classification of covered workers 
(e.g., laborers or painters) working on those projects, WHD then makes 
a determination of the prevailing wage rate for that classification on 
that construction type in that county. See 40 U.S.C. 3142(b) (requiring 
prevailing wages to be determined for ``corresponding classes'' of 
laborers or mechanics); 29 CFR 1.7(a). In determining whether there is 
sufficient current wage data, WHD can use data on wages paid on current 
projects or, where necessary, projects under construction up to one 
year before the beginning of the survey. 29 CFR 1.7(a).
    The second concept addressed in Sec.  1.7 is the procedure that WHD 
follows when it does not receive sufficient current wage data at the 
county level to determine a prevailing wage rate for a given 
classification of workers in a given construction type. This process is 
described in detail in the 2013 Chesapeake Housing ARB decision. ARB 
No. 12-010, 2013 WL 5872049. In short, if there is insufficient data to 
determine a prevailing wage rate for a classification of workers in a 
given county, WHD will determine that county's wage-rate for that 
classification by progressively expanding the geographic scope of data 
(still for the same classification of workers) that it uses to make the 
determination. First, WHD expands to include a group of surrounding 
counties at a ``group'' level. See 29 CFR 1.7(b) (discussing 
consideration of wage data in ``surrounding counties''); Chesapeake 
Housing, ARB No. 12-010, 2013 WL 5872049, at *2-3. If there is still 
not sufficient data at the group level, WHD considers a larger grouping 
of counties in the State, which has been called a ``super group,'' and 
thereafter may use data at a statewide level. Chesapeake Housing, ARB 
No. 12-010, 2013 WL 5872049, at *3; see 29 CFR 1.7(c).\132\
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    \132\ For residential and building construction types, this 
expansion of the scope of data considered also involves the use of 
data from Federal and federally assisted projects subject to Davis-
Bacon labor standards at each county-grouping level when data from 
non-Federal projects is not sufficient. See 29 CFR 1.3(d). Data from 
Federal and federally assisted projects subject to Davis-Bacon labor 
standards is used in all instances to determine prevailing wage 
rates for heavy and highway construction. Id.
---------------------------------------------------------------------------

    In the 1981-1982 rulemaking, the Department imposed a limitation on 
this process. The Department included, in Sec.  1.7(b), a strict bar on 
combining data from ``metropolitan'' and ``rural'' counties when there 
is insufficient wage data in a given county. See 47 FR 23647. That 
proviso stated that projects in ``metropolitan'' counties may not be 
used as a source of data for a wage determination in a ``rural'' 
county, and vice versa. 29 CFR 1.7(b). The regulation did not define 
the terms metropolitan and rural.
    To be consistent with the prohibition on cross-consideration in 
Sec.  1.7(b), WHD developed a practice of using designations from the 
Office of Management and Budget (OMB) to identify whether a county is 
``metropolitan'' or ``rural.'' The OMB designations WHD has used for 
this purpose are called the core based statistical area (CBSA) 
standards. See 86 FR 37770 (July 16, 2021). As part of the CBSA 
designations, OMB identifies two types of statistical areas: 
metropolitan statistical areas (MSAs) and micropolitan statistical 
areas. The OMB standards do not specifically identify counties as 
``rural.'' However, because OMB identifies counties that have 
metropolitan characteristics as part of MSAs, the practice of the WHD 
Administrator has been to designate counties as ``metropolitan'' if 
they are within an OMB-designated MSA and

[[Page 57579]]

``rural'' if they are not. See Mistick Constr., ARB No. 04-051, 2006 WL 
861357, at *8. If OMB designates a county as a micropolitan statistical 
area, WHD will identify the county as rural, even if it is contiguous 
with a nearby MSA. The ARB has determined that such proxy designations 
are reasonable. See id.\133\
---------------------------------------------------------------------------

    \133\ The OMB standards are different from the Census Bureau's 
classification of urban and rural areas. The OMB standards use 
counties or county-equivalents as the basic building blocks of their 
MSA designations. The Census Bureau's urban-rural classification 
uses smaller ``census blocks'' as the ``analysis unit (or geographic 
building block)'' of its classification process. See Urban Area 
Criteria for the 2020 Census-Final Criteria, 87 FR 16706, 16709 
(Mar. 24, 2022).
---------------------------------------------------------------------------

    The ban on combining metropolitan and rural county data that was 
implemented in the 1981-1982 rulemaking did not apply explicitly to the 
consideration of data above the surrounding-counties level. See 29 CFR 
1.7(c). After that rulemaking, however, the Department implemented 
procedures that did not mix metropolitan and rural county data at any 
level in the expansion of geographic scope, including even at the 
statewide level.
(A) ``Metropolitan'' and ``Rural'' Wage Data in Surrounding Counties
    In the NPRM, the Department proposed to eliminate the language in 
Sec.  1.7(b) barring the cross-consideration of metropolitan and rural 
wage data at the surrounding-counties level. In explaining this 
proposal, the Department noted prior feedback that the blanket bar had 
not adequately considered the heterogeneity of commuting patterns and 
local labor markets between and among counties that may be designated 
overall as ``rural'' or ``metropolitan.'' In its 2011 report, for 
example, the GAO noted criticism of the DBA program for using 
``arbitrary geographic divisions,'' given that the relevant regional 
labor markets, which are reflective of area wage rates, ``frequently 
cross county and state lines.'' 2011 GAO Report, at 24.\134\
---------------------------------------------------------------------------

    \134\ See note 8, supra.
---------------------------------------------------------------------------

    The NPRM explained that the Department understood the point in the 
GAO report to be that actual local labor markets are not constrained by 
or defined by county lines, and that the point applies even to those 
lines between counties identified (by OMB or otherwise) as 
``metropolitan'' or ``rural.'' The Department noted that this is 
particularly the case for the construction industry, in which workers 
tend to have longer commutes than other professionals, resulting in 
geographically larger labor markets. See, e.g., Keren Sun et al., 
``Hierarchy Divisions of the Ability to Endure Commute Costs: An 
Analysis based on a Set of Data about Construction Workers,'' J. of 
Econ. & Dev. Stud., Dec. 2020, at 4.\135\ Even within the construction 
industry, workers in certain trades have greater or lesser tolerance 
for longer commutes. Keren Sun, ``Analysis of the Factors Affecting the 
Commute Distance/Time of Construction Workers,'' Int'l J. of Arts & 
Humanities, June 2020, at 43.\136\
---------------------------------------------------------------------------

    \135\ http://jedsnet.com/journals/jeds/Vol_8_No_4_December_2020/1.pdf.
    \136\ http://ijah.cgrd.org/images/Vol6No1/3.pdf.
---------------------------------------------------------------------------

    By excluding a metropolitan county's wage rates from consideration 
in a determination for a bordering rural county, the strict ban 
implemented in the 1981-1982 rulemaking disregarded the potential for 
projects in neighboring counties to compete for the same supply of 
construction workers and be in the same local construction labor 
market. In many cases, the workers working on a metropolitan county's 
projects may themselves live across the county line in a neighboring 
rural county and commute to the metropolitan projects. In such cases, 
under the current bar, the Department cannot use the wage rates of 
these workers to determine the prevailing wage rate for projects in the 
rural county in which they live, even where there is otherwise no data 
from that rural county to rely on. Instead, WHD would import wage rates 
from other ``rural''-designated counties, potentially somewhere far 
across the State. As the Department noted in the NPRM, this practice 
can result in Davis-Bacon wage rates that are lower than the wage rates 
that actually prevail in a cross-county metropolitan-rural labor 
market.
    For these reasons, the Department stated in the NPRM that it 
believed that limitations based on binary rural and metropolitan 
designations at the county level can result in geographic groupings 
that at times do not fully account for the realities of relevant 
construction labor markets. To address this concern, the Department 
considered the possibility of using smaller basic units than the county 
as the initial area for a wage determination and expanding to labor 
market areas that do not directly track county lines. This could 
include cities or their equivalents, or even census blocks, which as 
noted above, are the basic units for the Census Bureau's urban-rural 
classifications. The Department, however, concluded that continuing the 
longstanding practice of using counties as the civil subdivision basis 
unit is more administratively feasible.\137\ As a result, the NPRM 
instead proposed to eliminate the metropolitan-rural bar in Sec.  
1.7(b) and to allow the agency to use metropolitan data in appropriate 
circumstances to help set rural county prevailing wage rates where the 
survey has not resulted in sufficient current wage data from the rural 
county. Eliminating the bar will also allow the Department to use data 
from adjacent rural counties to help set a metropolitan county's rates 
in circumstances where the survey has not resulted in sufficient 
current wage data from the metropolitan county.
---------------------------------------------------------------------------

    \137\ The Department also considered this option in the 1981-
1982 rulemaking, but similarly concluded that the proposal to use 
the county as the basic unit of a wage determination was the ``most 
administratively feasible.'' See 47 FR 23647.
---------------------------------------------------------------------------

    The Department explained that eliminating the strict bar could have 
other benefits in addition to allowing WHD to account for actual 
construction labor market patterns. It could allow WHD to publish more 
rates at the surrounding-counties group level rather than having to 
rely on data from larger geographic areas, because it could increase 
the number of counties that may be available to supply data at that 
initial group level. Eliminating the bar could also allow WHD to 
publish more rates for more classifications overall by authorizing the 
use of both metropolitan and rural county data together when the 
Department must rely on statewide data. Combining rural and 
metropolitan data at the State level would be a final option for 
geographic expansion when otherwise the data could be insufficient to 
identify any prevailing wage at all. The Department stated that the 
purposes of the Act may be better served by using such combined 
statewide data to allow prevailing wages to be determined more often.
    The Department also explained that eliminating the strict rural-
metropolitan bar would result in a program that would be more 
consistent with the Department's original practice between 1935 and the 
1981-1982 rulemaking as well as the text and legislative history of the 
DBA. Congressional hearings shortly after the passage of the initial 
1931 Act suggest that Congress understood the DBA as allowing the 
Secretary to refer to metropolitan rates where rural rates were not 
available, including by looking to the nearest city when there was 
insufficient construction in a village or ``little town'' to determine 
a prevailing wage. See 75 Cong. Rec. at 12366, 12377 (1932) (remarks of 
Rep. Connery). Likewise, the Department's original 1935 regulations 
directed the Department to ``the nearest large city'' when there had 
been no

[[Page 57580]]

similar construction in the locality in recent years. See Labor 
Department Regulation No. 503 section 7(2) (1935).\138\
---------------------------------------------------------------------------

    \138\ See also 29 CFR 1.8(b) (1982) (if no similar construction 
is in area, ``wage rates paid on the nearest similar construction 
may be considered''); 21 FR 5801, 5802 (1956) (same).
---------------------------------------------------------------------------

    In the NPRM, in addition to eliminating the metropolitan-rural 
proviso language in Sec.  1.7(b), the Department also discussed other 
potential changes to the methods for describing the surrounding-
counties groupings procedure. Because the term ``surrounding counties'' 
was not defined in the 1981-1982 rulemaking, it has from time to time 
led to confusion about whether a county can be considered 
``surrounding'' if it does not share a border with the county for which 
more data is needed. As noted, WHD's current method of creating 
surrounding-counties groupings is to use OMB-designed MSAs to create 
pre-determined county groupings. This method does not require that all 
counties in the grouping share a border with (in other words, be a 
direct neighbor to) the county in need. Rather, at the surrounding-
counties grouping, WHD will include counties in a group as long as they 
are all a part of the same contiguous area of either metropolitan or 
rural counties, even though each county included may not be directly 
adjacent to every other county in the group.\139\
---------------------------------------------------------------------------

    \139\ In addition, in certain limited circumstances, WHD has 
allowed the aggregation of counties at the ``surrounding counties'' 
level that are not part of a contiguous grouping of all-metropolitan 
or all-rural counties. This has been considered appropriate where, 
for example, two rural counties border an MSA on different sides and 
do not themselves share a border with each other or with any other 
rural counties. Under WHD's current practice, those two rural 
counties could be considered to be a county group at the 
``surrounding counties'' level even though they neither share a 
border nor are part of a contiguous group of counties.
---------------------------------------------------------------------------

    For example, in the Chesapeake Housing case, one group of 
``surrounding counties'' that WHD had compiled included the areas of 
Portsmouth, Virginia Beach, Norfolk, and Suffolk. ARB No. 12-010, 2013 
WL 5872049, at *1 n.1. That was appropriate because those jurisdictions 
all were part of the same contiguous OMB-designated MSA, and each 
jurisdiction thus shared a border with at least one other in the 
group--even if they did not all share a border with every other 
jurisdiction in the group. See id. at *5-6. Thus, by using the group, 
WHD combined data from Virginia Beach and Suffolk at the surrounding-
counties level, even though Virginia Beach and Suffolk do not 
themselves share a border. The ARB concluded that this grouping 
strategy--of relying on OMB MSA designations--was consistent with the 
term ``surrounding counties.'' See Mistick Constr., ARB No. 04-051, 
2006 WL 861357, at *7-8.
    In the NPRM, the first option for the surrounding-counties group 
level that the Department discussed was to maintain the current group 
description without further amendment. The Department noted that the 
term ``surrounding counties'' itself is not so ambiguous and devoid of 
meaning that it requires additional definition. The Department stated 
that the term has been reasonably read to require that such a grouping 
be of a contiguous grouping of counties as the Department currently 
requires in its use of OMB MSAs (as described above), with limited 
exceptions. Thus, while the elimination of the metropolitan-rural 
proviso would allow a nearby rural county to be included in a 
surrounding-counties grouping with metropolitan counties that it 
borders, it would not allow WHD to append a faraway rural county to a 
surrounding-counties grouping made up entirely of metropolitan counties 
with which the rural county shares no border at all. Conversely, the 
term ``surrounding counties'' does not allow the Department to consider 
a faraway metropolitan county to be part of a surrounding-counties 
grouping of rural counties with which the metropolitan county shares no 
border at all.
    The second and third options the Department outlined in the NPRM 
were to add more precise definitions to the term ``surrounding.'' The 
second option was to limit ``surrounding counties'' to solely those 
counties that share a border with the county for which additional wage 
data is sought. The Department noted that this proposal would generally 
ensure that the surrounding-counties grouping would not expand beyond 
the commuting range of the construction workers who would work on 
projects in the county at issue. However, the Department explained, the 
narrowness of such a limitation would also be a drawback, as it could 
lead to fewer wage rates being set at the surrounding-counties group 
level. It also would have a significant drawback in that it would not 
allow for the use of pre-determined county groupings that would be the 
same for a number of counties, because each county may have a different 
set of counties with which it alone shares a border. This could result 
in a substantial burden on WHD in developing far more county-grouping 
rates than it currently develops.
    The third option was to include language that would define 
``surrounding counties'' as a grouping of counties that are all a part 
of the same ``contiguous local construction labor market'' or some 
comparable definition. The Department noted that, in practice, this 
methodology could result in similar (but not identical) groupings as 
the current methodology, as the Department could decide to use OMB 
designations to assist in determining what counties are part of the 
contiguous local labor market. Without the strict metropolitan-rural 
proviso, however, this option would allow the Department to use 
additional evidence on a case-by-case basis to determine whether the 
OMB designations--which do not track construction markets 
specifically--are too narrow for a given construction market.
(1) Comments Regarding Metropolitan and Rural Wage Data
    A number of union and contractor association commenters generally 
agreed with the Department's proposed changes to Sec.  1.7(b). 
Commenters such as FTBA, MCAA, and NABTU supported eliminating the 
strict prohibition on combining data from rural and metropolitan areas, 
because eliminating the prohibition would allow the Department's wage 
determinations to better reflect the complexities of the construction 
industry. As NCDCL noted, rural areas are frequently economically 
interconnected to nearby metropolitan areas. For this reason, 
commenters explained, the proposal is common sense because it does not 
limit the Department to the use of ``arbitrary geographic 
designations.''
    Several commenters supporting the proposal emphasized that it is 
important that the Department have the flexibility to create groupings 
instead of being bound by a rigid rule. SMART and SMACNA, for example, 
stated that the task of figuring out how to properly expand geographic 
scope is a complicated one ``for which regional and demographic 
differences necessitate solutions that reflect the realities of local 
markets.'' They agreed that ``county lines do not dictate local labor 
markets'' and that there is great diversity on a state-by-state basis 
in how county lines are drawn. SMART and SMACNA stated that under the 
bar on cross-consideration, the Department has effectively treated all 
rural counties as a ``monolith'' instead of as diverse entities with 
differing levels of integration with metropolitan counties and a wide 
range of populations and economic activity.\140\

[[Page 57581]]

They noted that ``there is no single, universally preferred definition 
of rural'' and no ``single rural definition that can serve all policy 
purposes.'' That variability makes ``rigid rules banning the use of 
metropolitan data in rural counties unreasonable.'' \141\ LIUNA 
criticized the Department's current ``absolutist'' approach that 
``prevents the Administrator from properly considering labor markets in 
instances where discretion is required.''
---------------------------------------------------------------------------

    \140\ See, e.g., Haya El Nasser, ``More Than Half of U.S. 
Population in 4.6 Percent of Counties,'' Census.gov: Big and Small 
America (Oct. 24, 2017), https://www.census.gov/library/stories/2017/10/big-and-small-counties.html.
    \141\ SMART and SMACNA cited an Issue Brief prepared for the 
Rural Policy Research Institute Health Panel that compared OMB and 
Census bureau statistical area designations and noted that 30 
million ``Census Bureau-defined rural people live in OMB-defined 
metropolitan areas, and 20 million urban people live in 
nonmetropolitan areas.'' Andrew F. Coburn, et al., ``Choosing Rural 
Definitions: Implications for Health Policy,'' Rural Pol'y Rsch. 
Inst. 3 (Mar. 2007).
---------------------------------------------------------------------------

    A number of the commenters, including LIUNA and NABTU, agreed with 
the Department's reasoning in the NPRM that the strict bar has had a 
depressive effect in particular on the prevailing wage rates for rural 
counties that border--and have a level of labor-market integration 
with--metropolitan areas. The commenters noted that the Department's 
rural county groupings have combined data from metropolitan-adjacent 
rural counties with other rural counties that may be geographically 
remote and have no connection to any metropolitan area. UBC, likewise, 
explained that this practice is counterintuitive given that wage rates 
are higher in metropolitan-adjacent counties than in remote rural 
counties because projects in the metropolitan-adjacent counties have to 
compete for the same workers as projects in the neighboring 
metropolitan areas. The UA asserted that eliminating the strict bar in 
Sec.  1.7(b) should increase the accuracy of wage determinations for 
these types of metropolitan-adjacent counties by better reflecting 
actual labor markets and commuting patterns.
    Several union commenters, including IUOE, West Central Illinois 
Building and Construction Trades Council, and others, agreed with the 
Department that the current binary approach to categorizing counties 
does not account for ``realities of the construction industry, in which 
workers tend to commute longer distances than other professionals.'' 
These commenters explained that this fact is in part related to the 
``cyclical nature of construction employment.'' When one project ends, 
they explained, workers are forced to follow the next project that will 
provide gainful employment, even if it means traveling to surrounding 
communities.
    A number of commenters, including industry associations such as 
ABC, NAHB, and IEC, opposed the Department's proposal to eliminate the 
strict bar. These commenters asserted that adoption of higher average 
wages reflected in metropolitan county data will likely result in 
inflated wages in nearby rural counties that do not reflect local area 
prevailing wage rates. Numerous individual commenters, as part of an 
organized campaign, stated that the elimination of the bar, in 
combination with other aspects of the Department's proposed rule, was 
likely to ``further distort the accuracy'' of WHD wage determinations. 
ABC issued a survey to its members and stated that only 14.4 percent of 
respondents agreed that ``aggregating metropolitan and rural wage 
data'' would ``increase the accuracy'' of wage determinations. IEC and 
the group of U.S. Senators stated that construction unions tend to be 
more heavily concentrated in metropolitan areas than in rural areas, so 
the proposal would lead to higher union rates being applied to rural 
areas that may not have a high union density. Several commenters 
opposing the proposal, including ABC and the group of U.S. Senators, 
said that the importation of metropolitan wages that may be higher than 
wages actually paid in a rural county would be inconsistent with the 
purpose and congressional intent underlying the DBRA.
    Commenters opposing the proposal also stated that increased 
prevailing wage rates in rural counties would have negative effects. 
NAHB stated that increased wage rates would decrease production of 
affordable housing. IEC stated that ``by equating rates between 
metropolitan and rural areas, the rule would disincentivize workers 
from taking on higher-paying jobs in metropolitan areas, which have 
numerous additional out-of-pocket expenses for such workers, including 
but not limited to commuting, parking, subsistence, and other related 
costs.'' IEC further stated this would create a shortage of workers 
being willing to incur these expenses for work in metropolitan areas, 
thus driving up costs of metropolitan projects even further to attract 
workers. IEC also stated that using a metropolitan county's wage rate 
for a rural county would inflate rural wage rates above what the local 
economy can support and would ``undermine existing methods of 
incentivizing rural construction, such as subsistence pay to offset 
food and lodging.'' The comment from the Senators argued that the 
proposal would ``upset the local wage structure'' and result in small 
local contractors being ``excluded from bidding on Federal projects.''
    Commenters opposing the Department's proposal also criticized the 
Department's reasoning in the NPRM for proposing the change. NAHB 
argued that the Department's explanation--that construction workers 
travel long distances for work and that nearby counties with different 
designations may be competing for the same supply of workers--is one 
that ``contradicts'' the system of MSAs set up by OMB. NAHB noted that 
OMB already analyzes commuting data in order to capture local labor 
markets when it designates MSAs, and that these areas are treated as 
``authoritative'' and used by a variety of government agencies for 
important programs. They argue that these labor market definitions 
should not be ignored or contradicted without substantial evidence.
    NAHB also stated that the two academic studies on construction-
worker commuting time that the Department referenced were not 
persuasive because they were based on evidence from one city in 
California, did not show that construction commutes were substantially 
longer than the next longest commutes, and that any lengthier commute 
times could be explained by the need for workers to travel to different 
construction sites rather than to a single central office, and 
therefore do not necessarily mean commute times extend outside of 
metropolitan areas. NAHB also noted one of the two papers stated that 
construction workers travel long distances to projects in search of 
higher wages, and this, NAHB stated, did not support the idea that 
workers in metropolitan counties would travel to nearby rural counties 
for work.
    The comment from the group of U.S. Senators criticized the proposal 
as allowing for rural wage determinations to be governed by ``locality-
distinct metropolitan wages'' from metropolitan areas that may be 
``lacking both commonality and contiguousness with the rural 
locality.'' The comment also argued that the process of geographic 
expansion at all--even the current process allowing the use of MSAs at 
the group level--inflates prevailing wages compared to the ``actual 
prevailing wage BLS calculated.'' ABC argued that ``combining data from 
rural and metropolitan counties cannot improve accuracy so long as the 
underlying wage data comes from a self-selected, statistically 
unrepresentative sample.''
    Various commenters supporting and opposing the proposal disagreed 
about the extent to which the Department's

[[Page 57582]]

historical practice supports the proposal. On one hand, the comment 
from the group of U.S. Senators argued that the Department 
mischaracterized in the NPRM that the bar on combining data has existed 
only since the 1982 rulemaking. They noted that, as early as 1977, the 
Secretary's Operations Manual for the Issuance of the Wage 
Determinations Under the DBRA instructed that ``[g]enerally, a 
metropolitan county should not be used to obtain data for a rural 
county (or visa [sic] versa).'' Donovan, 712 F.2d at 618.\142\ They 
cited the Carter Administration regulations that were suspended before 
enactment in 1981 as seeking to ``formalize such a prohibition,'' and 
they cited a WAB decision from 1977 for the proposition that the WAB 
had warned against importing rates from non-contiguous counties.
---------------------------------------------------------------------------

    \142\ In their comment, the U.S. Senators left out the word 
``generally'' from their recitation of the language from the Manual. 
See Donovan, 712 F.2d at 618.
---------------------------------------------------------------------------

    On the other hand, a number of commenters supporting the proposal 
agreed with the Department that eliminating the strict bar was 
consistent with the legislative history of the DBA and the Department's 
historical practice from the enactment of the Act until the 1981-1982 
rulemaking. NABTU stated that the legislative history ``supports the 
proposition that [the Department] should first consider neighboring 
communities'' when there is not sufficient wage data in a non-
metropolitan area. The Iron Workers noted in particular the exchange in 
the 1932 hearings regarding amending the DBA where Congressman William 
Connery, the manager of the bill, used the example of the construction 
of the Hoover Dam (then referred to as the Boulder Dam) near the 
Arizona-Nevada line. See 75 Cong. Rec. at 12366, 12377 (1932) (remarks 
of Rep. Connery). Rep. Connery had explained how at the time there may 
have been a need to go 500 miles to find a city large enough to provide 
a sufficient amount of wage data to determine what prevailing wage 
rates should be for the project. As the Iron Workers explained, Rep. 
Connery's statement supports the conclusion that Congress intended to 
give the Secretary discretion to determine the necessary scope of 
geographic aggregation where there was insufficient wage data--to 
aggregate from a geographic scope that is ``large enough to include 
wage data from a sufficient number of similar projects.'' SMART and 
SMACNA noted that the Department then, until the 1981-1982 rulemaking, 
consistently relied on data from more populous areas in deriving 
prevailing rates for thinly-populated areas in appropriate 
circumstances.\143\
---------------------------------------------------------------------------

    \143\ For the Oahe Reservoir constructed in rural South Dakota 
in 1954, the Solicitor of Labor explained that ``[t]he labor force 
for the project obviously had to be drawn from the entire state and 
beyond,'' since there were ``no projects of a character similar in 
the civil subdivisions involved.'' Charles Donahue, ``The Davis-
Bacon Act and the Walsh-Healey Public Contracts Act: A Comparison of 
Coverage and Minimum Wage Provisions,'' 29 Law & Contemp. Probs. 
488, 510 (1964).
---------------------------------------------------------------------------

    Commenters supporting and opposing the proposal also disagreed 
about whether the D.C. Circuit's decision in Donovan supports the 
proposal. The Donovan decision considered the reasons that the 
Department had provided in its 1981-1982 rulemaking for enacting the 
strict bar on cross-consideration and ultimately upheld the 
Department's rule as a permissible exercise of its discretion. 712 F.2d 
at 618. The comment by the group of U.S. Senators argued that the 
Department's reasons for enacting the bar in the 1981-1982 rulemaking 
had been ``compelling,'' and that the D.C. Circuit had validated those 
reasons by stating that they ``make sense.'' The Senators asserted that 
the Department's reasoning now is similar to the reasoning of the 
unions and others who opposed the 1981-1982 rulemaking, and that these 
arguments were ``dismissed'' by the D.C. Circuit. ABC stated that the 
Department's justifications now are inadequate in light of the Donovan 
decision.
    The Iron Workers, on the other hand, emphasized that the D.C. 
Circuit's decision about the metropolitan-rural bar in Donovan was 
based on a deferential standard of review. The import of the decision, 
according to the Iron Workers, is that the Department is not bound by 
prior practice and can adopt new rules regarding geographic aggregation 
as long as they are consistent with the purposes of the DBA and not 
arbitrary. The Iron Workers and SMART and SMACNA also noted that the 
development of the program after the 1981-1982 rulemaking (and the 
Donovan decision) supports revisiting the strict bar. The 2011 GAO 
Report analyzed a group of surveys and found that in those surveys, the 
Department received increasingly insufficient current wage data at the 
county and surrounding-counties levels, which caused the Department to 
rely more heavily on super-group and statewide data to calculate 
prevailing wage rates. See supra note 10, at 21. This circumstance, the 
commenters argued, showed that the Department was too often relying on 
far-away county data when the better alternative would be adding 
neighboring counties to the surrounding-counties group level and thus 
relying on data from within local construction labor markets.
(2) Department's Decision Regarding Metropolitan and Rural Wage Data
    The Department generally agrees with the commenters supporting the 
proposal. Given the wide variation in counties and construction labor 
markets, the current bar on cross-consideration of the binary 
categories of ``metropolitan'' and ``rural'' county data unnecessarily 
limits the Department's geographic aggregation methodology. 
Accordingly, the Department has decided to revert to the prior 
approach, pre-dating the 1981-1982 rulemaking, under which the 
regulations do not strictly bar the Administrator from using data from 
metropolitan counties to help set prevailing wage rates in other 
counties in appropriate circumstances. In doing so, the Department will 
be able to better distinguish between metropolitan-adjacent counties 
that are part of a larger metropolitan construction market and those 
rural counties that are not economically integrated with any nearby 
metropolitan areas, will be able to set more wage determinations at 
smaller levels of geographic aggregation, and will be able to include 
more classifications in wage determinations overall.
    Some of the criticism of the Department's proposal may reflect 
underlying misunderstandings. The geographic aggregation provisions of 
Sec.  1.7 apply only when there is not sufficient current wage data in 
a county to determine a prevailing wage for a particular classification 
for that county. This can happen for a variety of reasons. As one 
commenter, a Professor of Economics from the University of Utah, 
stated, there may be insufficient wage data in some counties because 
they are simply ``too small to provide adequate numbers of survey 
responses,'' which is not uncommon given that there are counties in the 
United States with populations as low as 64 people. As this commenter 
noted, this challenge can also be common regardless of county size for 
specialized subclassifications on complex heavy construction projects 
(such as dams) because these types of projects ``are often non-
repeating, vast and unique in their design so that obtaining sufficient 
comparable wage data in one county is challenging.'' Only where there 
is not sufficient current wage data for a particular classification in 
a particular county will WHD expand

[[Page 57583]]

its geographic scope of consideration to consider data from other 
counties.\144\
---------------------------------------------------------------------------

    \144\ In addition, as the Department noted in the NPRM, if more 
interested parties participate in the wage survey, then there will 
be fewer counties without sufficient wage data for which the Sec.  
1.7 expansion process becomes relevant.
---------------------------------------------------------------------------

    The corollary of this structure is that the geographic aggregation 
provisions do not apply when there is already sufficient wage data for 
a classification at the county level in a WHD survey. It may be helpful 
to consider the example of a core metropolitan county, County A, and an 
outlier county, County B, that shares a border with County A. If the 
Department's wage survey produces sufficient current wage data for a 
certain classification in County A and separately produces sufficient 
current wage data for that classification in County B, then the 
Department's proposal would not result in any combination of data for 
the two counties. The proposal would only potentially apply if the wage 
survey did not produce sufficient current wage data for a 
classification in County A or County B. In that circumstance, the 
Department would need to consider how to set the prevailing wage rate 
for that classification and would look to wage data from outside of 
that county for that purpose.
    The Department disagrees with ABC that the proposal to eliminate 
the strict bar on cross-consideration is a ``dramatic change'' from the 
1981-1982 rulemaking. While eliminating the strict bar, the final rule 
does not require fundamental changes to the general underlying 
procedure for geographic aggregation described above. Under the final 
rule, as under current practice, the geographic aggregation provisions 
of Sec.  1.7 apply only when there is not sufficient current wage data 
in a county to determine a prevailing wage rate for a particular 
classification for that county. See 29 CFR 1.7(b). In these 
circumstances, as under the current practice, the Department would 
first aggregate data from ``surrounding counties'' to set the 
prevailing wage for the county with insufficient data. Id. Further 
geographic aggregation would occur only if sufficient data is still not 
available at the ``surrounding counties'' group level. In that 
circumstance, the Department could aggregate data from other 
``comparable counties or groups of counties.'' Id. Sec.  1.7(c). 
Finally, and only if there is no sufficient current wage data for the 
classification at this intermediate level, the Department could 
aggregate statewide data for the classification to set the prevailing 
wage rate in that county.
    In addition, the elimination of the strict bar does not require WHD 
to abandon the use of OMB designations as helpful references in the 
aggregation process. As noted above, the Department's current use of 
OMB designations to identify appropriate counties for geographic 
aggregation has been found to be consistent with the term ``surrounding 
counties'' and a reasonable method of addressing circumstances where 
there is insufficient wage data for a classification in a given county. 
The final rule will allow the Department to continue this practice, 
although the rule will not require it. It will also allow the 
Department to consider additional information on a case-by-case basis 
to avoid artificially or unreasonably depressing prevailing wage rates 
in counties that are adjacent to metropolitan areas but not designated 
as part of the MSA by OMB and to enable the calculation of more 
prevailing wages at the surrounding-counties group level rather than 
based on data from larger, more disparate super group or even statewide 
areas.
    The Department disagrees with NAHB that cross-consideration of data 
from outside of the same MSA ``contradicts'' these OMB designations. As 
an initial matter, OMB itself notes that ``[c]ounties included in 
metropolitan and micropolitan statistical areas may contain both urban 
and rural territory and population.'' 86 FR 37772. It also disclaims 
that its standards ``produce an urban-rural classification.'' Id. at 
37776. OMB requires counties to achieve a relatively high level of 
economic integration in order to be included in the same MSA. An 
outlying county will only be included in an MSA if 25 percent or more 
of the workers living in the county work in the central county or 
counties of the MSA or 25 percent or more of the employment in the 
county is accounted for by workers who reside in the central or county 
or counties. Id. Given that construction workers may generally commute 
longer distances than other workers, it is reasonable that counties 
that are economically integrated--but to a somewhat lesser extent than 
are MSAs--may still be a part of the same local construction labor 
market.
    One example that would be permissible under the final rule would be 
for the Department to take a new approach with counties that OMB 
designates as micropolitan statistical areas. As OMB notes, 
metropolitan and micropolitan statistical areas are ``conceptually 
similar to each other, but a micropolitan area features a smaller 
nucleus.'' 86 FR 37771.\145\ The Department, however, has generally 
considered counties designated as micropolitan to be ``rural'' and thus 
not appropriately included in a metropolitan ``surrounding county'' 
grouping even where the micropolitan county shares a border with an 
MSA. Under the final rule, the Department could analyze micropolitan 
counties on a case-by-case basis to determine how to include them in 
surrounding-counties groupings.
---------------------------------------------------------------------------

    \145\ An MSA is ``based on Urban Areas of 50,000 or more 
population,'' and a micropolitan statistical area is ``based on 
Urban Areas of at least 10,000 population but less than 50,000 
population.'' 86 FR 37776.
---------------------------------------------------------------------------

    Where a micropolitan county is not adjacent to any MSA, and is 
surrounded by rural counties with no urban population, the Department 
could continue (as it generally does under the existing strict bar) to 
include such a county within a surrounding-counties grouping of other 
adjacent and contiguous ``rural'' counties. In such circumstances, 
there would be no combining of metropolitan and ``rural'' data at the 
county or surrounding-counties group level for that county. However, 
where a micropolitan county is adjacent to one or more metropolitan 
counties, the Department might reasonably consider it to be a part of 
the same surrounding-counties grouping as those nearby counties within 
the MSA for the purpose of geographic aggregation. OMB's ``combined 
statistical areas'' concept could be useful in such a circumstance. OMB 
creates combined statistical areas by appending micropolitan counties 
to adjacent MSAs where there is a sufficient ``employment interchange'' 
between the two areas. 86 FR 37777-78. Although the final rule does not 
require as much, it would permit the Department to use data from 
metropolitan counties to set prevailing wages for micropolitan counties 
(for which there is not sufficient current wage data for a 
classification at the micropolitan county level) that are within the 
same combined statistical area.
    Given the wide variety of counties and local construction labor 
markets, the Department does not believe it is appropriate to set 
overly simplistic rules that apply rigidly throughout the country. 
Rather, depending on resource availability, the Department should be 
permitted to analyze data and other evidence on a state-by-state basis 
to determine appropriate county groupings. For example, Rice County in 
Minnesota is a micropolitan county that is adjacent to the Minneapolis-
St. Paul

[[Page 57584]]

MSA. In the most recent DBA wage determination process, the Department 
considered Rice County to be rural and therefore did not use any wage 
data from Minneapolis-St. Paul to assist in wage determinations. 
Because it satisfies the threshold for employment integration, however, 
OMB considers Rice County to be part of the Minneapolis-St. Paul 
Combined Statistical Area.\146\ Likewise, Rice is also within the same 
union jurisdiction for various construction crafts as the metropolitan 
counties in the adjacent MSA. In a future survey, if there are 
classifications in Rice County for which there is not sufficient 
current wage data, it would be reasonable under these circumstances for 
the Department to expand to a surrounding-counties grouping that 
includes the other counties within the same Minneapolis-St. Paul 
Combined Statistical Area.
---------------------------------------------------------------------------

    \146\ See U.S. Census Bureau, ``Minnesota: 2020 Core Based 
Statistical Areas and Counties,'' https://www2.census.gov/programs-surveys/metro-micro/reference-maps/2020/state-maps/27_Minnesota_2020.pdf.
---------------------------------------------------------------------------

    The Department has considered and disagrees with NAHB's criticism 
of the two academic papers that the Department used to illustrate that 
construction labor markets can be geographically larger than the 
average occupation's labor market. NAHB stated that the papers were not 
persuasive, but it did not cite to any studies or other data that 
contradicted them. NAHB first stated these papers were unconvincing 
because the average commute time they cited for construction workers--
while the highest of all occupational groups--was only 1.6 minutes 
higher than the next highest occupational group. By comparing the 
commute times to the next highest number, however, NAHB ignored that 
the average commute times for construction workers in the study are 
significantly longer than many other common occupations. For example, 
they are 31 percent higher than sales workers, 44.5 percent higher than 
education workers, and nearly 52 percent higher than food service 
workers. See Sun et al. (Dec. 2020) supra note 135, at 1, 4.
    NAHB also stated that any lengthier commute times for construction 
workers could be explained by the need for workers to travel to 
different construction sites rather than to a single central office, 
and therefore do not necessarily mean commute times extend outside of 
metropolitan areas. The Department agrees that lengthy construction 
worker commutes may in part be a result of commuting to project sites 
instead of a central office.\147\ However, the Department is not 
persuaded that such a distinction is relevant to whether these longer 
commutes cross metropolitan-rural county borders and reflect a larger 
construction labor market. The two academic papers, moreover, note a 
high percentage of particularly long commutes in the study area: 40 
percent of the workers in the study commuted more than 50 miles from 
home to the project site, and 12 percent of workers commuted more than 
80 miles. See Sun et al. (June 2020), supra note 136, at 40. It is 
reasonable to assume that commutes of this length can often extend 
across metropolitan-rural county borders.\148\
---------------------------------------------------------------------------

    \147\ As another paper noted, it is reasonable to assume that 
commute times are higher for construction workers because commute 
times will generally be longer for workers (like construction 
workers) who have ``greater uncertainty about future job location.'' 
Randall Crane and Daniel G. Chatman, ``As Jobs Sprawl, Whither the 
Commute?,'' ACCESS Mag., Fall 2003, at 14, 17.
    \148\ NAHB also criticized the two papers because they were 
based only on data from one city in California. The Department, 
however, does not find that criticism to be persuasive. The average 
commute times discussed in the papers were not local numbers, but 
were numbers derived from the nationwide U.S. Census data in the 
2014 American Community Survey. See Sun et al. (Dec. 2020) supra 
note 135 (citing Dan Kopf, ``Which Professions Have the Longest 
Commutes?,'' Priceonomics (Feb. 23, 2016), https://priceonomics.com/which-professions-have-the-longest-commutes/). While the commute 
mileage numbers were from a single California city, the Department's 
proposal is to increase the Administrator's flexibility to treat 
different construction labor markets differently. Thus, the 
potential that data from other cities in the country could show 
different commuting patterns for construction workers does not 
undermine the rationale for the proposal.
---------------------------------------------------------------------------

    Finally, NAHB also noted that construction workers travel long 
distances to projects in search of higher wages, and this, they stated, 
did not support the idea that workers in metropolitan counties would 
travel to nearby rural counties for work. The Department agrees that as 
a general matter, construction contractors may need to pay a premium to 
motivate workers to commute longer distances. This does not, however, 
undermine the Department's reasoning. To the contrary, it suggests that 
if a rural county is within commuting distance of a metropolitan area 
and the rural county does not itself have sufficient construction 
workers in a particular classification, workers from the metropolitan 
area may need to be paid a premium to be willing to commute to the job. 
This is the concept underlying the ``zone pay'' premiums in CBAs, which 
are discussed above in section III.B.1.ii.(A)(4).\149\
---------------------------------------------------------------------------

    \149\ A comment from The Pacific Companies, an affordable 
housing developer and owner of affordable housing, provided another 
example of this phenomenon. The comment noted that it prefers to use 
modular construction to reduce the need for labor and offset labor 
costs in rural areas ``where labor is more scarce and costs can be 
higher.''
---------------------------------------------------------------------------

    The Department has also considered the comments from opponents of 
the proposal that the elimination of the strict bar will likely result 
in ``inflated'' wages in the rural counties in which metropolitan data 
is newly used. In support of this argument, the comment from the group 
of U.S. Senators referenced statements in the 1979 GAO Report and by 
then-Comptroller General Staats that criticized the importation of 
rates from one county to another. Also supporting this argument, NAHB 
cited testimony from an NAHB member asserting that it had constructed 
two projects--one in the Philadelphia metropolitan area and the other 
``outside of the Philadelphia area'' that was ``described as a more 
complex project''--and that the labor costs and cost-per-unit had been 
higher on the metropolitan project. NAHB, in addition, pointed to 
litigation over certain DBA rates in Nevada, where geographic 
aggregation led to the adoption of Las Vegas metropolitan rates in a 
smaller metropolitan area in Northern Nevada that included Reno.
    The Department does not find the reference to the 1979 GAO Report 
to be persuasive. The GAO Report was criticizing the importation of 
rates from other counties ``even though an adequate basis generally 
existed for issuing prevailing rates based on the labor force and 
construction data in the locality.'' 1979 GAO Report, at 50. Later, the 
GAO referenced a project where it stated that the Department had not 
even attempted to survey a rural county and instead adopted a wage rate 
from a metropolitan county that did not even share a border with the 
rural county. Id. at 174.\150\ This is not what the Department proposed 
in the NPRM. Rather, the proposal would not change the fundamental 
threshold for

[[Page 57585]]

geographic expansion in the regulation at Sec.  1.7(b), which only 
expands the scope when the Department has surveyed a county and the 
survey has not resulted in sufficient current wage data to make a wage 
determination.
---------------------------------------------------------------------------

    \150\ Similarly, the U.S. Senators cited to the WAB decision in 
Texas Paving & Utilities Rates, WAB No. 77-19, 1977 WL 24839 (Dec. 
30, 1977), to support the argument that importing wage rates could 
violate the plain language of the DBRA by ``establishing new wage 
rates rather than reflecting local wages.'' In the Texas Paving 
decision, however, the Administrator had not surveyed the area at 
issue and set rates notwithstanding the lack of a survey. This would 
not be an issue under the proposed scope-of-consideration rule, as 
the Department's current methodology requires the use of surveys, 
and geographic aggregation only occurs if a survey has resulted in 
insufficient current wage data in the county at issue.
---------------------------------------------------------------------------

    The Senators also cite language in the GAO Report stating that 
``the use of wage rates from another area is not in accord with the 
act's intent[.]'' 1979 GAO Report, at 50. The Department interprets 
this statement as referencing the practices that the GAO was 
criticizing--of using rates from another area without even attempting 
to survey the county at issue--and not a broader statement that the use 
of wage rates from another area is never permitted. However, to the 
extent that the GAO Report intended a broader rejection of the practice 
of geographic aggregation, that position was subsequently undermined by 
the D.C. Circuit in the Donovan decision upholding the geographic 
aggregation provisions in Sec.  1.7. In Donovan, the D.C. Circuit 
concluded from the legislative history of the DBA that the practice of 
using data from outside the area where necessary was permissible and 
consistent with the statute. As the court explained ``if a prevailing 
wage could not be set in a given county by looking only to projects in 
that county, it was essential to the attainment of the general purpose 
of Congress--the predetermination of locally prevailing wages--that 
another mechanism be found.'' 712 F.2d at 618.
    The Department also does not agree that the proposal will lead to 
an impermissible adoption of inaccurate and ``inflated'' wage rates. 
The Department agrees that different areas can have different wage 
structures; that is the basic concept underlying the Act. However, as 
the D.C. Circuit noted, the Department is tasked with finding a way to 
make wage determinations even where there is not sufficient current 
wage data from a given county to make the determination. Donovan, 712 
F.2d at 618. In such circumstances, the Department must consider a 
number of factors in determining how to proceed, including consistency 
with local area practice, as well as administrative feasibility, 
publishing as many wage determinations as possible, and reducing the 
need for conformances. As the Department noted in the NPRM, there is no 
perfect solution for identifying county groupings in the geographic 
aggregation procedure. However, on balance, the Department has 
concluded that the better approach is not to constrain the agency with 
strict limits based on an overly simplistic binary categorization of 
counties.
    The Department agrees that there is a possibility that increased 
flexibility may lead to higher prevailing wage rates in certain 
counties that are adjacent to metropolitan areas. The Department agrees 
with the commenters that supported the proposal that the current 
geographic aggregation methodology can have a depressive effect on the 
prevailing wage rates for rural counties that border--and have a level 
of labor-market integration with--metropolitan areas.
    Conversely, however, increased flexibility in geographic 
aggregation may in other circumstances lead to lower prevailing wage 
rates. Under the current ban, where a survey does not result in 
sufficient current wage data for a classification in a metropolitan 
county, the Department may need to use a super group of metropolitan 
counties from different parts of the state to make a wage determination 
for that classification. This can result in relying on data from far 
away metropolitan areas that may have less in common with the 
metropolitan county than neighboring micropolitan counties (that are 
currently treated as ``rural''). Without the ban, the Department could 
instead look to the adjacent rural county that is within commuting 
distance from the metropolitan county for which there is not sufficient 
current wage data for the classification at issue. The result in that 
instance could be a lower rate in the wage determination, but one that 
might better reflect the prevailing wage in the specific local 
construction labor market.\151\
---------------------------------------------------------------------------

    \151\ The same is true for prevailing wage rates based on CBAs. 
IEC speculated that the end of the absolute bar could lead to 
metropolitan area CBA rates being applied to neighboring rural 
counties. However, it is equally as likely that small metropolitan 
MSAs that have insufficient data and would be subject to a CBA-based 
rate at a metropolitan ``super group'' level under the existing 
regulations, will, under the final rule, have the potential to 
instead reach sufficiency at the surrounding-counties group level 
with a combination of metropolitan and rural county data that may 
not be CBA-based.
---------------------------------------------------------------------------

    A similar effect can be anticipated for rural areas that are 
adjacent to small metropolitan areas. Under the current approach, if 
there were insufficient data in a rural metropolitan-adjacent county, 
the Department would look to other ``rural'' areas elsewhere in the 
state where wage rates might be driven by rates in micropolitan 
counties with markedly higher rates. For example, in a recent survey of 
Utah, WHD determined that the combined prevailing wage and fringe 
benefit rate in a smaller metropolitan county, Weber County, for a 
Laborer: Mason Tender/Cement Concrete was $14.93. In neighboring Rich 
County, a rural county, there was no sufficient current wage data, and 
WHD calculated the prevailing wage for the same classification by 
looking to other rural counties statewide, resulting in a determination 
of $19.33. If instead WHD had been able to combine the metropolitan 
data from neighboring Weber County with the rural Rich County, the 
prevailing wage in Rich County would be lower than it has been 
calculated under the existing strict bar on cross-consideration of 
``metropolitan'' and ``rural'' data.
    This same phenomenon can occur even when the metropolitan area is 
not a particularly small one. For example, in a recent survey of 
Tennessee, WHD determined that the prevailing wage for an Electrician 
in a number of counties within the MSA of Nashville-Davidson-
Murfreesboro was $22.53. In neighboring Lawrence County, a micropolitan 
county that is part of the larger combined statistical area, but still 
considered to be a ``rural'' county under the current rules, there was 
not sufficient wage data to make a wage determination for the 
Electrician classification. WHD thus calculated the prevailing wage for 
Electricians in Lawrence County by looking to other ``rural'' counties 
at a super-group level, resulting in a determination of $26.25. If 
instead WHD had been able to combine the ``metropolitan'' data from the 
neighboring MSA with micropolitan Lawrence County, the prevailing wage 
in Lawrence would have been lower.
    Overall, while it is reasonable to expect that ending the strict 
bar on cross-consideration may in some counties lead to increases in 
the published prevailing wage rates, the Department does not agree that 
such increases would be unwarranted or inaccurate, or that they would 
have significant negative effects that outweigh their benefits. In 
addressing these questions, the Department has considered the arguments 
that were made during the 1981-1982 rulemaking and subsequent 
litigation, as well as the comments received on the current proposal. 
Many of these arguments are similar, and many mirror the arguments that 
the same commenters made regarding the proposed reversion to the 30-
percent rule, such as NAHB's statement that increased wage rates would 
decrease production of affordable housing, and IEC's statement that 
using a metropolitan county's wage rate for a rural county would 
inflate rural wage rates ``above what the local economy

[[Page 57586]]

can support.'' \152\ The Department does not find these arguments to be 
persuasive for the same reason that they are not persuasive with regard 
to the 30-percent rule. See section III.B.1.ii.
---------------------------------------------------------------------------

    \152\ Similarly, the comment from the group of U.S. Senators 
stated that wages would be inflated if they were compared to 
``actual prevailing wage[s] BLS calculated,'' and ABC argued that 
the proposal regarding metropolitan and rural data cannot improve 
accuracy so long as the Department continues to use its current 
voluntary survey process.
---------------------------------------------------------------------------

    The comments identifying potential negative effects on rural 
contractors also do not provide persuasive reasons to reject the 
proposal. The Department does not agree with the comment from the 
Senators that eliminating the strict bar would result in small local 
contractors being ``excluded from bidding on Federal projects.'' In 
support of this argument, the Senators cited the 1979 GAO Report in 
which the GAO speculated that for certain contracts in rural counties, 
the lack of local contractors could be attributed to these contractors 
declining to bid on contracts with higher ``metropolitan'' prevailing 
wage rates because they did not want to ``disrupt their wage 
structures.'' 1979 GAO Report, at 73-74. In addition, the Department's 
1981-1982 NPRM noted a comment from the National Utility Contractors 
Association that ``in the past'' the ``importation'' of metropolitan 
rates into rural areas had ``disrupted labor relations in rural areas, 
because employees who received high wages on a Davis-Bacon project were 
unwilling to return to their usual pay scales after the project was 
completed.'' 47 FR 23647.
    The Department is not persuaded by the concerns about ``labor 
disruption'' for several reasons. As an initial matter, the comment 
assumes a significant discrepancy between the wage that construction 
workers are paid in a rural county and the prevailing wage that the 
Department would set through the geographic aggregation process. Among 
the counties that the Department has identified as potentially affected 
by this rule change are metropolitan-adjacent counties--within 
commuting distance of the metropolitan core--in which the Department 
does not have sufficient current wage data from the county to make a 
determination. In many or most such circumstances, it will be 
reasonable to assume that the wage rate from a neighboring county is 
not significantly different and therefore that there is no reason to 
assume labor disruption from setting the same prevailing wage rate. 
Moreover, where non-metropolitan counties are next to metropolitan 
areas, the workers in these counties generally already live within 
commuting range of earning the metropolitan rates that could 
potentially be designated as prevailing. Thus, it does not follow that 
the potential for additional projects--all within the same commuting 
range--to be governed by these rates would result in a disruption of 
labor relations.\153\
---------------------------------------------------------------------------

    \153\ The Department notes that IEC, while generally disagreeing 
with the Department's proposal, agreed that the labor disruption 
argument is not at issue where the cross-consideration of rates is 
occurring within the same commuting area.
---------------------------------------------------------------------------

    It also does not follow that the requirement to pay certain higher 
base rates would, as the IEC asserts, ``undermine existing methods of 
incentivizing rural construction, such as subsistence pay to offset 
food and lodging.'' Prevailing wage rates do not operate as a maximum 
rate that can be paid; if contractors provide additional pay to cover 
food and lodging so as to ensure that metropolitan-based workers are 
willing to commute to a rural job, then they are permitted to provide 
such additional incentives above and beyond the prevailing wage rate.
    Finally, even if using wage rates from a metropolitan county to set 
the prevailing wage rate in an adjacent rural area were to result in a 
higher prevailing wage rate than under the current policy, such a 
result would not ``exclude'' any bidders. As noted above in response to 
the Senators' comments on the 30-percent rule proposal, a higher 
required prevailing wage rate does not exclude bidders because all 
bidders are equally required to pay the same wage rate. See section 
III.B.1.ii.A. The potential that some contractors might choose not to 
bid on covered contracts is also not a persuasive reason to abandon the 
proposal. In any type of county, not just rural counties, it may be 
possible that contractors that derive competitive advantage only by 
paying the lowest wages might be disincentivized from bidding on 
contracts covered by prevailing wage requirements. Studies have shown, 
however, that this potential may be generally offset by the incentive 
that prevailing wage requirements provide for higher-skilled 
contractors to bid where they might not otherwise. See section 
V.F.1.\154\ This conclusion is also supported by commenters on the 
current proposal. Many comments from contractor associations supporting 
the current proposal stated that appropriate enforcement of prevailing 
wage requirements provides more contractors with the ability to pay 
their workers fairly and bid on contracts on the basis of skill and 
quality instead of on which contractor will pay the lowest wage rates. 
Accordingly, the Department is not convinced that the elimination of 
the strict bar will have net negative effects on local rural 
contractors or rural construction workers generally.
---------------------------------------------------------------------------

    \154\ In 1979, when the GAO sought the Department's comment on 
its preliminary findings, the Department criticized GAO's conclusion 
that the Department was implementing the Act in a way that harmed 
local contractors in rural counties. See 1979 GAO Report, at 224-225 
(appending letter from the Department). The Department stated that 
the GAO has based its conclusions on a statistically insignificant 
sample of projects and on mistaken understandings about the specific 
projects.
---------------------------------------------------------------------------

    Although commenters did not expressly assert as much, the 
Department also considered whether the concerns about ``disruption'' of 
rural wage structures (and other comments regarding the scope-of-
consideration regulation at Sec.  1.7) amounted to assertions of 
reliance interests in the current regulations that would weigh against 
adopting the changes in the final rule. Contractors have not asserted, 
and the Department does not believe, that the rural wage rates or 
practices that the commenters have mentioned have been set in reliance 
on the Davis-Bacon wage determination methodology. However, to the 
extent they have been, and required prevailing wage rates may rise as a 
result of the rulemaking, the barriers for such contractors to increase 
wage rates when working on DBRA-covered projects are not unreasonably 
high, given that any new wage rates will apply only to new contracts--
with limited exceptions reflected in Sec.  1.6(c)(2)(iii) and discussed 
in section III.C. (``Applicability Date'') below--and contractors can 
adjust their bids or future negotiations on contract pricing as 
necessary to accommodate them. In instances where required wage rates 
may fall instead of rise, and specifically where they may fall from a 
CBA rate, the potential for disruption may be greater. In those 
circumstances, it is possible that contractors who have agreed to be 
bound by a CBA may have done so in part relying on the existence of 
CBA-based prevailing rates for work on Federal contracts. 
Notwithstanding this possibility, the Department has determined that it 
is preferable to eliminate the absolute bar on cross-consideration to 
allow the determination of wage rates to more often occur based on 
smaller geographic groupings.
    The Department has also considered that the concern about labor 
disruption was discussed by the D.C. Circuit when it upheld the strict 
bar in 1983. See Donovan, 712 F.2d at 618-19. The Donovan decision 
noted the Department's apparent reliance on the labor-disruption 
argument in the 1981-1982 rulemaking, and the court then

[[Page 57587]]

broadly stated that the Department's reasoning ``makes sense.'' Id. at 
619. The underlying holding in Donovan, however, was that situations 
``where there is insufficient data from a given civil subdivision to 
determine a prevailing wage,'' represent ``interstitial areas'' of the 
statute, regarding which Congress had granted the Department broad 
authority to ``implement[ ] the Act in the way necessary to achieve its 
purposes.'' Id. at 618.
    Under these circumstances, a prior holding that a rule was 
reasonable does not prohibit the Department from coming to a different 
conclusion at a later date. See Home Care Ass'n of Am. v. Weil, 799 
F.3d 1084, 1092 (D.C. Cir. 2015) (holding that the Supreme Court's 
decision that prior rule was ``reasonable'' did not preclude different 
approach in new rule, where the matter was interstitial in nature and 
within the agency's discretion). Likewise, two opposing arguments can 
both ``make sense.'' Where they do, the Department has to determine 
what it believes to be the best course, taking into consideration its 
expertise and any new factual circumstances that have arisen after the 
earlier decision. As various commenters have correctly observed, the 
strict bar in the 1981-1982 rulemaking has led to an increasing 
reliance on data from super group and statewide levels to calculate 
prevailing wage rates. See 2011 GAO Report, at 21. Considering this 
trend, the Department has concluded that the better option is to allow 
a more case-by-case analysis of local construction labor markets--and 
thus increase the number of wage determinations that can be made with 
smaller geographical aggregations of data.
    The Department disagrees with the Senators' comment that the 
proposal is not permissible or reasonable because the D.C. Circuit in 
Donovan ``dismissed'' the arguments that the Department is now making 
regarding the need to have flexibility in geographic aggregation 
because of heterogeneity in commuting patterns. In the 1981-1982 
rulemaking, unions had argued that ``importing'' rates from nearby 
metropolitan areas is justified because workers from metropolitan areas 
often perform the work in rural areas due to shortages of skilled labor 
in rural areas. 47 FR 23647. The Department had responded, stating that 
if those commenters were correct that ``large numbers'' of workers from 
metropolitan areas typically work at higher metropolitan wage rates on 
projects in rural areas, then ``those higher wages would be found and 
receive proper weight in surveys of wages paid in such areas.'' Id. The 
D.C. Circuit's did not ``dismiss'' the reasonableness of the unions' 
argument or suggest that Department would have been prohibited from 
agreeing with the unions. To the contrary, the court acknowledged that 
``it might be true'' in some cases that looking to far away rural 
counties ``would not reveal the higher wages that should be paid in the 
project county.'' 712 F.2d at 619. The court held, however that the 
unions had not provided a sufficient factual basis to ``overturn the 
Secretary's informed exercise of authority.'' Id.
    In the years since the Donovan decision, the practical experience 
of making wage determinations based on the strict bar has highlighted a 
flaw in the Department's prior reasoning. The Department's hypothetical 
during the 1981-1982 rulemaking, and the court's analysis of it, did 
not grapple with factual circumstances in which the geographical 
aggregation rule in fact applies. In practice, the question of cross-
consideration of metropolitan and rural county data only arises when a 
wage survey finds that there is not sufficient current wage data in a 
county to determine a prevailing wage rate for a particular 
classification. Only then does the Department consider looking to 
``surrounding counties'' for comparable data. The fact that there may 
not have been sufficient similar projects in a county during the most 
recent survey period, as measured by the wage survey, however, does not 
reflect on what the wage rates are or would be on such projects when 
they do occur. In such a circumstance, the relevant question is not 
whether ``large numbers'' of workers from the metropolitan county have 
been working in the adjacent county during the survey period at 
metropolitan rates sufficient to set the prevailing wage. Rather, the 
question is whether the metropolitan-adjacent rural county is 
sufficiently part of a local construction labor market that it is 
reasonable to set the prevailing wage rate closer to the rates in the 
nearby metropolitan counties that are also part of that labor market 
than to a lower (or higher) rate of a farther-away rural county. As 
noted, wage rates in a metropolitan-adjacent rural county may be 
similar to a nearby metropolitan county not only because metropolitan-
county workers may routinely travel to the adjacent county to work, but 
also because workers who live in the rural county can command a similar 
wage rate to the adjacent metropolitan area because the rural county is 
sufficiently economically intertwined with it.
    At the time this question reached the D.C. Circuit in Donovan, it 
was sufficiently abstract that the court reasonably deferred to the 
Department's expertise. However, the imposition of the strict bar has 
given rise to many examples where the Department has overlooked indicia 
of economic integration solely because a county is not a part of an 
OMB-designated MSA. As discussed above, one example is where a 
micropolitan county is part of a combined statistical area with a 
neighboring MSA--thus sharing a certain level of measurable economic 
integration--or where there is evidence that a particular contractor 
community operates regularly in a geographic area that transcends an 
MSA's boundaries. Under such circumstances, there is sufficient reason 
to use data from the neighboring MSA to set wage rates where there 
otherwise is not sufficient current wage data in the county. The D.C. 
Circuit's decision in Donovan does not suggest otherwise.
    The Department has also considered IEC's argument that the proposal 
would incentivize workers to work on rural projects instead of taking 
jobs in metropolitan areas, leading to an increase in the costs of 
metropolitan projects to attract workers. The Department agrees with 
the principle underlying IEC's comment--that if two projects are in 
counties that are within commuting distance, then they will likely be 
competing for the labor of many of the same construction workers. This 
principle explains why the Department believes it can be appropriate to 
consider a metropolitan county's wage rates when there is not 
sufficient data in a neighboring rural county instead of relying on a 
farther away rural county or counties that may have much more limited 
connections to any metropolitan labor market.
    The Department, however, does not believe that adopting a 
metropolitan county's prevailing wage rates for an adjacent rural 
county will have the broad effect IEC anticipates so as to warrant 
maintaining the strict bar. The first problem with IEC's argument is 
that it begins with the assumption that the ``true'' prevailing rate in 
the rural county is significantly different than the rate in the 
neighboring metropolitan county, even though the two counties may be 
within commuting distance of one another and therefore within the same 
local construction labor market. As a related matter, IEC also 
necessarily must be assuming that most construction workers in the two-
county market live in the rural county and would therefore be willing 
to accept a lower rate in order to avoid commuting. While this may be 
true in some labor markets, it will not be true in others. If

[[Page 57588]]

most skilled construction workers reside in populous metropolitan 
counties, it may already be necessary for projects in nearby rural 
counties to pay wages commensurate with metropolitan rates (or even a 
premium above metropolitan rates) to attract sufficient workers from 
the metropolitan core, as is exemplified by the structure of many CBA 
``zone rates,'' discussed in section III.B.1.ii.(A).(4). Finally, IEC's 
hypothetical assumes a finite number of workers, which ignores the 
potential that additional significant construction projects (and any 
related increase in wage rates) may attract new workers to a labor 
market. In sum, there is significant variation in construction labor 
markets, and this variation suggests that the Department should have 
the flexibility to create county groupings through which it can attempt 
to account for these differences.
    The D.C. Circuit's decision in Donovan is helpful for addressing 
the question that the Senators raised regarding whether the proposal to 
relax the strict bar is consistent with the legislative history of the 
Act and with the Department's historical practice prior to the 1981-
1982 rulemaking. In Donovan, the district court had struck down the 
strict bar, as the D.C. Circuit explained, ``almost exclusively on what 
it saw as a longstanding and consistent administrative practice 
contrary to the proposed regulations.'' 712 F.2d at 619 (citing the two 
district court decisions below). The D.C. Circuit noted that the 
Department's administrative practice had not been ``quite as 
consistent'' as the district court had stated. Id. (citing the 1977 
Manual of Operations and the Carter Administration rule). Nonetheless, 
the D.C. Circuit opinion did not turn on this question. Rather, it 
stated that ``[m]ore fundamentally'' it was reversing the district 
court and upholding the strict bar because ``prior administrative 
practice carries much less weight when reviewing an action taken in the 
area of discretion,'' such as the interstitial question of how to make 
wage determinations in counties that do not have sufficient current 
wage data. Id.
    In any case, the current proposal to relax the strict bar is 
consistent with the Department's prior practice before the 1981-1982 
rulemaking. In that rulemaking, the Department acknowledged that the 
strict bar was a departure from the prior status quo, stating that the 
Department had determined ``that its past practice of allowing the use 
of wage data from metropolitan areas in situations where sufficient 
data does not exist within the area of a rural project is 
inappropriate.'' 47 FR 23647. As both the D.C. Circuit and the Senators 
noted, although there was no strict bar on cross-consideration from 
1935 until the 1981-1982 rulemaking, the Department's procedures were 
not necessarily uniform over that time period. In the late 1970s, while 
no strict bar existed in the regulations, the Department's Manual of 
Operations document provided that ``generally'' it would not mix such 
data. See 712 F.2d at 619 (citing the 1977 Manual of Operations). This 
description, however, would be a fair description of the expected 
effects of the Department's current proposal.
    There are two reasons why, as a practical matter, the Department 
will ``generally'' not combine metropolitan and rural data under the 
current proposal. First, aside from the exceptions of multi-county 
projects and highway projects described above, no cross-consideration 
will occur for any county (rural or metropolitan) for which a survey 
results in sufficient current wage data to make a wage determination. 
Second, even when there is no sufficient current wage data in a rural 
county, the Department will generally not need to combine the available 
rural wage data with metropolitan data as part of the surrounding-
counties grouping. For rural counties surrounded by other rural 
counties, the Department will usually look only to these neighboring 
rural counties as part of the surrounding-counties grouping. The only 
cross-consideration at the surrounding-counties grouping will generally 
be where a ``rural county'' shares a border with a metropolitan county 
and reasonably can be considered to be part of the local construction 
labor market.
    While the Department's proposal may not be exactly the same as 
prior administrative practice, Donovan instructs that the Department is 
not bound to apply geographic aggregation only in the same way as it 
has before as long as the Department has a reasonable basis for a new 
proposal that is consistent with the purposes of the Act. The 
Department believes that it is more consistent with the purpose of the 
Act to maintain sufficient flexibility in the wage determination 
process so as to adequately consider the heterogeneity of ``rural 
counties'' and avoid unnecessarily depressing (or increasing) 
prevailing wage rates in metropolitan-adjacent counties by referring to 
faraway rural counties before considering whether neighboring 
metropolitan county rates might reasonably be considered to prevail 
under the circumstances. It is also more consistent with the Act to 
seek to make prevailing wage determinations at smaller levels of 
geographic aggregation in order to better track local area practices.
(3) Defining ``Surrounding Counties''
    A number of commenters responded to the Department's request for 
comment regarding whether there was a need for additional definition 
within the regulatory text of the first level of geographic 
aggregation, which is currently referred to in the regulations as 
``surrounding counties.'' 29 CFR 1.7(b). Of the three options that the 
Department presented in the NPRM, commenters favored either Option 1 
(to leave the description the same) or Option 3 (to include in the 
regulatory text a definition of ``surrounding counties'' as a 
``contiguous local construction labor market'').\155\
---------------------------------------------------------------------------

    \155\ No commenters favored the second option, which would have 
relied only on counties sharing a border with the county in need. As 
noted, that option would have made predetermined groupings virtually 
impossible--even groupings based solely on OMB's statistical area 
designations as under current procedures. The Department is not 
adopting the second option for that reason. In the NPRM, the 
Department also stated that it was considering one more option of 
more explicitly tailoring the ban on combining metropolitan and 
rural data so that it applies only at the ``surrounding counties'' 
level, but not at the statewide level or an intermediate level. The 
Department received no comments regarding this option. While 
limiting the ban to ``surrounding counties'' but allowing cross-
consideration at higher levels would be more beneficial than the 
current regulations, it would not allow the Department the 
flexibility of identifying metropolitan-adjacent rural counties that 
can reasonably be added to metropolitan surrounding-counties 
groupings. Accordingly, the final rule does not adopt that option.
---------------------------------------------------------------------------

    The III-FFC supported defining ``surrounding counties'' as 
contiguous construction labor markets because it would give the 
Department the flexibility to use OMB designations, but also allow the 
use of additional evidence on a case-by-case basis to determine if OMB 
designations are too narrow for a given construction market. III-FFC 
also supported this option because, unlike the second option the 
Department had proposed, it would allow the Department to make 
predetermined county groupings or make determinations on a case-by-case 
basis. The NCDCL noted that the California State prevailing wage rules 
contain a similar definition, instructing the consideration of rates 
``in the nearest labor market area.'' Cal. Lab. Code section 
1773.9(b)(1). NCDCL commented that a county grouping methodology based 
on the nearest labor market area is the best way to effectuate the 
purpose of the DBRA by ``ensur[ing] that prevailing wage rates actually 
reflect the wages paid to workers in the labor market they work in.'' 
The FTBA

[[Page 57589]]

supported this definition as the best for reflecting the most relevant 
wage and benefits data ``in areas in which the labor pool is not 
limited to a single county.''
    Commenters opposed to the Department's proposal stated that none of 
the Department's proposed options adequately explained what other 
approaches it would be using (instead of relying on OMB 
``metropolitan'' designations) to expand geographic aggregation when 
necessary. AGC stated generally that ``metro and rural data should not 
be mixed''; it clarified, however, that it may be appropriate to 
combine county data when counties ``are economically related and part 
of the same sphere of influence.'' AGC also asserted that the 
Department should ``retain flexibility in this matter instead of 
prescriptiveness'' because ``[e]very state, county, city and especially 
construction market is unique.'' With regard to the Department's 
specific proposals, AGC requested that the Department set specific 
definitions and limitations to how it would identify a ``contiguous 
local construction labor market'' and recommended the Department 
instead use ``defined market approaches.''
    The Department has elected to retain the reference to ``surrounding 
counties'' without further definition in the regulatory text, given 
that the term already has accrued meaning through litigation in the 
ARB. See Chesapeake Housing, ARB No. 12-010, 2013 WL 5872049. As noted, 
a surrounding-counties grouping generally should be a contiguous group 
of counties that approximate a local labor market, either through the 
adoption of OMB designations or on the basis of some other appropriate 
evidence of economic relationship between the included counties. The 
Department agrees with AGC that construction markets can be unique, and 
it makes sense to retain flexibility and avoid prescriptiveness.\156\ 
Accordingly, while the Department has identified certain potentially 
appropriate types of surrounding-counties groupings (for example, 
following the lines of OMB ``combined statistical areas''), there may 
be other methodologies to identify whether counties are reasonably 
within the same local construction labor market and thus can be 
appropriately grouped together as ``surrounding counties.'' For 
example, as the Department noted in the NPRM, the Department could rely 
on county groupings in use by State governments for state prevailing 
wage laws, as long as they are contiguous county groupings that 
reasonably can be characterized as ``surrounding counties.'' 
Notwithstanding this flexibility, it will generally not be appropriate 
to include noncontiguous counties within a surrounding-counties 
grouping; all of the counties within a first-level grouping should 
border at least one other county in the grouping.
---------------------------------------------------------------------------

    \156\ AGC did not explain what it meant by its suggestion to use 
``defined market'' approaches. The Department interprets AGC comment 
as opposing the second option posed in the NPRM (of using only 
neighboring counties to the county with insufficient data), because 
such a policy would not allow the use of predetermined county groups 
that are the same for all of the counties in the group. The 
Department agrees that the second option would have been 
administratively infeasible and has not adopted it for that reason.
---------------------------------------------------------------------------

    Having considered the comments received regarding the proposal to 
eliminate the strict bar and to retain the surrounding-counties 
grouping, the Department has decided to adopt the language of Sec.  
1.7(a) and (b) as proposed in the NPRM.
(B) Other Proposed Changes to Sec.  1.7
    The Department proposed several other changes to Sec.  1.7. These 
included non-substantive changes to the wording of each paragraph in 
Sec.  1.7 to clarify that the threshold for expansion in each one is 
insufficient ``current wage data.'' The Department also sought comment 
on whether the existing definition of ``current wage data'' should be 
retained or amended to narrow or expand its scope. The existing 
regulation now defines ``current wage data'' in Sec.  1.7(a) as ``data 
on wages paid on current projects or, where necessary, projects under 
construction no more than 1 year prior to the beginning of the survey 
or the request for a wage determination, as appropriate.'' The 
Department did not receive any comments regarding the definition or 
these non-substantive changes, and the final rule has accordingly 
adopted the non-substantive changes as proposed and does not modify the 
definition of ``current wage data.''
    The Department also proposed amendments to Sec.  1.7(c) to better 
describe the process for expanding from the surrounding-counties level 
to consider data from an intermediary level (such as the current super-
group level) before relying on statewide data. In the proposed 
regulatory text, the Department described this second level of county 
groupings as ``comparable counties or groups of counties in the 
State.'' The Department stated that this proposed ``comparable 
counties'' language in Sec.  1.7(c) would allow the Department to 
continue to use the procedure described in Chesapeake Housing of 
combining various surrounding-counties groups (such as MSAs) or various 
non-contiguous groups of rural counties to create super groups. The 
proposal also included reference in Sec.  1.7(c) to the use of 
statewide data, but only ``if necessary.''
    The Department received only a few substantive comments regarding 
the proposal for clarifying the use of intermediate and statewide 
county groupings in Sec.  1.7(c). The labor organization REBOUND 
requested additional information about how intermediate groupings would 
be selected and expressed concern that the analysis for determining 
comparable counties could involve statistical analyses that could be 
the subject of political manipulation. NAHB expressed concern about 
eliminating the bar on cross-consideration of rural and urban data at 
the super group and statewide level. They stated that the proposal did 
not provide sufficient clarity about whether at each level it would 
adopt a single rate that combines both metropolitan and rural data. The 
comment from the group of U.S. Senators disagreed with the Department's 
reasoning that the purposes of the Act are better served by using 
combined statewide data to determine the prevailing wage, when the 
alternative could be to fail to publish a wage rate at all. Conversely, 
NCSHA supported the proposal, stating that it is important in 
particular in rural areas to ensure that as much data as possible can 
be considered so that there are more classifications published on wage 
determinations.
    The Department intended the proposed changes to Sec.  1.7(c) to be 
clarifying as opposed to substantive. The current regulation does not 
specifically mention the intermediate super-group county grouping. 
Rather, as the ARB stated in the Chesapeake Housing case, the existing 
regulations ``implicitly'' permit their use. ARB No. 12-010, 2013 WL 
5872049, at *1. In the Chesapeake Housing case, the ARB explained that 
WHD's practice was to create ``super groups'' by using the same OMB 
designations that are currently used at the surrounding-counties level 
to create super groups of either rural or metropolitan counties. Id. at 
*3. If there were still not sufficient data, WHD would expand further 
to a statewide level, still divided along metropolitan and rural lines, 
combining data for all rural counties or all metropolitan counties in 
the state. Id. While the ARB found that the existing regulations 
permitted the use of super groups, the Department believes it is 
preferable to have regulatory language that expressly notifies parties 
of the practice and provides basic guidance regarding how

[[Page 57590]]

these intermediate groupings will be identified.
    The Department, however, does not agree with REBOUND that further 
specificity is needed regarding the composition of intermediate 
groupings. The Department intends the word ``comparable'' in proposed 
Sec.  1.7(c) to apply both to ``counties'' and ``groups of counties.'' 
Thus, in order for counties or groups of counties to be grouped 
together in an intermediate grouping for the purposes of Sec.  1.7(c), 
WHD will need to identify county characteristics that are similar 
between the grouped-together counties and justify grouping them 
together as a fallback if there is not sufficient current wage data at 
the surrounding-counties group level. As with the surrounding-counties 
grouping, it would be consistent with this language to continue to 
identify intermediate groupings using OMB designations. Further 
specificity in the regulatory text is unwarranted because of the wide 
variety in size and composition of the states in which wage 
determinations are conducted. For some smaller states, as in the 
Virginia survey at issue in Chesapeake Housing, the intermediate 
groupings may effectively be statewide groupings of counties that share 
an OMB designation.\157\ For others, there may be a sufficient number 
of counties and variation among them to justify the creation of 
intermediate groupings of counties that do not encompass all of a 
certain OMB-designated (or otherwise specified) category of counties in 
a state.
---------------------------------------------------------------------------

    \157\ In Chesapeake Housing, WHD had used a ``super group'' 
intermediate grouping that consisted of all metropolitan counties 
and independent cities in eastern Virginia including those from the 
DC MSA, the Richmond MSA, and the Norfolk-Virginia Beach MSA. ARB 
No. 12-010, 2013 WL 5872049, at *3. The ARB noted that this grouping 
was in fact the same as it would have been had the Department used 
``statewide'' data segregated along metropolitan and rural county 
lines, because the ``super group'' included all of the MSAs in the 
state. Id. at *5-6.
---------------------------------------------------------------------------

    The Department anticipates that the intermediate county groupings 
discussed in Sec.  1.7(c) will generally be composed of combinations of 
comparable surrounding-counties groupings. Thus, if there are several 
surrounding-counties groupings in a state that are each based on an 
MSA-anchored combined statistical area, then it may be appropriate to 
create intermediate groupings by grouping together all of the counties 
that are included within those combined statistical areas. Likewise, 
intermediate groupings may be formed out of groups of counties that are 
included in multiple surrounding-counties groups that are made up 
solely of ``rural'' counties that are not included in any combined MSA. 
Depending on the size of the State, number of counties, and complexity 
of local construction labor markets, it may also be appropriate to 
create multiple levels of intermediate groupings that initially combine 
only the most similar surrounding-counties groupings, before making 
larger intermediate-grouping combinations.
    With regard to the final grouping--statewide data--NAHB requested 
clarification regarding whether ``metropolitan'' and ``rural'' counties 
will be grouped together statewide before (or instead of) considering a 
single rate that combines all counties. The proposal did not require a 
particular procedure. Given the flexibility discussed for the 
intermediate county groupings, the Department does not believe that 
there is need to specify that statewide data must be considered along 
binary ``rural'' and ``metropolitan'' lines before it is ultimately 
combined as a last fallback before older data can be used. This is 
because the highest level of intermediate grouping the Department can 
design will effectively be statewide grouping of comparable counties. 
The Department would only use fully combined statewide data (combining 
all counties in a state, without regard for any designation) if current 
wage data at the intermediate grouping level is not sufficient to make 
a wage determination.\158\ The Department agrees with NCSHA that the 
proposal (and, specifically, the possibility of using fully combined 
statewide data) provides a valuable benefit of making it possible for 
the Department to publish more classifications on rural wage 
determinations in particular.
---------------------------------------------------------------------------

    \158\ In addition, the language of Sec.  1.7(c) in the final 
rule permits, but does not require, the use of statewide data.
---------------------------------------------------------------------------

    Having considered the comments regarding the intermediate and 
statewide county groupings procedure in Sec.  1.7(c), the Department 
adopts the language of Sec.  1.7(c) as proposed.
viii. Section 1.8 Reconsideration by the Administrator
    In the NPRM, the Department proposed to revise Sec. Sec.  1.8 and 
5.13 to explicitly provide procedures for reconsideration by the 
Administrator of decisions, rulings, or interpretations made by an 
authorized representative of the Administrator. Parts 1 and 5 both 
define the term ``Administrator'' to mean the WHD Administrator or an 
authorized representative of the Administrator. See 29 CFR 1.2(c), 
5.2(b). Accordingly, when parties seek rulings, interpretations, or 
decisions from the Administrator regarding the Davis-Bacon labor 
standards, it is often the practice of the Department to have such 
decisions made in the first instance by an authorized representative. 
After an authorized representative issues a decision, the party may 
request reconsideration by the Administrator. The decision typically 
provides a time frame in which a party may request reconsideration by 
the Administrator, often within 30 days.
    To provide greater clarity and uniformity, the Department proposed 
to codify this practice and clarify how and when a reconsideration may 
be sought. First, the Department proposed to amend Sec.  1.8, which 
concerns reconsideration of wage determinations and related decisions 
under part 1. The Department proposed to provide that if a decision for 
which reconsideration is sought was made by an authorized 
representative of the Administrator, the interested party seeking 
reconsideration may send such a request to the WHD Administrator. The 
Department proposed that requests for reconsideration must be submitted 
within 30 days from the date the decision is issued, and that this time 
period may be extended for good cause at the Administrator's discretion 
upon a request by the interested party. Second, the Department proposed 
to amend Sec.  5.13, which concerns rulings and interpretations under 
parts 1, 3, and 5, to similarly provide for the Administrator's 
reconsideration of rulings and interpretations issued by an authorized 
representative. The Department proposed to apply the same procedures 
for such reconsideration requests in Sec.  5.13 as apply to 
reconsideration requests under Sec.  1.8. The Department also proposed 
to divide Sec. Sec.  1.8 and 5.13 into paragraphs for clarity and 
readability, and to add email addresses for parties to submit requests 
for reconsideration and requests for rulings or interpretations.
    The Department received two comments regarding this proposal, one 
from REBOUND, a non-profit organization; and another from a former 
director of REBOUND. These comments did not oppose the proposed 
changes, but suggested that the regulations also explicitly provide for 
a level of review prior to review by the Administrator, and that such 
review be conducted by an individual who was not connected in any way 
with the original decision. The comments indicated that intermediate 
review often occurs under current practice, but rarely results in 
reversal of the original decision because the individuals who perform 
such review

[[Page 57591]]

are often either the same individuals who rendered the original 
decision or their managers. The comments agreed that if done properly, 
intermediate review can resolve cases more promptly without the need to 
appeal to the Administrator, but suggested that without a requirement 
that such review be independent, it will not accomplish this goal 
because reviewers will be reluctant to overturn decisions that they 
made in the first instance.
    After considering the comments above, the Department retains the 
language as proposed. The final rule permits an intermediate level of 
review without requiring it, and, as the commenters noted, in many 
instances an intermediate level of review is provided. The language 
similarly allows for reconsideration requests to be considered by 
agency personnel who were or were not involved in the original 
decision, as the circumstances warrant. The Department believes that it 
is important for the regulations to preserve such administrative 
flexibility when handling reconsideration requests so that the 
Department can properly allocate its resources. Agency staff are able 
to consider and help respond to reconsideration requests with 
objectivity regardless of whether they played any role in the 
underlying decision, and resource constraints make it infeasible to 
adopt a blanket rule that intermediate review cannot be handled by 
anyone who participated in the original decision. Moreover, as the 
commenters note, intermediate decisions are appealable to the 
Administrator. The Department therefore declines to codify specific 
procedures or requirements for intermediate-level reconsideration and 
adopts the change as proposed.
ix. Section 1.10 Severability
    The Department proposed to add a new Sec.  1.10, titled 
``Severability.'' The proposed severability provision explained that 
each provision is capable of operating independently from one another, 
and that if any provision of part 1 is held to be invalid or 
unenforceable by its terms, or as applied to any person or 
circumstance, or stayed pending further agency action, the Department 
intended that the remaining provisions remain in effect.
    The Department received no comments on this proposal. The final 
rule therefore adopts this change as proposed. An expanded discussion 
of severability is below in section III.B.5.
x. References to Website for Accessing Wage Determinations
    The Department proposed to revise Sec. Sec.  1.2, 1.5, and 1.6 to 
reflect, in more general terms, that wage determinations are maintained 
online, without a reference to a specific website.
    The current regulations reference Wage Determinations OnLine 
(WDOL), previously available at https://www.wdol.gov, which was 
established following the enactment of the E-Government Act of 2002, 
Public Law 107-347, 116 Stat. 2899 (2002). WDOL.gov served as the 
source for Federal contracting agencies to use when obtaining wage 
determinations. See 70 FR 50887 (Aug. 26, 2005). WDOL.gov was 
decommissioned on June 14, 2019, and SAM, specifically https://sam.gov/content/wage-determinations, became the authoritative and single 
location for obtaining DBA general wage determinations.\159\ The 
transition of wage determinations onto SAM was part of the Integrated 
Award Environment (IAE), a government-wide initiative administered by 
GSA to manage and integrate multiple online systems used for awarding 
and administering Federal financial assistance and contracts.\160\ To 
avoid outdated website domain references in the regulations should the 
domain name change in the future, the Department proposed to use the 
more general term ``Department of Labor-approved website,'' which would 
refer to any official government website the Department approves for 
posting wage determinations.
---------------------------------------------------------------------------

    \159\ ``WDOL.gov Decommissioning Approved by IAE Governance: 
System Set to Transition to beta.SAM.gov on June 14, 2019,'' GSA 
Interact (May 21, 2019), https://interact.gsa.gov/blog/wdolgov-decommissioning-approved-iae-governance-system-set-transition-betasamgov-june-14-2019.
    \160\ About This Site, System for Award Management, https://sam.gov/content/about/this-site.
---------------------------------------------------------------------------

    The Department received a question from Montana Lines Inc. asking 
how the location of the Department-approved website would be 
communicated to contractors. The Department currently publicizes the 
online location of wage determinations, SAM, in various resource 
materials (fact sheets, frequently asked questions, and WHD's PWRB) and 
in multiple prominent locations on the Department's website. Promptly 
following publication of this final rule, WHD will update the PWRB and 
other resources to refer to the SAM website. Should there be a change 
in domain, the Department would announce such change and make changes 
to appropriate materials and websites. The Department believes that 
such an approach is preferable to codifying the website location in 
regulatory text that can become outdated if the location changes.
    HarringtonMitova LLC requested that the Department make all DBRA 
relevant information, presumably including wage determinations, 
accessible from a single website. The Department notes that while this 
specific proposal is beyond the scope of this rulemaking, WHD's website 
contains extensive, well-organized materials regarding the DBRA, 
including information regarding Davis-Bacon wage surveys and compliance 
principles, and that general wage determinations are available through 
a single, government-wide website (specifically SAM, the official 
website of the U.S. Government for the Federal award process) for the 
ease and convenience of the contracting community. NFIB commented that 
the website for viewing wage determinations should be ``at no cost and 
without any condition of access such as registration, a unique 
identifier, or submission of any information.'' NFIB also suggested 
that such language be added to Sec.  1.5(a). SAM, the current website, 
is an improved and streamlined government-wide website administered by 
GSA that integrates multiple online systems used for awarding and 
administering Federal financial assistance and contracts. Access to 
search or obtain wage determinations on this website is free and does 
not require registration or the submission of any information other 
than the details of the wage determination being requested (project 
location and/or construction type). The Department intends to maintain 
these features in the future and does not believe it is necessary to 
codify them in the regulations.
    The UA commented that the proposal does not substantively alter the 
practice for publication of wage determinations and suggested that the 
Department require the applicable wage determination(s) for a specific 
project, as well as any conformances that were granted for the project, 
to be published online. Although the Department appreciates this 
suggestion, it is beyond the scope of the current rulemaking, which did 
not address whether to require the online publication of the specific 
wage determinations and conformances applicable to each particular 
DBRA-covered project. The Department also notes that interested parties 
such as contracting agencies and contractors should be able to identify 
the wage determination that applies to a given project, as such wage 
determinations are included in the contract documents, and that 29 CFR

[[Page 57592]]

5.5(a)(1)(i) already requires contractors and subcontractors to post 
wage determinations, including conformed classifications and wage 
rates, in a prominent and accessible place at the site of the work 
where it can be easily seen by the workers.
    The final rule therefore adopts this change as proposed.
xi. Appendices A and B to Part 1
    The Department proposed to remove Appendices A and B to 29 CFR part 
1 and make conforming technical edits to sections that reference those 
provisions. Appendix A lists statutes related to the Davis-Bacon Act 
that require the payment of wages at rates predetermined by the 
Secretary of Labor, and Appendix B lists local offices of the WHD. As 
the Department explained in the NPRM, these appendices are no longer 
current and updated information contained in both appendices can be 
found on WHD's website at https://www.dol.gov/agencies/whd/. 
Specifically, a listing of statutes requiring the payment of wages at 
rates predetermined by the Secretary of Labor under the Davis-Bacon Act 
can be found at https://www.dol.gov/agencies/whd/government-contracts, 
and a listing of WHD local offices can be found at https://www.dol.gov/agencies/whd/contact/local-offices.
    The Department received one comment in response to this proposal. 
The UA supported the Department's approach, stating that outdated 
information presents problems, such as suggesting a narrower scope of 
Davis-Bacon coverage (Appendix A), or directing potential complainants 
to incorrect resources (Appendix B). The Department agrees and adopts 
this change as proposed.
xii. Frequently Conformed Rates
    The Department proposed to revise Sec. Sec.  1.3 and 5.5 to provide 
that, where WHD has received insufficient data through its wage survey 
process to publish a prevailing wage for a classification for which 
conformance requests are regularly submitted, WHD nonetheless may list 
the classification and wage and fringe benefit rates for the 
classification on the wage determination, provided that the three basic 
criteria for conformance of a classification and wage and fringe 
benefit rate have been satisfied: (1) the work performed by the 
classification is not performed by a classification in the wage 
determination; (2) the classification is used in the area by the 
construction industry; and (3) the wage rate for the classification 
bears a reasonable relationship to the wage rates contained in the wage 
determination. The Department specifically proposed that the wage and 
fringe benefit rates for these classifications be determined in 
accordance with the ``reasonable relationship'' criterion that is 
currently used in conforming missing classifications pursuant to 
current 29 CFR 5.5(a)(1)(ii)(A). The Department welcomed comments 
regarding all aspects of this proposal.
    WHD determines DBA prevailing wage rates based on wage survey data 
that contractors and other interested parties voluntarily provide. See 
29 CFR 1.1-1.7. When WHD receives robust participation in its wage 
surveys, it is able to publish wage determinations that list prevailing 
wage rates for numerous construction classifications. However, in some 
instances survey participation may be limited, particularly in surveys 
for residential construction or in rural areas, thereby preventing WHD 
from receiving sufficient wage data to publish prevailing wage rates 
for various classifications generally necessary for a particular type 
of construction.
    When a wage determination lacks a wage rate for a classification of 
work that is necessary for performance of DBRA-covered construction, 
the missing classification and an appropriate wage rate must be added 
to the wage determination on a contract-specific basis through the 
conformance process. Conformance is the process by which a 
classification and wage and fringe benefit rate are added to an 
existing wage determination applicable to a specific DBRA-covered 
contract. See 29 CFR 5.5(a)(1)(ii)(A). When, for example, a wage 
determination lists only certain skilled classifications such as 
carpenter, plumber, and electrician (because they are the skilled 
classifications for which WHD received sufficient wage data through its 
survey process), the conformance process is used at the request of a 
contracting agency to provide a contractor that has been awarded a 
contract with minimum wage rates for other necessary classifications 
(such as, in this example, painters and bricklayers).
    ``By design, the Davis-Bacon conformance process is an expedited 
proceeding created to `fill in the gaps' '' in an existing wage 
determination, with the ``narrow goal'' of establishing an appropriate 
wage rate for a classification needed for performance of the contract. 
Am. Bldg. Automation, Inc., ARB No. 00-067, 2001 WL 328123, at *3 (Mar. 
30, 2001). As a general matter, WHD is given ``broad discretion'' in 
setting a conformed wage rate, and the Administrator's decisions ``will 
be reversed only if inconsistent with the regulations, or if they are 
unreasonable in some sense[.]'' Millwright Loc. 1755, ARB No. 98-015, 
2000 WL 670307, at *6 (May 11, 2000) (internal quotations and citations 
omitted). See, e.g., Constr. Terrebonne Par. Juvenile Justice Complex, 
ARB No. 17-0056, 2020 WL 5902440, at *2-4 (Sept. 4, 2020) (reaffirming 
the Administrator's ``broad discretion'' in determining appropriate 
conformed wage rates); Courtland Constr. Corp., ARB No. 17-074, 2019 WL 
5089598, at *2 (Sept. 30, 2019) (same).
    The regulations require the following criteria be met for a 
proposed classification and wage rate to be conformed to a wage 
determination: (1) the work to be performed by the requested 
classification is not performed by a classification in the wage 
determination; (2) the classification is used in the area by the 
construction industry; and (3) the proposed wage rate, including any 
bona fide fringe benefits, bears a reasonable relationship to the wage 
rates in the wage determination. See 29 CFR 5.5(a)(1)(ii)(A).
    Pursuant to the first conformance criterion, WHD may approve a 
conformance request only where the work of the proposed classification 
is not performed by any classification on the wage determination. WHD 
need not ``determine that a classification in the wage determination 
actually is the prevailing classification for the tasks in question, 
only that there is evidence to establish that the classification 
actually performs the disputed tasks in the locality.'' Am. Bldg. 
Automation, 2001 WL 328123, at *4. Even if workers perform only a 
subset of the duties of a classification, they are still performing 
work that is covered by the classification, and conformance of a new 
classification thus would be inappropriate. See, e.g., Fry Bros. Corp., 
WAB No. 76-06, 1977 WL 24823, at *6 (June 14, 1977). In instances where 
the first and second conformance criteria are satisfied and it has been 
determined that the requested classification should be added to the 
contract wage determination, WHD will address whether the third 
criterion has also been satisfied, i.e., whether ``[t]he proposed wage 
rate, including any bona fide fringe benefits, bears a reasonable 
relationship to the wage rates'' in the wage determination.
    WHD typically receives thousands of conformance requests each year. 
In some instances, including instances where contractors are unaware 
that the work falls within the scope of work performed by an 
established

[[Page 57593]]

classification on the wage determination, WHD receives conformance 
requests where conformance plainly is not appropriate because the wage 
determination already contains a classification that performs the work 
of the proposed classification. In other instances, however, 
conformance is necessary because the applicable wage determination does 
not contain all of the classifications that are necessary to complete 
the project. The need for conformances due to the absence of necessary 
classifications on wage determinations reduces certainty for 
prospective contractors in the bidding process, who may be unsure of 
what wage rate must be paid to laborers and mechanics performing work 
on the project, and taxes WHD's resources. Such uncertainty may cause 
contractors to underbid on construction projects and subsequently pay 
less than the required prevailing wage rates to workers.
    To address this issue, the Department proposed to revise 29 CFR 1.3 
and 5.5(a)(1) to expressly authorize WHD to list classifications and 
corresponding wage and fringe benefit rates on wage determinations even 
when WHD has received insufficient data through its wage survey 
process. Under this proposal, for key classifications or other 
classifications for which conformance requests are regularly 
submitted,\161\ the Administrator would be authorized to list the 
classification on the wage determination along with wage and fringe 
benefit rates that bear a ``reasonable relationship'' to the prevailing 
wage and fringe benefit rates contained in the wage determination, 
using essentially the same criteria under which such classifications 
and rates are currently conformed by WHD pursuant to current Sec.  
5.5(a)(1)(ii)(A)(3). In other words, for a classification for which 
conformance requests are regularly submitted, and for which WHD 
received insufficient data through its wage survey process, WHD would 
be expressly authorized to essentially ``pre-approve'' certain 
conformed classifications and wage rates, thereby providing contracting 
agencies, contractors, and workers with advance notice of the minimum 
wage and fringe benefits required to be paid for those classifications 
of work. WHD would list such classifications and wage and fringe 
benefit rates on wage determinations where: (1) the work performed by 
the classification is not performed by a classification in the wage 
determination for which a prevailing wage rate has been determined; (2) 
the classification is used in the area by the construction industry; 
and (3) the wage rate for the classification bears a reasonable 
relationship to the prevailing wage rates contained in the wage 
determination. The Administrator would establish wage rates for such 
classifications in accordance with proposed Sec.  5.5(a)(1)(iii)(A)(3). 
Contractors would be required to pay workers performing work within 
such classifications at no less than the rates listed on the wage 
determination. Such classifications and rates on a wage determination 
would be designated with a distinct term, abbreviation, or description 
to denote that they essentially reflect pre-approved conformed rates 
rather than prevailing wage and fringe benefit rates that have been 
determined through the Davis-Bacon wage survey process.
---------------------------------------------------------------------------

    \161\ As explained in WHD's PWRB, WHD has identified several 
``key classifications'' normally necessary for one of the four types 
of construction (building, highway, heavy, and residential) for 
which WHD publishes general wage determinations. See supra note 19, 
Davis-Bacon Surveys at 6. The PWRB contains a table that lists the 
key classifications for each type of construction. The table, which 
may be updated periodically as warranted, currently identifies the 
key classifications for building construction as heat and frost 
insulators, bricklayers, boilermakers, carpenters, cement masons, 
electricians, iron workers, laborers (common), painters, 
pipefitters, plumbers, power equipment operators (operating 
engineers), roofers, sheet metal workers, tile setters, and truck 
drivers; the key classifications for residential construction as 
bricklayers, carpenters, cement masons, electricians, iron workers, 
laborers (common), painters, plumbers, power equipment operators 
(operating engineers), roofers, sheet metal workers, and truck 
drivers; and the key classifications for heavy and highway 
construction as carpenters, cement masons, electricians, iron 
workers, laborers (common), painters, power equipment operators 
(operating engineers), and truck drivers. Id.
---------------------------------------------------------------------------

    These rates would apply to the applicable classification without 
the need to submit a conformance request in accordance with current 
Sec.  5.5(a)(1)(ii)(A)-(C). However, if a contracting agency, 
contractor, union, or other interested party has questions or concerns 
about how particular work should be classified--and, specifically, 
whether the work at issue is performed by a particular classification 
included on a wage determination (including classifications listed 
pursuant to this proposal) as a matter of local area practice or 
otherwise, the contracting agency should submit a conformance request 
in accordance with Sec.  5.5(a)(1) or seek guidance from WHD pursuant 
to 29 CFR 5.13. Moreover, under the proposal, contracting agencies 
would still be required to submit conformance requests for any needed 
classifications not listed on the wage determination, which would be 
approved, modified, or disapproved as warranted after award of the 
contract, as required by the regulatory provisions applicable to 
conformance requests.
    The Department also proposed to add language to Sec.  5.5(a)(1) to 
state that the conformance process may not be used to split or 
subdivide classifications listed in the wage determination, and that 
conformance is appropriate only where the work which a laborer or 
mechanic performs under the contract is not within the scope of any 
classification listed on the wage determination, regardless of job 
title. This language reflects the principle that conformance is not 
appropriate when the work of the proposed classification is already 
performed by a classification on the wage determination. See 29 CFR 
5.5(a)(1)(ii)(A)(1). Even if workers perform only some of the duties of 
a classification, they are still performing work that is covered by the 
classification, and conformance of a new classification thus would be 
inappropriate. See, e.g., Fry Bros. Corp., WAB No. 76-06, 1977 WL 
24823, at *6 (contractor could not divide carpentry work between 
carpenters and carpenter tenders in order to pay a lower wage rate for 
a portion of the work; under the DBA, it is not permissible to divide 
the work of a classification into several parts according to the 
contractor's assessment of each worker's skill and to pay for such 
division of the work at less than the specified rate for the 
classification). The proposed regulatory language is also in line with 
the principle that WHD must base its conformance decisions on the work 
to be performed by the proposed classification, not on the contractor's 
own classification or perception of the workers' skill. See 29 CFR 
5.5(a)(1)(i) (``Such laborers and mechanics shall be paid the 
appropriate wage rate and fringe benefits . . . for the classification 
of work actually performed, without regard to skill . . . .''); see 
also, e.g., Tele-Sentry Sec., Inc., WAB No. 87-43, 1987 WL 247062, at 
*7 (Sept. 11, 1987) (workers who performed duties falling within the 
electrician classification must be paid the electrician rate regardless 
of the employer's classification of workers as laborers). The 
Department encouraged comments on this proposal.
    The Department also proposed to make non-substantive revisions to 
current Sec.  5.5(a)(1)(ii)(B) and (C) to more clearly describe the 
conformance request process, including by providing that contracting 
officers should submit the required conformance request information to 
WHD via email using a specified WHD email address.
    The Department also proposed changes relating to the publication of

[[Page 57594]]

rates for frequently conformed classifications. The Department's 
proposed changes to this paragraph are discussed in section III.B.1.xii 
(``Frequently conformed rates''), together with proposed changes to 
Sec.  1.3.
    The Department also proposed to add language to the contract 
clauses at Sec.  5.5(a)(1)(vi), (a)(6), and (b)(4) requiring the 
payment of interest on any underpayment of wages or monetary relief 
required by the contract. This language is consistent with and would be 
subject to the proposed discussion of interest in 29 CFR 5.10 
(Restitution, criminal action), which requires that calculations of 
interest be carried out at the rate specified by the Internal Revenue 
Code for underpayment of taxes and compounded daily.
(A) Discussion of Comments
    A number of contractors, unions, industry trade associations, and 
elected officials expressed support for the proposed change. See, e.g., 
Braswell DM; International Brotherhood of Electrical Workers (IBEW); 
NABTU; SMACNA; several members of the U.S. House of Representatives 
from Illinois. Many unions, associations, and individual commenters 
stated that proactively adding ``missing classifications to wage 
determinations using existing standards under the conformance process, 
will guard against abuses, and enhance predictability in bidding.'' 
International Union of Bricklayers and Allied Craftworkers; see also 
West Central Illinois Building and Construction Trades Council. Many of 
these same commenters also stated that the Department's proposal is in 
line with Congressional intent to preserve key craft classifications, 
quoting the admonition in Fry Brothers that there would be little left 
of the Davis-Bacon Act if contractors were permitted to ``classify or 
reclassify, grade or subgrade traditional craft work'' as they wished. 
WAB No. 76-06, 1977 WL 24823, at *6. Many commenters also voiced 
concern that unscrupulous contractors frequently subdivide 
classifications listed on wage determinations under the current system 
in order to fabricate low wage subclassifications. See, e.g., 
Affiliated Construction Trades Foundation. In expressing support for 
the Department's proposal, these commenters stated that proactively 
adding missing classifications to wage determinations when survey data 
is insufficient will help guard against such abuse.
    III-FFC highlighted that ``[p]re-approving frequently conformed 
rates will significantly improve a process that otherwise causes 
unnecessary delay and is an inefficient use of WHD resources.'' They 
also stated that the Department's proposal ``will significantly improve 
the conformance process to the benefit of all parties involved with 
Davis-Bacon covered projects.'' The Department agrees.
    Several commentors agreed with the proposed changes but also 
offered suggestions for improvement. The Related Urban Development 
Group suggested that classifications for which conformance requests are 
regularly submitted ``should more closely reflect industry standards,'' 
and said, for example, that glazing/windows, when delivered to a 
worksite, should be installed by carpenters and not glazers. The 
Department notes that all relevant factors, including local area 
practice, are considered when resolving questions regarding the type of 
work performed by a classification. The Department reiterates that if a 
contracting agency, contractor, union, or other interested party has 
questions or concerns about how particular work should be classified--
and, specifically, whether the work at issue is performed by a 
particular classification included on a wage determination (including 
classifications listed pursuant to this regulatory revision) as a 
matter of local area practice or otherwise--the contracting agency 
should submit a conformance request in accordance with Sec.  5.5(a)(1) 
or seek guidance from WHD pursuant to 29 CFR 5.13.
    AWHA encouraged the Department to identify in wage determinations 
which classifications and wage rates were pre-approved. The Department 
stated in the NPRM that such classifications and rates on a wage 
determination would be designated with a distinct term, abbreviation, 
or description to denote that they essentially reflect pre-approved 
conformed rates rather than prevailing wage and fringe benefit rates 
that have been determined through the Davis-Bacon wage survey process. 
AWHA also urged the Department to ``set a clear timeline for responding 
to the contracting entity'' in cases where there is no pre-approved 
conformance and the Department still must respond to a conformance 
request The Department notes that current 29 CFR 5.5(a)(1)(ii)(C) 
(which is being recodified at 29 CFR 5.5(a)(1)(iii)(C)) already states 
that the Administrator, or an authorized representative, will issue a 
determination within 30 days of receipt or will notify the contracting 
officer within the 30-day period if additional time is necessary.
    While generally supportive of the Department's proposal, the 
International Union of Elevator Constructors (IUEC) misinterpreted the 
Department's proposal to apply only to classifications that are 
considered a ``key classification,'' i.e., one that is ``normally 
necessary for one of the four types of construction.'' Based on this 
misinterpretation, IUEC requested the Department acknowledge elevator 
mechanic as a ``key classification'' for at least building 
construction. As noted in its proposal, adding pre-approved 
classifications to wage determinations is not limited to ``key 
classifications.'' Rather, the Department's proposal also encompassed 
other classifications for which conformance requests are regularly 
submitted.
    AGC agreed that the proposal to include frequently conformed rates 
in wage determinations constituted a ``logical preemptive action by the 
Department to provide contractors more information upfront in the 
contract bidding and award process.'' AGC, however, encouraged the 
Department to revise its wage survey process to increase the 
``collection of accurate utilizable wage data'' through increased 
survey participation.
    Several commentors generally supported the revisions to Sec. Sec.  
1.3(f) and 5.5(a)(1)(ii) and requested stakeholder involvement prior to 
implementation. LIUNA, for example, requested that pre-approved 
conformed rates not be designated unless stakeholders have an 
opportunity in advance to provide input to WHD. COSCDA similarly 
encouraged WHD to involve stakeholders and suggested a pilot or trial 
development on a smaller scale to help address any issues ahead of a 
wider launch. Other commenters requested additional clarification on 
the precise methodology that would be employed for pre-approving 
certain conformed classifications and wage rates. The FTBA asked 
whether the Department would set rates based on previously conformed 
rates and ``whether or how conformed rates would be updated on wage 
determinations.'' SMART and SMACNA suggested adopting safeguards to 
ensure that the pre-approval process does not result in the 
``deskilling'' of highly skilled trades. SMART and SMACNA proposed to 
include a prohibition (similar to proposed Sec.  5.5(a)(1)(B)) against 
using the pre-approval process to split or subdivide classifications in 
Sec.  1.3(f). SMART and SMACNA, while noting that AAM 213 was an 
improvement in WHD's administration of conformances, cautioned that 
WHD's use of an ``overly broad `skilled crafts' category advantages 
some trades and disadvantages others depending upon the relative skill 
levels of individual

[[Page 57595]]

trades.'' Concerned that AAM 213 does not accurately address the 
disparity in skill sets among skilled crafts, SMART and SMACNA 
recommended the regulatory text be revised to explicitly require WHD to 
determine which classification already listed in the wage determination 
is ``most comparable in terms of skill'' to the class of employee being 
conformed.
    As stated in the NPRM, the Department will ensure that (1) the work 
performed by the classification is not performed by a classification in 
the wage determination for which a prevailing wage rate has been 
determined; (2) the classification is used in the area by the 
construction industry; and (3) the wage rate for the classification 
bears a reasonable relationship to the prevailing wage rates contained 
in the wage determination. The Administrator would establish wage rates 
for such classifications in accordance with proposed Sec.  
5.5(a)(1)(iii)(A)(3).
    The Department believes that the conformance process, including the 
reasonable relationship process already discussed in detail in AAM 213 
and in other publicly available resource materials, is responsive to 
the concerns commenters raised. AAM 213 states that ``to determine a 
`reasonable relationship,' the requested additional classification is 
compared to the classifications on the applicable wage determination 
within the same category.'' AAM 213 illustrates that a ``proposed 
skilled craft classification is compared to skilled classifications in 
the wage determination; a proposed laborer classification is compared 
to existing laborer classifications; a proposed power equipment 
operator classification is compared to existing power equipment 
operator classifications; and a proposed truck driver classification is 
compared to existing truck driver classifications.'' AAM 213 further 
clarifies that when considering a conformance request for a skilled 
classification, WHD generally considers the entirety of the rates for 
the skilled classifications on the applicable wage determination and 
looks to where the proposed wage rate falls within the rates listed on 
the wage determination. AAM 213 notes that whether the wage rates in 
the applicable category (skilled craft, laborer, power equipment 
operator, truck driver, etc.) in the wage determination are 
predominantly union prevailing wage rates or predominantly weighted 
average wage rates should be considered when proposing rates for an 
additional classification. For example, if a wage determination 
contains predominantly union prevailing wage rates for skilled 
classifications, it typically would be appropriate to look to the union 
sector skilled classifications in the wage determination and the rates 
for those classifications when proposing a wage rate for the additional 
classification. Conversely, if a wage determination contains 
predominantly weighted average wage rates for skilled classifications, 
it typically would be appropriate to look to the weighted average/non-
union sector skilled classifications in the wage determination and the 
rates for those classifications when proposing a wage rate for the 
additional classification. The Department believes that the process for 
determining reasonable relationship is sufficiently explained in 
existing materials and does not need to be expanded in the regulation, 
particularly since the ARB has repeatedly affirmed WHD's application of 
AAM 213. See System Tech, Inc., ARB No. 2020-0029, at *4 (ARB May 25, 
2021); Constr. Terrebonne Par. Juvenile Justice Complex, ARB No. 2017-
0056, 2020 WL 5902440, at *2; Courtland Construction Corp., ARB No. 17-
074, 2019 WL 5089598, at *2; Velocity Steel, Inc., ARB No. 16-060 (ARB 
May 29, 2018). Additional clarification, if needed, will be through 
subregulatory guidance.
    Similarly, although the Department does not plan to implement this 
regulatory change on a pilot or trial basis, or to provide for 
stakeholder review of pre-approved conformed wage rates before they are 
issued, the Department will be available to respond to questions and 
concerns regarding particular rates, and interested parties may also 
challenge particular classifications pursuant to 29 CFR 1.8 and/or seek 
a formal response to questions or concerns regarding conformed wage 
rates pursuant to 29 CFR 5.13. In response to SMART and SMACNA's 
specific concerns about the potential subdivision of classifications, 
the Department notes that classification decisions will be made in 
accordance with relevant legal precedent and subregulatory guidance, 
including the decision in Fry Brothers and other precedent regarding 
classification and subregulatory guidance such as AAM 213. The 
Department thus declines SMART and SMACNA's proposal to revise the 
regulatory text to explicitly require WHD to determine which 
classification already listed in the wage determination is ``most 
comparable in terms of skill'' to the class of employee being 
conformed; rather, determinations of the appropriate wage rate will be 
made in accordance with currently established principles, including 
those reflected in the existing conformance regulations, as revised by 
this rule, and AAM 213 and similar guidance.
    The IEC opposed the proposal, contending that ``this change 
eliminates contractors' rights to dispute a proposed classification and 
wage rate, currently found at 29 CFR 5.5(a)(1)(ii)(C).'' Although the 
dispute mechanism cited by the IEC will not apply to pre-approved 
classifications and wage rates, the Department notes that, as reflected 
above, interested parties have the right to dispute these 
classifications and wage rates prior to contract award pursuant to 29 
CFR 1.8.
    CC&M did not state whether they supported or opposed adding 
conformed rates to wage determinations, but they provided suggestions 
on how to improve the conformance process and related matters. In 
particular, this commenter proposed that contractors seeking a 
conformance be required to submit scopes of work and backup 
documentation relating to wage and fringe benefits proposed; that 
contractors should be allowed to apply a wage classification and rate 
from one wage determination to another type of work without submitting 
a conformance when multiple wage determinations are applicable to a 
project; and that contractors should be allowed to adopt conformed wage 
rates from the same county that are contained in a different 
determination, presumably including from wage determinations that are 
not included in the DBRA-covered contract. The Department is not 
adopting such suggestions, which could be viewed as beyond the scope of 
this rulemaking, as they would require regulatory changes that were not 
proposed, and which are contrary to established procedures and 
requirements applicable to conformed classifications and wage rates, 
including the settled principle that a contractor ``may not rely on a 
wage determination granted to another party regardless of the 
similarity of the work in question'' and also may not prospectively 
rely on WHD's prior approval of conformed classifications and rates for 
application to a different contract performed at the same location. E&M 
Sales, Inc., WAB No. 91-17, 1991 WL 523855, at *2-3 (Oct. 4, 1991); see 
also Inland Waters Pollution Control, Inc., WAB No. 94-12, 1994 WL 
596585, at *5 (Sept. 30, 1994). As for CC&M's separate proposal that 
``once a conformance is granted, it could be included in the next 
update for the prevailing wage determination in that particular 
jurisdictional area,'' the Department notes that the conformance-
related regulatory change it is adopting concerns only classifications 
for which

[[Page 57596]]

conformance requests are frequently occurring, not all conformance 
requests. In certain instances, where conformance requests pertaining 
to a classification are sufficiently recurring, WHD may in fact publish 
a pre-approved conformed wage rate on the next modification of a 
particular wage determination.
    In opposition to the Department's proposal, ABC stated that the 
Department can better meet its objectives in Sec. Sec.  1.3 and 
5.5(a)(1) by calculating missing prevailing wage rates using BLS data 
and using statistical modeling. The Department has explained in section 
III.B.1.ii.A.1 why the Department declines to use BLS data to determine 
prevailing wages. For the same reasons, using BLS data to determine a 
reasonable relationship to rates on the wage determination is 
inappropriate.
    The Department does not believe additional language or further 
changes are necessary and the final rule adopts Sec.  5.5(a)(1)(ii) and 
new Sec.  1.3(f) as proposed.
2. 29 CFR Part 3
    ``Anti-kickback'' and payroll submission regulations under section 
2 of the Act of June 13, 1934, as amended, 40 U.S.C. 3145, commonly 
known as the Copeland Act, are set forth in 29 CFR part 3. This part 
details the obligations of contractors and subcontractors relative to 
the weekly submission of statements regarding the wages paid on work 
covered by the Davis-Bacon labor standards; sets forth the 
circumstances and procedures governing the making of payroll deductions 
from the wages of those employed on such work; and delineates the 
methods of payment permissible on such work.
i. Corresponding Edits to Part 3
    The Department proposed multiple revisions to various sections in 
part 3 to update language and ensure that terms are used in a manner 
consistent with the terminology used in 29 CFR parts 1 and 5, update 
websites and contact information, and make other similar, non-
substantive changes. The Department also proposed conforming edits to 
part 3 to reflect proposed changes to part 5, such as revising Sec.  
3.2 to clarify existing definitions or to add new defined terms also 
found in parts 1 and 5. The Department similarly proposed to change 
certain requirements associated with the submission of certified 
payrolls to conform to changes made to the recordkeeping requirements 
in Sec.  5.5(a)(3).
    To the extent that those proposed changes were substantive, the 
changes, and any comments associated with them, are discussed below in 
Sec. Sec.  5.2 and 5.5. The Department did not receive any comments 
regarding the incorporation of conforming changes to part 3. 
Accordingly, the Department adopts these changes as proposed, along 
with additional conforming changes to reflect revisions to 
corresponding language in part 5 in the final rule.
    The Department requested comment on whether it should further 
consolidate and/or harmonize the definitions in Sec. Sec.  1.2, 3.2, 
and 5.2 in a final rule, such as by placing all definitions in a single 
regulatory section applicable to all three parts. The Department 
received one comment in support of such a change. UBC noted that many 
of the same words and phrases are defined similarly across the 
different parts and supported consolidating the sections. UBC further 
noted in their comment that harmonizing the definitions will ``benefit 
understanding and application of the rule by the regulated community 
and will thus decrease implementation costs.'' The Department 
appreciates UBC's input on this issue but declines to make this change 
at this time. While the Department received many comments specifically 
in response to proposed revisions to defined terms, no other commenters 
expressed support for consolidating all definitions in a single 
regulatory section. Particularly in the absence of any indication from 
other commenters that consolidating all definitions in a single section 
would be preferable to setting forth the relevant definitions at the 
beginning of each of the key parts of the DBRA's implementing 
regulations, the Department believes that the regulated community will 
find it helpful to have the relevant definitions set forth at the 
beginning of parts 1, 3, and 5. Accordingly, the Department will 
maintain definitions in Sec. Sec.  1.2, 3.2, and 5.2.
    The Department also proposed to remove Sec.  3.5(e) regarding 
deductions for the purchase of United States Defense Stamps and Bonds, 
as the Defense Stamps and Bonds are no longer available for purchase. 
Similarly, the Department proposed to simplify the language regarding 
deductions for charitable donations at Sec.  3.5(g) by eliminating 
references to specific charitable organizations and instead permitting 
voluntary deductions to charitable organizations as defined by 26 
U.S.C. 501(c)(3). The Department received no comments on these 
proposals. The final rule therefore adopts these changes as proposed.
    Finally, the Department proposed to add language to Sec.  3.11 
explaining that the requirements set forth in part 3 are considered to 
be effective as a matter of law, whether or not these requirements are 
physically incorporated into a covered contract, and cross-referencing 
the proposed new language discussing incorporation by operation of law 
at Sec.  5.5(e). These proposed changes, and the comments related to 
them, are discussed further in the sections on operation-of-law.
3. 29 CFR Part 5
    The regulations at 29 CFR part 5 establish rules providing for the 
payment of minimum wages, including fringe benefits, to covered workers 
engaged in construction activity covered by the Davis-Bacon and Related 
Acts, as well as establishing rules for the enforcement of these 
prevailing wage obligations. The regulations at this part also set 
forth contract clauses to be included in all covered contracts that 
specify contractors' prevailing wage and other obligations on such 
contracts.
i. Section 5.1 Purpose and Scope
    The Department proposed minor technical revisions to Sec.  5.1 to 
update statutory references and delete the listing of laws requiring 
Davis-Bacon labor standards provisions, given that any such list 
inevitably becomes out-of-date due to statutory revisions and the 
enactment of new Related Acts. In lieu of this listing in the 
regulation, the Department proposed to add new paragraph (a)(1) to 
refer to the current WHD website (https://www.dol.gov/agencies/whd/government-contracts) or its successor website on which a listing of 
laws requiring Davis-Bacon labor standards provisions is currently 
found and regularly updated.
    The Department received no comments on this proposal. The final 
rule therefore adopts this change as proposed.
ii. Section 5.2 Definitions
(C) Agency, Agency Head, Contracting Officer, Secretary, and Davis-
Bacon Labor Standards
    The Department proposed to revise the definitions of ``agency 
head'' and ``contracting officer'' and to add a definition of 
``agency'' to reflect more clearly that State and local agencies enter 
into contracts for projects that are subject to the Davis-Bacon labor 
standards and that they allocate Federal assistance they have received 
under a Davis-Bacon Related Act to sub-recipients. These proposed 
definition changes also were intended to reflect that, for some funding 
programs, the responsible Federal agency has delegated administrative 
and

[[Page 57597]]

enforcement authority to states or local agencies. When the existing 
regulations referred to the obligations or authority of agencies, 
agency heads, and contracting officers, they were referring to Federal 
agencies and Federal contracting officers. However, as noted above, 
State or local agencies and their agency heads and contracting officers 
exercise similar authority in the administration and enforcement of 
Davis-Bacon labor standards. Because the existing definitions defined 
``agency head'' and ``contracting officer'' as particular ``Federal'' 
officials or persons authorized to act on their behalf, which did not 
clearly reflect the role of State and local agencies in effectuating 
Davis-Bacon requirements, including by entering into contracts for 
projects subject to the Davis-Bacon labor standards and inserting the 
Davis-Bacon contract clauses in such contracts, the Department proposed 
to revise these definitions to reflect the role of State and local 
agencies. The proposed revisions also enabled the regulations to 
specify the obligations and authority held by both State or local and 
Federal agencies, as opposed to obligations that are specific to one or 
the other.
    The Department received no comments on this proposal. The final 
rule therefore adopts these changes as proposed.
    The Department also proposed to define the term ``Federal agency'' 
as a sub-definition of ``agency'' to distinguish those situations where 
the regulations refer specifically to an obligation or authority that 
is limited solely to a Federal agency that enters into contracts for 
projects subject to the Davis-Bacon labor standards or allocates 
Federal assistance under a Davis-Bacon Related Act.
    The Department received no comments on this proposal. The final 
rule therefore adopts this change as proposed.
    The Department also proposed to add the District of Columbia to the 
definition of ``Federal agency.'' The DBA states in part that it 
applies to every contract in excess of $2,000, to which the Federal 
Government ``or the District of Columbia'' is a party. See 40 U.S.C. 
3142(a). As described above, Reorganization Plan No. 14 of 1950 
authorizes the Department to prescribe regulations to ensure that the 
Act is implemented in a consistent manner by all agencies subject to 
the Act. See 15 FR 3176, 5 U.S.C. app. 1. Accordingly, the proposed 
change to the definition of ``Federal agency'' in Sec.  5.2 clarified 
that the District of Columbia is subject to the DBA and the regulations 
implemented by the Department pursuant to Reorganization Plan No. 14 of 
1950.\162\ The proposed change was also consistent with the definition 
of ``Federal agency'' in part 3 of this title, which specifically 
includes the District of Columbia. See 29 CFR 3.2(g). The proposed 
change simply reflected the DBA's applicability to the District of 
Columbia and was not intended to reflect a broader or more general 
characterization of the District of Columbia as a Federal Government 
entity.
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    \162\ The 1973 Home Rule Act, Public Law 93-198, transferred 
from the President to the District of Columbia the authority to 
organize and reorganize specific governmental functions of the 
District of Columbia, but does not contain any language removing the 
District of Columbia from the Department's authority to prescribe 
DBA regulations pursuant to Reorganization Plan No. 14 of 1950.
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    The Department received no comments on this proposal. The final 
rule therefore adopts this change as proposed.
    The Department also proposed a change to the definition of 
``Secretary'' to delete a reference to the Deputy Under Secretary for 
Employment Standards. As noted, the Employment Standards Administration 
was eliminated in a reorganization in 2009, and its authorities and 
responsibilities were devolved into its constituent components, 
including WHD.
    The Department received no comments on this proposal. The final 
rule therefore adopts this change as proposed.
    Lastly, the Department proposed a minor technical edit to the 
definition of ``Davis-Bacon labor standards'' that reflected proposed 
changes to Sec.  5.1, discussed above. The Department also made a 
clarifying, non-substantive change to the term ``labor standards'' by 
calling that term ``Davis-Bacon labor standards.''
    The Department received no comments on this proposal. The final 
rule therefore adopts this change as proposed.
(B) Building or Work
(1) Energy Infrastructure and Related Activities
    The Department proposed to modernize the definition of the terms 
``building or work'' by including solar panels, wind turbines, 
broadband installation, and installation of electric car chargers to 
the non-exclusive list of construction activities encompassed by the 
definition. These proposed additions to the definition were 
clarifications intended to reflect the significance of energy 
infrastructure and related projects to modern-day construction 
activities subject to the Davis-Bacon and Related Acts, as well as to 
illustrate the types of energy-infrastructure and related activities 
that are encompassed by the definition of ``building or work.''
    The Department received multiple comments on these proposed 
additions, several of which favored the proposed language. III-FFC 
strongly supported the proposal, stating that the inclusion of energy 
infrastructure projects on the non-exclusive list of examples of 
buildings or works ensures that Davis-Bacon definitions more accurately 
reflect the modern construction industry and will help ensure that 
workers on such projects will receive Davis-Bacon prevailing wages when 
applicable. SMART noted that the proposed additions will make it clear 
to the regulated community that such projects are considered buildings 
or work, thereby preventing potential litigation. LIUNA stated that 
this clarification will be helpful as Federal funding for such 
construction, generally performed by construction workers, has been 
increasing in recent years. Three LIUNA local chapters also commented 
that the proposed language was a useful clarification of coverage, as 
did the Alaska District Council of Laborers. The NCDCL also noted that 
the proposed clarifications were consistent with long-standing policy 
and that such projects were clearly construction work.
    In contrast, other commenters opposed the proposed additions. ABC 
stated that the proposed language expanded coverage to green energy 
projects, creating a large administrative burden for developers and 
small contractors that would in turn inhibit the construction of such 
projects. In support of their claim, they cited to a 2010 GAO report 
and a 2010 U.S. Department of Energy (DOE) OIG report, stating that 
both reports indicated that the expansion of Davis-Bacon coverage to 
green energy and weatherization projects due to American Reinvestment 
and Recovery Act of 2009 (ARRA) funding delayed construction of such 
projects and increased costs.\163\ An ABC

[[Page 57598]]

member write-in campaign similarly mentioned the proposed language as 
one of several changes that they asserted would increase the 
inflationary effects of prevailing wage requirements and increase the 
regulatory burden on contractors, as did two individual commenters. 
CIRT stated that the inclusion of green energy projects within the 
scope of Davis-Bacon coverage would be beyond the scope of the statute. 
A comment by the group of members of the U.S. House Committee on 
Education & Labor also stated that including green energy projects 
within the definition of building or work would increase the number of 
small businesses subject to the Davis-Bacon requirements, subjecting 
such small businesses to additional costs and uncertainty.
---------------------------------------------------------------------------

    \163\ The GAO report stated that four Federal funding agencies 
and several State and local funding recipients indicated that 
because their programs had not previously received any Related Act 
funding prior to receiving funding to ARRA, they had to establish 
internal infrastructure and procedures to allow them to handle the 
large increase in funding and manage the accompanying Davis-Bacon 
requirements. GAO report ``Project Selection and Starts Are 
Influenced by Certain Federal Requirements and Other Factors.'' Feb. 
2010. The DOE OIG report indicated that the need to determine 
prevailing wages for weatherization work and develop guidance for 
funding sub-recipients on Davis-Bacon requirements delayed states' 
use of ARRA weatherization funding.
---------------------------------------------------------------------------

    After considering these comments, the final rule adopts the 
revisions as proposed. As noted in the proposed rule, the inclusion of 
these energy infrastructure projects in the non-exclusive list of 
examples of a building or work simply provides clarification that such 
projects are among the types of buildings or works that may be covered 
by the DBRA, and therefore that Federal or federally assisted 
construction of these projects will be subject to Davis-Bacon 
prevailing wage requirements when all other requirements are met, 
including that the work is pursuant to a Federal contract under the DBA 
or federally funded under a Related Act, that the project is for 
construction, prosecution, completion, and/or repair, and that the work 
is performed by laborers and mechanics and, if required under the 
relevant statute, is done at the site of the work.
    Opposing comments appear to be based on the assumption that such 
projects were not previously considered to be buildings or works that 
could be subject to Davis-Bacon coverage, and that the inclusion of 
these projects as examples of a building or work would expand this 
definition to previously uncovered energy projects. However, this is an 
inaccurate presumption, as such projects already clearly fit within the 
existing definition of a building or work, which includes ``without 
limitation, buildings, structures, and improvements of all types.'' The 
GAO and DOE OIG reports cited by ABC clearly show that energy 
infrastructure projects are already understood to be within the 
existing definition of building or work. For example, ARRA did not 
change the definition of building or work; rather, it was a Related Act 
that provided that projects funded under its provisions, including 
various improvements to energy infrastructure, are covered by the 
Davis-Bacon labor standards. See ARRA sec. 406, 1606. Likewise, a 
number of other Related Acts cover government-funded energy 
projects,\164\ and the existing regulation's inclusion of projects such 
as dams, plants, power lines, and heavy generators makes clear that 
``building or work'' has long included the construction of energy 
infrastructure projects. Because those energy infrastructure projects 
already were buildings or works under the existing definition, the 
additional Related Act funding triggered Davis-Bacon prevailing wage 
requirements for these energy infrastructure projects. Had such 
projects not already fit within the definition of building or work, 
however, Davis-Bacon prevailing wage requirements would not have 
applied. Therefore, pursuant to its authority under Reorganization Plan 
No. 14 of 1950 ``to prescribe appropriate standards, regulations, and 
procedures'' for the DBRA and to eliminate any potential confusion as 
to whether energy infrastructure projects should be considered 
buildings or works, and to provide some examples of those types of 
projects in the non-exhaustive list, the final rule retains the 
proposed language.
---------------------------------------------------------------------------

    \164\ See https://www.dol.gov/agencies/whd/government-contracts 
(List of Current Davis-Bacon and Related Acts).
---------------------------------------------------------------------------

(2) Coverage of a Portion of a Building or Work
    The Department proposed to add language to the definitions of 
``building or work'' and ``public building or public work'' to clarify 
that these definitions can be met even when the construction activity 
involves only a portion of an overall building, structure, or 
improvement. The definition of ``building or work'' already states that 
the terms ``building'' and ``work'' ``generally include construction 
activity as distinguished from manufacturing, furnishing of materials, 
or servicing and maintenance work,'' and includes ``without limitation, 
buildings, structures, and improvements of all types.'' 29 CFR 5.2(i). 
In addition, the regulation already provides several examples of 
construction activity included within the term ``building or work'' 
that do not constitute an entire building, structure, or improvement, 
such as ``dredging, shoring, . . . scaffolding, drilling, blasting, 
excavating, clearing, and landscaping.'' Id. Moreover, the current 
regulations define the term ``construction, prosecution, completion, or 
repair'' to mean ``all types of work done on a particular building or 
work at the site thereof . . . including, without limitation . . . 
[a]ltering, remodeling, installation . . . ; [p]ainting and 
decorating.'' Id. Sec.  5.2(j).
    However, to further make plain that ``building or work'' includes 
not only construction activity involving an entire building, structure, 
or improvement, but also construction activity involving a portion of a 
building, structure, or improvement, or the installation of equipment 
or components into a building, structure, or improvement, the 
Department proposed to add a sentence to this definition stating that 
``[t]he term building or work also includes a portion of a building or 
work, or the installation (where appropriate) of equipment or 
components into a building or work.'' The Department also proposed to 
include additional language in the definition of ``public building or 
public work'' to clarify that a ``public building'' or ``public work'' 
includes the construction, prosecution, completion, or repair of a 
portion of a building or work that is carried on directly by authority 
of or with funds of a Federal agency to serve the interest of the 
general public, even where construction of the entire building or work 
does not fit within this definition.
    The Department explained that these proposed revisions are 
consistent with the Davis-Bacon Act. The concepts of alteration or 
repair presuppose that only a portion of a building, structure, or 
improvement will be affected. By specifically including the alteration 
or repair of public buildings or works within its scope of coverage, 
the Davis-Bacon Act itself necessitates that construction activity 
involving merely a portion of a building or work may be subject to 
coverage.
    The Department also noted that these proposed revisions are 
consistent with the Department's longstanding policy that a ``public 
building'' or ``public work'' includes construction activity involving 
a portion of a building or work, or the installation of equipment or 
components into a building or work when the other requirements for 
Davis-Bacon coverage are satisfied. See, e.g., AAM 52 (July 9, 1963) 
(holding that the upgrade of communications systems at a military base, 
including the installation of improved cabling, constituted the 
construction, alteration or repair of a public work); Letter from 
Sylvester L. Green, Dir., Div. of Cont. Standards Operations, to Robert 
Olsen, Bureau of Reclamation (Mar. 18, 1985) (finding that the removal 
and

[[Page 57599]]

replacement of stator cores in a hydroelectric generator was covered 
under the Davis-Bacon Act as the alteration or repair of a public 
work); Letter from Samuel D. Walker, Acting Adm'r, to Edward Murphy 
(Aug. 29, 1990) (stating that ``[t]he Department has ruled on numerous 
occasions that repair or alteration of boilers, generators, furnaces, 
etc. constitutes repair or alteration of a `public work' ''); Letter 
from Nancy Leppink, Deputy Adm'r, to Armin J. Moeller (Dec. 12, 2012) 
(finding that the installation of equipment such as generators or 
turbines into a hydroelectric plant is considered to be the improvement 
or alteration of a public work).
    The Department further explained that the proposed revisions are 
consistent with the Department's longstanding position that a ``public 
building'' or ``public work'' may include structures, buildings, or 
improvements that will not be owned by the Federal government when 
construction is completed, so long as the construction is carried on 
directly by authority of or with funds of a Federal agency to serve the 
interest of the general public. Accordingly, the Department has long 
held that the Davis-Bacon labor standards provisions may apply to 
construction undertaken when the government is merely going to have the 
use of the building or work, such as in lease-construction contracts, 
depending upon the facts and circumstances surrounding the contract. 
See Reconsideration of Applicability of the Davis-Bacon Act to the 
Veteran Admin.'s Lease of Med. Facilities, 18 Op. O.L.C. 109, 119 n.10 
(May 23, 1994) (``1994 OLC Memorandum'') (``[T]he determination whether 
a lease-construction contract calls for construction of a public 
building or public work likely will depend on the details of the 
particular arrangement.''); FOH 15b07. In AAM 176 (June 22, 1994), WHD 
provided guidance to the contracting community regarding the DBA's 
application to lease-construction contracts, and specifically advised 
that the following non-exclusive list of factors from the 1994 OLC 
Memorandum should be considered in determining the scope of DBA 
coverage: (1) the length of the lease; (2) the extent of Government 
involvement in the construction project (such as whether the building 
is being built to Government requirements and whether the Government 
has the right to inspect the progress of the work); (3) the extent to 
which the construction will be used for private rather than public 
purposes; (4) the extent to which the costs of construction will be 
fully paid for by the lease payments; and (5) whether the contract is 
written as a lease solely to evade the requirements of the DBA.
    In sum, as noted above, the term ``building or work'' has long been 
interpreted to include construction activity involving only a portion 
of a building, structure, or improvement. As also noted above, a public 
building or public work is not limited to buildings or works that will 
be owned by the Federal Government, but may include buildings or works 
that serve the general public interest, including spaces to be leased 
or used by the Federal Government. Accordingly, it necessarily follows 
that a contract for the construction, alteration, or repair of a 
portion of a building, structure, or improvement may be a DBA-covered 
contract for construction of a ``public building'' or ``public work'' 
where the other requirements for coverage are met, even if the Federal 
Government is not going to own, lease, use, or otherwise be involved 
with the construction of the remaining portions of the building or 
work. For example, as WHD has repeatedly explained in connection with 
one contracting agency's lease-construction contracts, where the 
Federal Government enters into a lease for a portion of an otherwise 
private building--and, as a condition of the lease, requires and pays 
for specific tenant improvements requiring alterations and repairs to 
that portion to prepare the space for government occupancy in 
accordance with government specifications--Davis-Bacon labor standards 
may apply to the tenant improvements or other specific construction 
activity called for by such a contract. In such circumstances, the 
factors discussed in AAM 176 must be considered to determine if 
coverage is appropriate, but the factors would be applied specifically 
with reference to the leased portion of the building and the 
construction required by the lease.
    Finally, the Department noted that these proposed revisions would 
further the remedial purpose of the DBA by ensuring that the Act's 
protections apply to contracts for construction activity for which the 
government is responsible. Walsh v. Schlecht, 429 U.S. 401, 411 (1977) 
(reiterating that the DBA ``was not enacted to benefit contractors, but 
rather to protect their employees from substandard earnings by fixing a 
floor under wages on Government projects'') (citation and internal 
quotation marks omitted); 1994 OLC Memorandum, 18 Op. O.L.C. at 121 
(``[W]here the government is financially responsible for construction 
costs, the purposes of the Davis-Bacon Act may be implicated.''). If 
the Davis-Bacon Act were only applied in situations where the Federal 
Government is involved in the construction of the entire (or even the 
majority of the) building or work, coverage of contracts would be 
dependent on the size of the building or work, even if two otherwise 
equivalent contracts involved the same square footage and the 
government was paying for the same amount of construction. Such an 
application of coverage would undermine the statute's remedial purpose 
by permitting publicly funded construction contracts for millions of 
dollars of construction activity to evade coverage merely based on the 
size of the overall structure or building.
    Accordingly, and as noted above, the Department proposed revisions 
to the definitions of ``building or work'' and ``public building or 
public work'' that served to clarify rather than change existing 
coverage requirements. However, the Department recognized that in the 
absence of such clarity under the existing regulations, contracting 
agencies have differed in their implementation of Davis-Bacon labor 
standards where construction activity involves only a portion of a 
building, structure, or improvement, particularly in the context of 
lease-construction contracts. Thus, as a practical matter, the proposed 
revisions would result in broader application of Davis-Bacon labor 
standards. The Department therefore invited comment on the benefits and 
costs of these proposed revisions to private business owners, workers, 
and the Federal Government, particularly in the context of leasing. 
After consideration of the comments received, for the reasons detailed 
below, the Department is adopting these proposed revisions in this 
final rule, with one additional clarification.
    Several commenters expressed their general support for the proposed 
changes, indicating that they agreed that the proposed changes would 
provide additional clarification of Davis-Bacon coverage. More 
specifically, IUOE stated that this was an important change that helps 
bring Davis-Bacon coverage into the 21st century, allowing Davis-Bacon 
labor standards to continue to apply to public buildings and public 
works despite the increase in non-traditional funding and contracting 
methods such as public-private partnerships, complex bond finance 
schemes, leasing agreements, and other sorts of private involvement in 
public buildings and works. III-FFC and the UA both noted that the 
proposed changes would result in Davis-Bacon coverage being more 
consistently applied to contracts for construction activity for which 
the

[[Page 57600]]

government is responsible. UBC also commented favorably on the proposed 
changes, noting that they clarify that Davis-Bacon coverage can exist 
even when the building or work will not be owned by the Federal 
Government, while also suggesting revising the proposed language in the 
definition of ``public building or public work'' to include ``the 
construction, prosecution, completion, installation of equipment (where 
appropriate) of components, or repair. . . .'' [proposed addition in 
italics], to harmonize the proposed definition of ``public building or 
public work'' with the proposed language for ``building or work.'' 
\165\
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    \165\ In suggesting this additional regulatory language, UBC 
indicated that this language was already contained in the 
Department's proposed definition of ``building or work.'' However, 
the Department's proposed definition of ``building or work''--
specifically, the language ``installation (where appropriate) of 
equipment or components''--is slightly different than the language 
proposed by UBC. The Department interprets UBC's comment as 
intending to propose that the Department include ``installation 
(where appropriate) of equipment or components'' in the definition 
of ``public building or public work.''
---------------------------------------------------------------------------

    SMART agreed with the Department that Davis-Bacon coverage should 
not be determined by the size of the building or work, or portion of 
the building or work, and stated that the proposed changes would ensure 
that the entire regulated community would have consistent information 
as to Davis-Bacon applicability when bidding for government contracts 
and meeting prevailing wage obligations. SMART also found the legal 
authority cited in support of the proposed change persuasive, noting 
that not only did the authority involve the application of Davis-Bacon 
coverage to portions of a building or work or the installation of 
equipment, but also that none of the cases considered the fact that the 
construction only involved a portion of a building or work to be in any 
way worthy of comment when applying coverage. SMART further agreed that 
the concept of alteration or repair, included in the DBA itself, pre-
supposes that coverage is applicable to a portion of a building or 
work, pointing out that this position is ``fully consistent with 
decades of interpretations of dozens of work functions and construction 
activities.'' SMART further recommended that the Department amend the 
proposed definition of building or work to state that ``[t]he term 
building or work also includes a portion of a building or work, or the 
installation (where appropriate) of equipment or components into a 
building or work at a primary construction site or a secondary 
construction site'' [proposed addition in italics]. SMART stated that 
this proposed addition would clarify that the installation of equipment 
or components into a building or work being constructed at another site 
should be included in determining whether a ``significant portion'' of 
the building or work is being constructed at that other site, such that 
it should be considered a secondary site of work. SMART also requested 
that the Department add language stating that the proposed definition 
of ``portion'' in ``building or work,'' with no size parameter or 
limitation, has the same meaning in the definition of the ``site of the 
work,'' such that the construction of a ``portion,'' regardless of 
size, is covered work whether it takes place on the primary or 
secondary site.
    The Department agrees with the above comments that the changes 
proposed by the Department codify long-standing principles of Davis-
Bacon coverage, will result in a more consistent application of Davis-
Bacon coverage, and will support the remedial purpose of the DBA. The 
Department analyzes the additional regulatory changes proposed by these 
commenters at the end of this section.
    Some commenters disagreed with the Department's proposal based on 
assertions that the proposed change conflicts with the decision of the 
U.S. Court of Appeals for the District of Columbia Circuit (D.C. 
Circuit) in District of Columbia v. Dep't of Labor, 819 F.3d 444 (D.C. 
Cir. 2016) (CityCenterDC). In particular, ABC stated that the court in 
CityCenterDC ``found that lease agreements similar to agreements 
described in the NPRM did not qualify as 'contracts for construction' 
even though construction was contemplated on portions of buildings 
pursuant to the lease(s)'' and that imposing Davis-Bacon ``coverage in 
the absence of federal funding was unlawful.'' AGC similarly asserted 
that CityCenterDC held that the ``DBA cannot reasonably be read to 
cover construction contracts to which the [Federal government] is not a 
party,'' and claimed that the proposed changes would unlawfully 
eliminate the coverage requirement that the Federal Government must be 
a party to a contract for construction. NAHB expressed the view that 
the portion of the existing definition of ``public building or public 
work,'' which provides that a public building or work must be ``carried 
on directly by authority of or with funds of a Federal agency to serve 
the interest of the general public'' (emphasis added), was inconsistent 
with CityCenterDC, on the grounds that CityCenterDC made clear that DBA 
coverage applies to publicly-funded construction projects and/or those 
which are owned or operated by the government, and not to projects that 
merely serve the ``public interest.''
    The Department does not find the comments relating to CityCenterDC 
persuasive. In that case, private developers leased land from the 
District of Columbia and entered into development agreements under 
which the land would be used as the site of a new mixed-use 
development, to include shops, restaurants, a hotel, other private 
retail business, and private residential units. CityCenterDC, 819 F.3d 
at 447. The developers paid the District of Columbia for the lease of 
the land, so that money flowed from the developers to the government 
rather than from the government to the developers. Id. The District of 
Columbia (1) did not provide any funding for the construction of the 
project, through a lease or any other contractual arrangement, as the 
developers were leasing from and paying money to the government, (2) 
would not own or operate any portion of the project upon its 
completion, and (3) did not propose to occupy any portion of the space 
or offer any services there. Id. On these unusual facts, the D.C. 
Circuit held that the District did not enter into a contract for 
construction of the project. Id. at 450-51 (explaining that the 
District entered into contracts that ``refer[red] to the eventual 
construction that the Developers would pay for'' (emphasis added)); id. 
at 453 (``DC did not expend funds for the construction of CityCenterDC. 
Quite the opposite. The Developers make substantial rental payment to 
DC''). In reaching this conclusion, the court observed that a finding 
of Davis-Bacon coverage would constitute a ``sudden[] exten[sion]'' of 
the Act. Id. at 450. The court therefore explicitly distinguished the 
CityCenterDC situation from various other cases where, over the course 
of decades, the DBA had been held applicable to leases, because those 
other cases involved situations where, ``unlike [CityCenterDC], the 
Government was the lessee not the lessor, and the leases required 
construction for which the Government would pay de facto through its 
rental payments.'' \166\ Id. at 450 n.3.

[[Page 57601]]

Separately from its conclusion that the District did not enter into a 
contract for construction, the D.C. Circuit determined that 
CityCenterDC was not a covered project for the independent reason that 
CityCenterDC was not a public building or work, stating that a project 
must at least have either public funding or government ownership or 
operation to be considered a public building or public work, and that 
CityCenterDC had neither. Id. at 451-54.
---------------------------------------------------------------------------

    \166\ In distinguishing these cases, the court did not express 
disagreement with the Department's longstanding interpretation that 
a contract is for construction if ``more than an incidental amount 
of construction-type activity is involved in the performance of a 
government contract.'' Mil. Hous., Fort Drum, WAB No. 85-16, 1985 WL 
167239, at *4 (Aug. 23, 1985) (determining that contracts to lease 
housing units for military families that were to be built on private 
land to the specifications of the Department of the Army were 
contracts for construction for purposes of the DBA). See, e.g., Phx. 
Field Off., Bureau of Land Mgmt., ARB No. 01-010, 2001 WL 767573, at 
*8-9 (June 29, 2001) (concluding that the DBA applied to a lease by 
the Bureau of Land Management of a building and storage facility to 
be built for the Bureau's use); Crown Point, Ind. Outpatient Clinic, 
WAB No. 86-33, 1987 WL 247049, at *2-3 (June 26, 1987) (holding that 
Davis-Bacon coverage applied to the Veteran Administration's lease 
of an outpatient clinic to be constructed under the terms of the 
lease), enforced sub nom., Bldg. & Constr. Trades Dep't, AFL-CIO v. 
Turnage, 705 F. Supp. 5, 6 (D.D.C. 1988). See also, e.g., 
Choctawhatchee Elec. Coop., Inc., ARB Case No. 2017-0032, 2019 WL 
3293926, at *6 (June 14, 2019) (CHELCO) (distinguishing CityCenterDC 
based on its ``controversial facts'' and affirming WHD 
Administrator's determination that an electric utility privatization 
contract was a ``contract for construction'' under the DBA where the 
privatization contract called for significant construction that was 
at least heavily funded by the Federal government).
---------------------------------------------------------------------------

    The proposed changes to the definition of a public building or 
work, adopted in this final rule, do not eliminate the requirement that 
the Federal Government enter into a contract for construction for the 
DBA to be applicable. As reflected not only in the CityCenterDC 
decision but also in the statute itself, coverage under the DBA applies 
to ``every contract in excess of $2,000, to which the Federal 
Government or the District of Columbia is a party, for construction, 
alteration, or repair, including painting and decorating, of public 
buildings and public works.'' 40 U.S.C. 3142(a). The requirement that 
the Federal Government enter into a contract for construction and the 
requirement that such a contract for construction must be for a public 
building or public work are two distinct requirements, both of which 
must be satisfied for the DBA to apply to a contract. The changes to 
the definitions of ``building or work'' and ``public building or public 
work'' described here simply provide that the construction of a portion 
of a building or work may still be considered a public building or 
work, even where the entire building or work is not owned, leased by, 
or to be used by a Federal agency. These revisions do not eliminate or 
affect the separate requirement under the DBA that the Federal 
government enter into a ``contract . . . for construction.''
    Moreover, contrary to commenters' contentions, CityCenterDC did not 
hold that lease-construction contracts like those discussed in the NPRM 
are not contracts for construction. As mentioned, the D.C. Circuit 
explicitly distinguished the CityCenterDC development from contracts in 
which the Federal Government or District of Columbia pays a third party 
to lease land and requires construction, alteration, or repair as a 
condition of the lease. CityCenterDC, 819 F.3d at 450 & n.3; AAM 222 
(Jan. 11, 2017), at 7. Specifically, in CityCenterDC, the District of 
Columbia was leasing land to a private developer that was paying the 
government to use the land to build a new mixed-use development 
entirely for private use. There was no agreement that the District of 
Columbia would own, operate, lease, or even use any portion of the 
development once completed, and therefore there was no agreement 
requiring construction of a government-owned, operated or leased 
portion. In contrast, in the NPRM's lease-construction agreement 
example, the Federal Government leases a portion of a building from a 
private developer or owner--and, as a condition of the lease, requires 
and pays for specific tenant improvements requiring alterations and 
repairs to the leased portion to ensure that the space meets the 
requirements for government occupancy or use.
    The Department similarly does not agree that the proposed revisions 
extend Davis-Bacon coverage to any project involving a portion of a 
building or work that is in the general public interest. The revised 
definitions still require the construction, prosecution, completion, or 
repair of that portion of the building or work to be carried on 
directly by authority of or with funds of a Federal agency and that the 
construction of the portion of the building or work serve the interest 
of the general public.
    Nor does the Department agree that maintaining the requirement that 
construction projects must serve the public interest contradicts the 
holding in CityCenterDC. The D.C. Circuit held that, at minimum, a 
public building or work must have either public funding or government 
ownership or operation, consistent with the existing definition and the 
proposed changes. See CityCenterDC, 819 F.3d at 452 n.5, 453 n.6 
(suggesting that 29 CFR 5.2(k) requires public funding for construction 
but not government ownership or operation but explicitly noting that 
the court was not resolving the question of whether either one of the 
two characteristics was alone sufficient for a project to be a public 
work). By stating that the construction of the building or work must 
serve the general public interest, the definition recognizes that while 
government ownership or operation is one indication that the building 
or work serves the public interest sufficiently to be considered a 
public building or work, a project that receives Federal funding 
without government ownership or operation may still fulfill a 
significant need or goal of the relevant Federal agency and serve the 
general public interest. See AAM 222, at 8; see also United States ex 
rel. Noland Co. v. Irwin, 316 U.S. 23, 28 (1942) (holding that a 
privately-owned library building at Howard University was a public work 
for purposes of the Miller Act, relying on the definition of ``public 
works'' in the National Industrial Recovery Act, Public Law 73-90, 48 
Stat. 201 (June 16, 1933)--from which the Department's regulatory 
definition is derived--because the project received Federal funding and 
because the ``education of youth in the liberal arts and sciences'' 
fulfills a public interest).
    Some commenters also expressed concerns with the proposed changes 
on grounds that were unrelated to the CityCenterDC decision. NAHB noted 
that the proposed language does not include a threshold for the amount 
of or degree of work that must be performed to trigger Davis-Bacon 
requirements for buildings where the construction of a portion of the 
building is ``carried on by authority of . . . a Federal agency to 
serve the interest of the general public.'' NAHB recommended that such 
a limitation, similar to the ``significant portion'' language in the 
existing and proposed ``site of the work'' definition, be incorporated 
into the proposed ``building or work'' definition, or alternatively 
that the Department should adopt a monetary threshold. NAHB noted that 
although the proposed changes might be intended to clarify coverage, 
confusion among contracting agencies may still arise if agencies are 
inconsistent in their interpretation of the added language regarding 
Davis-Bacon coverage of portions of a building or work, or 
misunderstand the other elements of the definition, and that 
subregulatory interagency guidance therefore may also be needed to 
address such potential confusion. Commenters participating in a write-
in campaign also expressed concern about the applicability of Davis-
Bacon requirements to improvements to private buildings or works, with 
governmental leasing as one of multiple listed items that the 
commenters

[[Page 57602]]

contended would increase regulatory burdens and costs for contractors 
on projects that have not typically been subject to Davis-Bacon 
coverage. Such commenters, however, did not express any specific 
concerns regarding the definitions of ``building or work'' or ``public 
building or public work.''
    The Department also does not agree with NAHB's assertion that the 
inclusion of an additional size or dollar threshold in the definition 
of ``public building or public work'' is necessary, because the DBA 
already imposes a dollar threshold for coverage. The revised definition 
does not alter this threshold, but instead merely clarifies that where 
the construction of a portion of a building or work is carried on 
directly by authority of or with funds of a Federal agency to serve the 
interest of the general public, that portion of a building or work is a 
public building or public work to which DBA coverage applies if the 
Act's $2,000 dollar threshold is satisfied. The revised definition does 
not automatically extend DBA coverage in this scenario to construction 
not called for in the contract, i.e., of the entire building or work. 
Nor does it alter the long-standing requirements and analysis needed to 
determine whether an entire building or work is a public building or 
public work. In other words, where the government has entered into a 
contract in excess of $2,000 for the construction, alteration, or 
repair of a public building or public work, the contract will be 
subject to DBA requirements regardless of whether the contract applies 
only to a portion of a building or work or to an entire building or 
work. To apply an additional threshold beyond the statutory $2,000 
threshold to contracts for construction of a portion of a building or 
work would result in the arbitrary exclusion of otherwise-covered 
contracts from Davis-Bacon coverage.
    The Department does not agree with SMART's suggestion to add 
language to the regulation stating that the proposed definition of 
``portion'' in ``building or work'', without any size parameter or 
other threshold, has the same meaning as the word ``portion'' in the 
term ``significant portion'' in the existing definition of ``site of 
the work.'' The term ``portion'' is not defined, and the Department 
simply intends that it be given its ordinary meaning, that is, a part 
of a whole. However, the final rule specifically defines the term 
``significant portion'' for purposes of the definition of a ``secondary 
construction site.'' The final rule explains that ``significant 
portion'' is limited to instances where an entire portion or module of 
a building or work, such as a completed room or structure, is 
constructed offsite with minimal construction work remaining. This term 
is necessarily more limiting than ``portion,'' and is used in a 
specific context, and therefore Department does not believe it would be 
helpful to insert any language that could be read to suggest that the 
two terms are equivalent.
    The Department also declines to adopt SMART's suggestion to amend 
the proposed definition of building or work to state that ``[t]he term 
building or work also includes a portion of a building or work, or the 
installation (where appropriate) of equipment or components into a 
building or work at a primary construction site or a secondary 
construction site'' [proposed addition in italics]. Although the 
Department agrees, as explained above, that the installation of 
components and equipment into a building or work or portion thereof is 
construction work, the Department does not believe that it would be 
appropriate to incorporate references to ``site of the work'' elements 
into the definition of ``building or work.'' This is because the 
``building or work'' requirement applies even under statutes whose 
application is not limited to the site of the work and so applies to 
all work performed by laborers and mechanics in the development of a 
project, as discussed further below.
    Finally, the Department agrees with UBC's suggestion to revise the 
proposed definition of ``public building or public work'' to include 
the installation (where appropriate) of equipment or components in 
order to harmonize the revised definition of ``public building or 
public work'' with the revised definition of ``building or work.'' As 
the examples discussed in the NPRM and earlier in this section clearly 
indicate, installation of equipment or components has long been 
considered to be covered construction activity, and the Department 
agrees that including corresponding language in both definitions may 
clarify that such installation may similarly be considered a public 
building or work when the other requirements are met. In such 
circumstances, the installation may be considered a public building or 
work even where the equipment or components are being installed in a 
larger structure that may not be a public building or work. For 
example, where the installation of equipment such as wind turbines or 
electric car chargers is carried on directly by authority of or with 
funds of a Federal agency to serve the interest of the general public, 
such installation would be considered a public building or work even 
where such installation takes place at a private facility. Similarly, 
when a Federal agency enters into a long-term lease of office space in 
an otherwise privately owned and occupied building, and the lease 
provides for the installation of equipment, at government expense and 
in accordance with government specifications, in the portion of the 
building that the Federal Government is leasing and occupying in order 
to provide public services, the installation of such equipment would be 
the construction of a public building or public work subject to Davis-
Bacon labor standards.
    Accordingly, for the reasons discussed, the Department is adopting 
the proposed definitions of ``building or work'' and ``public building 
or public work'' in this final rule, with one clarification to the 
definition of ``public building or public work,'' as explained.
(C) Construction, Prosecution, Completion, or Repair
    The final rule also adds a new sub-definition to the term 
``construction, prosecution, completion, or repair'' in Sec.  5.2, to 
better clarify when demolition and similar activities are covered by 
the Davis-Bacon labor standards.
    As explained in the proposed rule, in general, the Davis-Bacon 
labor standards apply to contracts ``for construction, alteration or 
repair . . . of public buildings and public works.'' 40 U.S.C. 3142(a). 
Early in the DBA's history, the Attorney General examined whether 
demolition fits within these terms and concluded that ``[t]he statute 
is restricted by its terms to `construction, alteration, and/or 
repair,''' and that this language ``does not include the demolition of 
existing structures'' alone. 38 Op. Atty. Gen. 229 (1935). However, the 
Attorney General expressly distinguished, and declined to decide the 
question of whether the Davis-Bacon labor standards apply to ``a razing 
or clearing operation provided for in a building contract, to be 
performed by the contractor as an incident of the building project.'' 
Id.
    Consistent with the Attorney General's opinion, the Department has 
long maintained that standalone demolition work is generally not 
covered by the Davis-Bacon labor standards. See AAM 190 (Aug. 29, 
1998); WHD Opinion Letter SCA-78 (Nov. 27, 1991); WHD Opinion Letter 
DBRA-40 (Jan. 24, 1986); WHD Opinion Letter DBRA-48 (Apr. 13, 1973); 
AAM 54 (July 29, 1963); FOH 15d03(a). However, the Department has 
understood the Davis-Bacon labor standards to cover demolition and 
removal under certain circumstances.

[[Page 57603]]

    First, demolition and removal activities are covered by Davis-Bacon 
labor standards when such activities in and of themselves constitute 
construction, alteration, or repair of a public building or work. For 
example, the Department has explained that removal of asbestos or paint 
from a facility that will not be demolished--even if subsequent 
reinsulating or repainting is not considered--is covered by Davis-Bacon 
because the asbestos or paint removal is an ``alteration'' of the 
facility. See AAM 153 (Aug. 6, 1990). Likewise, the Department has 
explained that Davis-Bacon labor standards can apply to certain 
hazardous waste removal contracts, because ``[s]ubstantial excavation 
of contaminated soils followed by restoration of the environment'' is 
``construction work'' under the DBA and because the term 
``landscaping'' as used in the DBA regulations includes ``elaborate 
landscaping activities such as substantial earth moving and the 
rearrangement or reclamation of the terrain that, standing alone, are 
properly characterized as the construction, restoration, or repair of a 
public work.'' AAM 155 (Mar. 25, 1991); see also AAM 190 (noting that 
``hazardous waste removal contracts that involve substantial earth 
moving to remove contaminated soil and recontour the surface'' can be 
considered DBA-covered construction activities).
    Second, the Department has consistently maintained that if future 
construction that will be subject to the Davis-Bacon labor standards is 
contemplated at the location where the demolition occurs--either 
because the demolition is part of a contract for such construction or 
because such construction is contemplated as part of a future contract, 
then the demolition of the previously existing structure is considered 
part of the construction of the subsequent building or work and 
therefore within the scope of the Davis-Bacon labor standards. See AAM 
190. This position is also articulated in the Department's SCA 
regulations at 29 CFR 4.116(b). Likewise, the Department has explained 
that certain activities under hazardous waste removal and remediation 
contracts, including ``the dismantling or demolition of buildings, 
ground improvements and other real property structures and . . . the 
removal of such structures or portions of them'' are covered by Davis-
Bacon labor standards ``if this work will result in the construction, 
alteration, or repair of a public building or public work at that 
location.'' AAM 187, attach., at 1-2 (Nov. 18, 1996).
    As noted in the proposed rule, while the Department has addressed 
these distinctions to a degree in the SCA regulations and in 
subregulatory guidance, the Department believes that clear standards 
for the coverage of demolition and removal and related activities in 
the DBA regulations will assist agencies, contractors, workers, and 
other stakeholders in identifying whether contracts for demolition are 
covered by the DBA. This, in turn, will ensure that Davis-Bacon 
contract clauses and wage determinations are incorporated into 
contracts where warranted, thereby providing contractors with the 
correct wage determinations prior to bidding and requiring the payment 
of Davis-Bacon prevailing wages where appropriate.\167\
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    \167\ The Department notes that under Federal contracts and 
subcontracts, demolition contracts that do not fall within the DBA's 
scope are instead service contracts covered by the SCA, and the 
Department uses DBA prevailing wage rates as a basis for the SCA 
wage determination. See AAM 190. However, federally funded 
demolition work carried out by State or local governments that does 
not meet the criteria for coverage under a Davis-Bacon Related Act 
would generally not be subject to Federal prevailing wage 
protections.
---------------------------------------------------------------------------

    Accordingly, the Department proposed to add a new paragraph (2)(v) 
to the definition of ``construction, prosecution, completion, or 
repair'' to assist agencies, contractors, workers, and other 
stakeholders in identifying when demolition and related activities fall 
within the scope of the DBRA. Specifically, the Department proposed to 
clarify that demolition work is covered under Davis-Bacon in any of 
three circumstances: (1) Where the demolition and/or removal activities 
themselves constitute construction, alteration, and/or repair of an 
existing public building or work; (2) where subsequent construction 
covered in whole or in part by Davis-Bacon labor standards is planned 
or contemplated at the site of the demolition or removal, either as 
part of the same contract or as part of a future contract; or (3) where 
otherwise required by statute.\168\
---------------------------------------------------------------------------

    \168\ [thinsp]This third option accounts for Related Acts when 
broader language may provide greater coverage of demolition work.
---------------------------------------------------------------------------

    While a determination of whether demolition is performed in 
contemplation of a future construction project is a fact-specific 
question, the proposed rule also included a non-exclusive list of 
factors that can inform this determination, including the existence of 
engineering or architectural plans or surveys; the allocation of, or an 
application for, Federal funds; contract negotiations or bid 
solicitations; the stated intent of the relevant government officials; 
the disposition of the site after demolition (e.g., whether it is to be 
sealed and abandoned or left in a state that is prepared for future 
construction); and other factors. Based on these guidelines, Davis-
Bacon coverage may apply, for example, to the removal and disposal of 
contaminated soil in preparation for construction of a building, or the 
demolition of a parking lot to prepare the site for a future public 
park. In contrast, Davis-Bacon likely would not apply to the demolition 
of an abandoned, dilapidated, or condemned building to eliminate it as 
a public hazard, to reduce likelihood of squatters or trespassers, or 
to make the land more desirable for sale to private parties for purely 
private construction.
    The Department received several comments supporting the proposed 
revisions regarding demolition. LIUNA, for example, noted that 
providing clear guidance on when demolition is covered by the DBRA will 
ensure workers on covered projects receive the protections of the DBRA. 
LIUNA noted its ongoing concern that contracting agencies incorrectly 
classify demolition activities as not covered by the DBRA because of 
insufficient or conflicting guidance from the contracting agency and 
the Department. Other commenters, including the III-FFC, the IUOE, and 
Public Employees Local 71, Alaska, echoed these concerns and supported 
the proposed language as a means of clarifying the circumstances under 
which demolition work is covered, ensuring workers receive the 
protections of the Davis-Bacon labor standards when appropriate.
    Conversely, the National Demolition Association (NDA) opposed the 
proposed revision and expressed concern that it would ``expand the 
scope of demolition activities that could be subject to the Davis-Bacon 
Act requirements.'' NDA also stated that the proposed change would add 
complexity to the implementation of the DBRA and pose an undue burden 
on small contractors. Other commenters, including ABC member campaign 
comments, also voiced opposition and termed the proposed revisions an 
``expansion'' of coverage.
    In the final rule, the Department adopts the language regarding 
demolition as proposed. As explained in the proposed rule, the revised 
language is not an expansion of Davis-Bacon coverage, but rather a 
codification and clarification of current Department policy that is 
already reflected in current DBRA subregulatory guidance and in SCA 
regulations. Thus, the revisions will not expand coverage or increase 
burdens or complexity. To the contrary, they will simplify and

[[Page 57604]]

streamline compliance efforts by explicitly setting these principles 
out in the DBRA regulations themselves so that contractors and 
contracting agencies can look to those regulations to determine whether 
or not the Davis-Bacon labor standards apply to particular demolition 
activities. This will improve the accuracy and consistency of coverage 
determinations prior to the submission of bids or the commencement of 
work, thus mitigating the need for investigations and costly corrective 
actions after work has started on a project. The change will also help 
ensure that all contractors have a better understanding of the 
circumstances under which demolition work is covered when bidding on 
federally funded or assisted construction projects.
(D) Contract, Contractor, Prime Contractor, and Subcontractor
    The Department proposed non-substantive revisions to the definition 
of ``contract'' and also proposed new definitions in Sec.  5.2 for the 
terms ``contractor,'' ``subcontractor'' and ``prime contractor.'' The 
definitions would apply to 29 CFR part 5, including the DBRA contract 
clauses in Sec.  5.5(a) and (b) of this part.
(1) Definition of ``Contract''
    While neither the DBA nor CWHSSA contains a definition of the word 
``contract,'' the language of the Davis-Bacon and Related Acts makes 
clear that Congress intended the prevailing wage and overtime 
requirements to apply broadly, to both prime contracts executed 
directly with Federal agencies as well as any subcontracts through 
which the prime contractors carry out the work on the prime contract. 
See 40 U.S.C. 3142(c); 40 U.S.C. 3702(b), (d). Thus, the Department's 
existing regulations define the term ``contract'' as including ``any 
prime contract . . . and any subcontract of any tier thereunder.'' 29 
CFR 5.2(h). The current definition of ``contract'' also states that it 
applies to prime contracts which are subject wholly or in part to the 
labor standards of any of the acts listed in Sec.  5.1. This definition 
reinforces that it is intended to apply equally to direct Federal 
contracts covered by the DBA and also to contracts between Federal, 
State, or local government entities administering Federal assistance 
and the direct recipients or beneficiaries of that assistance, where 
such assistance is covered by one of the Related Acts--as well as the 
construction contracts and subcontracts of any tier financed by or 
facilitated by such a contract for assistance. See id.
    In the NPRM, the Department stated that it was considering the 
creation of an expanded definition for the term ``contract'' in Sec.  
5.2, similar to the way that the term is defined in other Department 
regulations applying to Federal contracting statutes and Executive 
orders. In the regulations implementing Executive Order 13658 
(Establishing a Minimum Wage for Contractors), for example, the 
Department defined contract as ``an agreement between two or more 
parties creating obligations that are enforceable or otherwise 
recognizable at law'' and listed many types of specific instruments 
that fall within that definition. 29 CFR 10.2. The Department's SCA 
regulations, while containing a definition of ``contract'' that is 
similar to the current Davis-Bacon regulatory definition at 29 CFR 
5.2(h), separately specify that ``the nomenclature, type, or particular 
form of contract used . . . is not determinative of coverage'' at 29 
CFR 4.111(a).
    In the NPRM, the Department noted that the term ``contract'' in the 
Davis-Bacon and Related Acts has been interpreted in a similarly broad 
manner, with the common law of contract as the touchstone. For example, 
in its 1994 memorandum, the OLC cited the basic common-law 
understanding of the term to explain that, for the purposes of the DBA, 
``[t]here can be no question that a lease is a contract, obliging each 
party to take certain actions.'' 1994 OLC Memorandum, 18 Op. O.L.C. at 
113 n.3 (citing 1 Arthur Linton Corbin, Corbin on Contracts Sec. Sec.  
1.2-1.3 (rev. ed. 1993)); see also Bldg. & Const. Trades Dep't, AFL-CIO 
v. Turnage, 705 F. Supp. 5, 6 (D.D.C. 1988) (``The Court finds that it 
is reasonable to conclude, as the WAB has done, that the nature of the 
contract is not controlling so long as construction work is part of 
it.''). The Davis-Bacon and Related Acts thus have been routinely 
applied to various types of agreements that meet the common-law 
definition of a ``contract''--such as, for example, leases, utility 
privatization agreements, individual job orders or task letters issued 
under basic ordering agreements, and loans or agreements in which the 
only consideration from the agency is a loan guarantee--as long as the 
other elements of DBRA coverage are satisfied.
    In the NPRM, the Department also stated that it intends the use of 
the term ``contract'' in the DBRA regulations to apply also to any 
agreement in which the parties intend for a contract to be formed, even 
if (as a matter of the common law) the contract may later be considered 
to be void ab initio or otherwise fail to satisfy the elements of the 
traditional definition of a contract. Such usage, the Department 
explained, follows from the statutory requirement that the relevant 
labor standards clauses must be included not just in ``contracts'' but 
also in the advertised specifications that may (or may not) become a 
covered contract. See 40 U.S.C. 3142(a).
    In light of this discussion, the Department sought comments on 
whether it is necessary to include in the regulatory text itself a 
similarly detailed recitation of the types of agreements that may be 
considered to be contracts. The Department also proposed, in a non-
substantive change, to move a sentence addressing whether governmental 
entities are ``contractors'' from the current definition of 
``contract'' to the new definition of ``contractor.''
    Several commenters, including CEA, SMACNA, and the National 
Alliance for Fair Contracting (NAFC), expressed general support for the 
proposed definition of ``contract'' in the NPRM. No comments were 
submitted expressing a position regarding whether the proposed 
definition of contract should include the detailed list of agreements 
or legal instruments that could be considered to be ``contracts'' under 
the definition. As the Department noted in the NPRM, inclusion of a 
detailed list of types of contracts should not be necessary, given that 
such a list would follow directly from the use of the term ``contract'' 
in the statute.\169\ Thus, the final rule adopts the definition of 
``contract'' as proposed, with one conforming edit to ensure that the 
definition and the contract clauses that apply the defined term reflect 
the principle that employers meeting the definition of ``material 
supplier'' are not covered.\170\ See section III.B.3.ii.(G).(1).c 
(``Material supplier exception''). While the Department has not 
included a list in the regulatory text of all of the various types of 
agreements that may be considered to be ``contracts'' under the 
definition, it continues to interpret the DBRA as applying broadly to 
any contract that fits within the common law definition, as well as to 
contracts-implied-in-law where the parties intended to enter into such 
a contract, as long as the contract satisfies the other

[[Page 57605]]

statutory and regulatory elements of coverage.
---------------------------------------------------------------------------

    \169\ The Restatement (First) of Contracts, published in 1932, 
defined a ``contract'' as ``a promise or a set of promises for the 
breach of which the law gives a remedy, or the performance of which 
the law in some way recognizes as a duty.'' Restatement (First) of 
Contracts section 1 (Am. L. Inst. 1932).
    \170\ This conforming edit mirrors the language that the 
Department proposed, and adopts in the final rule, to similarly 
limit the definition of ``contractor.''
---------------------------------------------------------------------------

(2) Definition of ``Contractor''
    The Department proposed to include a new definition of the term 
``contractor'' in Sec.  5.2. The word ``contractor'' is not defined in 
the DBA or CWHSSA, and the existing DBRA regulations use the term 
``contractor'' but do not define it. Paralleling the definition of 
``contract,'' the Department proposed a definition of ``contractor'' to 
clarify that, where used in the regulations, it applies to both prime 
contractors and subcontractors. In addition, the proposed definition 
sought to clarify that sureties may also--under appropriate 
circumstances--be considered ``contractors'' under the regulations. As 
noted in the NPRM, this is consistent with the Department's 
longstanding interpretation. See Liberty Mut. Ins., ARB No. 00-018, 
2003 WL 21499861, at *6 (June 30, 2003) (finding that the term 
``contractor'' included sureties completing a contract pursuant to a 
performance bond). As the ARB explained in the Liberty Mutual case, the 
term ``contractor'' in the DBA should be interpreted broadly in light 
of Congress's ``overarching . . . concern'' in the 1935 amendments to 
the Act that the new withholding authority included in those amendments 
would ensure workers received the pay they were due. Id. (citing S. 
Rep. No. 74-1155, at 3 (1935)).
    The proposed definition of ``contractor'' contained additional 
clarifications. It contained language reflecting the long-held 
interpretation that bona fide ``material suppliers'' are generally not 
considered to be contractors under the DBRA, subject to certain 
exceptions. As noted above, the Department also moved two sentences 
from the existing definition of ``contract'' to the new definition of 
``contractor.'' This language clarifies that State and local 
governments generally are not regarded as contractors or subcontractors 
under the Related Acts in situations where construction is performed by 
their own employees. The exception is the subset of Related Act 
statutes that more broadly require payment of Davis-Bacon prevailing 
wages to all laborers and mechanics employed in the project's 
development regardless of their employment by a contractor or 
subcontractor.\171\ The Department proposed to supplement the language 
regarding State and local governments to explain (as the Department has 
similarly clarified in the SCA regulations) that the U.S. Government, 
its agencies, and instrumentalities are also not contractors or 
subcontractors for the purposes of the Davis-Bacon and Related Acts. 
Cf. 29 CFR 4.1a(f).\172\
---------------------------------------------------------------------------

    \171\ As discussed in section III.B.3.ii.G.2.e, the Department 
is including a new defined term, ``development statute,'' in the 
final rule, which refers to the Related Acts that have this broader 
scope of coverage.
    \172\ The Department has also considered work by Tribal 
governments using their own employees to be excluded from DBRA 
coverage in a similar manner and for the same reasons as work by the 
Federal agencies and instrumentalities and by State or local 
recipients of Federal assistance. Under the final rule, the 
Department will continue to interpret DBRA coverage in this manner.
---------------------------------------------------------------------------

    Several commenters, including CEA, SMACNA, and NAFC, expressed 
general support for the proposed definition of ``contractor'' in the 
NPRM. The Department did not receive any comments opposing the 
inclusion of sureties within the definition of ``contractor'' or 
opposing any of the other specific elements of the definition.\173\ AGC 
did not oppose the proposed definition of contractor, but they sought 
clarification on the status of ``business owners'' in the definition of 
``contractor,'' ``prime contractor,'' and ``subcontractor.'' Citing to 
FOH 15f06, AGC asserted that individuals who meet the definition of a 
``business owner'' in the FLSA regulation at 29 CFR 541.101 are 
``exempt from DBA coverage'' and should therefore not be included in 
the definition of contractor.
---------------------------------------------------------------------------

    \173\ Several commenters opposed the Department's definition of 
``material supplier'' (which is incorporated into the definitions of 
contractor and subcontractor) as too narrow and therefore expanding 
the types of companies treated as DBRA-covered ``contractors'' or 
``subcontractors.'' The Department has addressed these comments in 
the discussion of the definition of material supplier.
---------------------------------------------------------------------------

    AGC's comment appears to conflate two concepts: ``contractors'' and 
``laborers or mechanics.'' If a person or business is a ``contractor,'' 
they have responsibilities under the DBRA contract clauses and 
regulations to ensure that any workers they employ (or whose labor they 
contract for by subcontract) are paid the required prevailing wage. If 
a person is a ``laborer or mechanic,'' then they must be paid a 
prevailing wage by the contractor or subcontractor for whom they work. 
FOH 15f06 addresses whether an individual is a ``laborer or mechanic,'' 
not whether they are a ``contractor.''
    Under the current DBRA regulations, the FLSA exemption from the 
minimum wage and overtime requirements for a ``business owner'' is 
relevant to whether an individual is a ``laborer or mechanic'' under 
the DBRA who therefore must receive the prevailing wage. The DBRA 
regulations define ``laborer or mechanic'' in part with a reference to 
the part 541 FLSA regulations that provide tests for the 
administrative, professional, and executive exemptions from the minimum 
wage and overtime requirements under the FLSA. 29 CFR 5.2(m); 29 CFR 
541.0. The ``business owner'' regulation at Sec.  541.101 is a method 
of identifying employees who may be exempt under the FLSA exemption for 
executive employees.
    Unlike the definition of ``laborer or mechanic,'' the DBRA 
definition of ``contractor'' does not involve the consideration of 
whether an individual or entity is a business owner under 29 CFR 
541.101. The Department defines the term ``contractor'' as a person 
that ``enters into or is awarded a contract'' covered by the DBRA. If a 
person enters into a covered prime contract or subcontract, that person 
is a ``contractor'' to whom the DBRA requirements for contractors 
apply--requiring that they ensure that any laborers or mechanics they 
employ (or contract for) on the project are paid a prevailing wage.
    Accordingly, the Department has not amended the definition of 
``contractor'' to discuss the FLSA ``business owner'' exemption, and 
the final rule adopts the definition of ``contractor'' as proposed.
(3) Definition of ``Prime Contractor''
    The Department also proposed to add a definition for the term 
``prime contractor'' as it is used in part 5 of the regulations. 
Consistent with the ARB's decision in Liberty Mutual, ARB No. 00-018, 
2003 WL 21499861, at *6, the Department proposed a broad definition of 
prime contractor that would prioritize the appropriate allocation of 
responsibility for contract compliance and enhance the effectiveness of 
the withholding remedy. The proposed definition would clarify that the 
label an entity gives itself is not controlling; rather, an entity is 
considered to be a ``prime contractor'' based on its contractual 
relationship with the Government, its control over the entity holding 
the prime contract, or the duties it has been delegated.
    The proposed definition began by identifying as a prime contractor 
any person or entity that enters into a covered contract with an 
agency. This would include, under appropriate circumstances, entities 
that may not be understood in lay terms to be ``construction 
contractors.'' For example, where a non-profit organization, owner/
developer, borrower or recipient, project manager, or single-purpose 
entity contracts with a State or local government agency for covered 
financing or assistance with the construction of housing--and the other 
required elements of the relevant

[[Page 57606]]

Related Act statute are satisfied--that owner/developer or recipient 
entity is considered to be the ``prime contractor'' under the 
regulations. This is so even if the entity does not consider itself to 
be a ``construction contractor'' and itself does not employ laborers 
and mechanics and instead subcontracts with a general contractor to 
complete the construction. See, e.g., Phoenix Dev. Co., WAB No. 90-09, 
1991 WL 494725, at *1 (Mar. 29, 1991) (``It is well settled that prime 
contractors (`owners-developers' under the HUD contract at hand) are 
responsible for the Davis-Bacon compliance of their subcontractors.''); 
Werzalit of Am., Inc., WAB No. 85-19, 1986 WL 193106, at *3 (Apr. 7, 
1986) (rejecting petitioner's argument that it was a loan ``recipient'' 
standing in the shoes of a State or local government and not a prime 
``contractor'').
    The proposed definition of ``prime contractor'' also included the 
controlling shareholder or member of any entity holding a prime 
contract, the joint venturers or partners in any joint venture or 
partnership holding a prime contract, any contractor (e.g., a general 
contractor) that has been delegated all or substantially all of the 
responsibilities for overseeing and/or performing the construction 
anticipated by the prime contract, and any other person or entity that 
has been delegated all or substantially all of the responsibility for 
overseeing Davis-Bacon labor standards compliance on a prime contract. 
Under this definition, more than one entity on a contract--for example, 
both the owner/developer and the general contractor--could be 
considered to be ``prime contractors'' on the same contract. 
Accordingly, the proposal also explained that any of these related 
legal entities would be considered to be the ``same prime contractor'' 
for the purposes of cross-withholding.
    Although the Department had not previously included a definition of 
prime contractor in the implementing regulations, the proposed 
definition was consistent with the Department's prior enforcement of 
the DBRA. In appropriate circumstances, for example, the Department has 
considered a general contractor to be a ``prime contractor'' that is 
therefore responsible for the violations of its subcontractors under 
the regulations--even where that general contractor does not directly 
hold the contract with the Government (or is not the direct recipient 
of Federal assistance), but instead has been hired by the private 
developer that holds the overall construction contract. See Palisades 
Urb. Renewal Enters. LLP., ALJ No. 2006-DBA-00001, slip op. at 16 (Aug. 
3, 2007), aff'd, ARB No. 07-124, 2009 WL 2371237 (July 30, 2009); 
Milnor Constr. Corp., WAB No. 91-21, 1991 WL 494763, at *1, *3 (Sept. 
12, 1991); cf. Vulcan Arbor Hill Corp. v. Reich, 81 F.3d 1110, 1116 
(D.C. Cir. 1996) (referencing agreement by developer that ``its prime'' 
contractor would comply with Davis-Bacon standards). Likewise, where a 
joint venture holds the contract with the government, the Department 
has characterized the actions of the parties to that joint venture as 
the actions of ``prime contractors.'' See Big Six, Inc., WAB No. 75-03, 
1975 WL 22569, at *2, *4 (July 21, 1975).
    The proposed definition of prime contractor was also similar to the 
broad definition of the term ``contractor'' in the FAR part 9 
regulations that govern suspension and debarment across a broad swath 
of Federal procurement contracts. In that context, where the Federal 
Government seeks to protect its interest in effectively and efficiently 
completing procurement contracts, the FAR Council has adopted an 
expansive definition of contractor that includes affiliates or 
principals that functionally control the prime contract with the 
government. See 48 CFR 9.403. Under the FAR part 9 definition, 
``Contractor'' means any individual or entity that ``[d]irectly or 
indirectly (e.g., through an affiliate)'' is awarded a Government 
contract or ``[c]onducts business . . . with the Government as an agent 
or representative of another contractor.'' Id.\174\ The Department has 
a similar interest here in protecting against the use of the corporate 
form to avoid responsibility for the Davis-Bacon labor standards.
---------------------------------------------------------------------------

    \174\ The definition section in 48 CFR 9.403 specifies that it 
applies only ``as used in this subpart''--referring to subpart 9.4 
of the FAR. It thus applies only to the general suspension and 
debarment provisions of the FAR and does not apply to the 
regulations within the FAR that implement the Davis-Bacon labor 
standards, which are located in FAR part 22 and the contract clauses 
in FAR part 52. The DBRA-specific provisions of the FAR are based on 
the Department's regulations in parts 1, 3, and 5 of subtitle 29 of 
the CFR, which are the subject of this rulemaking. The Department 
does not anticipate that this rulemaking will affect FAR subpart 
9.4.
---------------------------------------------------------------------------

    The Department sought comment on the proposed definition of ``prime 
contractor,'' in particular, as it would affect the withholding 
contract clauses at Sec.  5.5(a)(2) and (b)(3), the prime contractor 
responsibility provisions at Sec.  5.5(a)(6) and (b)(4), and the 
proposed provisions in Sec.  5.9 regarding the authority and 
responsibility of contracting agencies for satisfying requests for 
cross-withholding.
    Several commenters, including LIUNA, UBC, and UA, expressed support 
for the proposed definition of ``prime contractor.'' These commenters 
supported the proposed definition of ``prime contractor'' because they 
believe the definition--in tandem with the modifications to the 
withholding contract clause--will help address violations on DBRA 
contracts by expanding the Department's ability to recover back wages. 
Commenters emphasized that there has been documentation of widespread 
labor violations in the construction industry in recent decades, and 
that this problem has been exacerbated by various enforcement 
shortcomings.\175\ As the UBC noted, the lack of meaningful enforcement 
in the industry has in turn led to ``a breakdown of industry self-
policing.'' Commenters also stated that there has been an increase in 
recent

[[Page 57607]]

decades in the use of ``contracting vehicles,'' such as single-purpose 
limited liability companies (LLCs). NCDCL and FFC stated that they had 
witnessed the use of these vehicles by contractors to avoid liability 
for wage violations. According to the UA, it is ``vital'' that the 
Department clarify liability for back wages for those contractors that 
``jump from one project to the next under various names.''
---------------------------------------------------------------------------

    \175\ WA BCTC and LIUNA, for example, pointed to the 
Department's recent data showing that the construction industry is 
consistently one of the top two low-wage, high violation industries. 
See https://www.dol.gov/agencies/whd/data/charts/low-wage-high-violation-industries. The comment from the Leadership Conference on 
Civil & Human Rights and other civil rights and worker advocacy 
organizations pointed to various studies showing that a significant 
number of construction employers misclassified workers as 
independent contractors or otherwise working ``off-the-books.'' See, 
e.g., Mark Erlich, ``Misclassification in Construction: The Original 
Gig Economy,'' 74 Indus. & Lab. Rel. Rev. 1202 (2021); Nat'l Emp. L. 
Project, ``Independent Contractor Misclassification Imposes Huge 
Costs on Workers and Federal and State Treasuries '' (Oct. 2020), 
https://www.nelp.org/publication/independent-contractor-misclassification-imposes-huge-costs-workers-federal-state-treasuries-update-october-2020; Nathaniel Goodell & Frank Manzo IV, 
``The Costs of Wage Theft and Payroll Fraud in the Construction 
Industries of Wisconsin, Minnesota, and Illinois: Impacts on Workers 
and Taxpayers '' (Jan. 2021), https://midwestepi.files.wordpress.com/2020/10/mepi-ilepi-costs-of-payroll-fraud-in-wi-mn-il-final.pdf; Mandy Locke, et. al., ``Taxpayers and 
Workers Gouged by Labor-Law Dodge,'' Miami Herald (Sept. 4, 2014), 
https://www.miamiherald.com/latest-news/article1988206.html; Russell 
Ormiston et al., supra note 70, at 75-113 (summarizing widespread 
labor violations in the residential construction industry). A 
comment from two Professors of Economics noted that the research 
documenting worker misclassification and wage theft in the U.S. 
construction industry is ``extensive.'' They noted one estimate 
using government data found between 12.4 percent and 20.5 percent of 
the U.S. construction workforce is misclassified, while other 
studies imply the proportion exceeds 30 percent in some locations. 
See Russell Ormiston et. al., ``An Empirical Methodology to Estimate 
the Incidence and Costs of Payroll Fraud in the Construction 
Industry'' (2020) at 37, http://iceres.org/wp-content/uploads/2020/06/ICERES-Methodology-for-Wage-and-Tax-Fraud.pdf; Workers Defense 
Project, ``Building a Better Texas: Construction Conditions in the 
Lone Star State'' (2013) at 2, https://workersdefense.org/wpcontent/uploads/2020/10/research/Build%20a%20Better%20Texas.pdf; Clayton 
Sinai et al., ``The Underground Economy and Wage Theft,'' Catholic 
Labor Network (2021) at 7,https://catholiclabor.org/wpcontent/uploads/2021/04/Underground-Economy-and-Wage-Theft-Report-4.14.pdf.
---------------------------------------------------------------------------

    As the comment from the LCCHR and other civil rights and worker 
advocacy organizations stated, the expanded definition of ``prime 
contractor'' will ensure that any person or entity that is entirely or 
mostly responsible for overseeing the contract will be accountable for 
following the law. Referencing the proposal, COSCDA stated that they 
concurred generally with the Department's efforts to recover back 
wages. III-FFC stated that the prime contractor definition, as 
incorporated into the proposed cross-withholding provision, would help 
to protect workers against wage theft and will help to achieve the 
fundamental purpose of the Davis-Bacon Act.
    Other commenters opposed the proposed definition. The Illinois Road 
& Transportation Builders Association (IRTBA), the Ohio Contractors 
Association (OCA), the Southern Illinois Builders Association (SIBA), 
and the American Pipeline Contractors Association (APCA) submitted 
comments arguing that the proposed definition would place an undue 
burden on contractors, increase their risk, and discourage them from 
bidding on work covered by the DBRA, thus making it harder for the 
government to find qualified contractors. These commenters, along with 
the FTBA, also argued that the new definition would not improve 
enforcement of the Davis-Bacon Act, and that the Department had not 
presented any evidence that the current standards for imposing 
liability are either ineffective or unworkable. The FTBA asserted that 
the Department's sole justification was to create a ``broader pot of 
funds if needed for withholding purposes.''
    Other commenters did not directly oppose the definition of ``prime 
contractor,'' but they expressed concerns or requested additional 
clarification. NAHB expressed concern that the proposed definition of 
``prime contractor'' (among other proposals) would introduce 
uncertainty as to liability for homebuilders, particularly multifamily 
builders that are highly dependent on subcontractors. In their comment, 
NAHB suggested that the definitions of ``prime contractor'' and 
``subcontractor'' seem to remove the ``defining line'' between general 
contractor and subcontractor liability. NAHB stated that the Department 
should clarify that the apportionment of liability between multiple 
entities should be governed by the ``joint employer'' standard under 
the FLSA. Likewise, AGC, in a manner similar to its comment regarding 
the definition of ``contractor,'' did not specifically oppose the 
proposed definition of ``prime contractor,'' but requested 
clarification that a ``business owner'' under the FLSA regulations is 
not included in the definition. Several other commenters opposed the 
Department's cross-withholding provisions but did not expressly oppose 
the definition of ``prime contractor.''
    The Department agrees with the commenters that supported the 
proposed definition of ``prime contractor'' because it will promote 
compliance with the DBRA by specifying which entities are properly 
defined as prime contractors. As these commenters explained, recent 
studies have shown that there is widespread noncompliance with basic 
wage and hour laws in the construction industry as a whole, and in the 
residential construction industry in particular.\176\ Under these 
circumstances, and given the very large number of DBRA-covered 
contracts for which the Department is in charge of enforcement, it is 
important that the regulations and contract clauses appropriately 
incentivize compliance.\177\ By codifying a definition of ``prime 
contractor,'' the Department clarifies which entities may be held 
liable for noncompliance of subcontractors. Doing so puts these 
entities on notice that they will be held liable for violations of 
subcontractors on the contract under the liability and flow-down 
provisions of the contract clauses at Sec.  5.5(a)(6) and (b)(4), which 
create an incentive for the prime contractors to ensure that 
subcontractors on the project will be in compliance with the DBRA 
before work commences.
---------------------------------------------------------------------------

    \176\ See supra note 175.
    \177\ The Department also addresses these arguments in its 
discussion of the cross-withholding provision in the DBRA contract 
clause, in section III.B.3.xxiii.
---------------------------------------------------------------------------

    The Department disagrees with commenters that opposed the proposed 
definition on the basis that the Department lacked sufficient evidence 
or analysis showing that the new definition is necessary. As noted 
above, the widespread compliance problems in the construction industry 
are well documented, see supra note 175, and, as explained in the NPRM, 
the Department has noted that the use of single-purpose LLC entities 
and similar joint ventures and teaming agreements has been increasing 
in recent decades. See, e.g., John W. Chierichella & Anne Bluth Perry, 
``Teaming Agreements and Advanced Subcontracting Issues,'' TAASI GLASS-
CLE A, at *1-6 (Fed. Publ'ns LLC, 2007); A. Paul Ingrao, ``Joint 
Ventures: Their Use in Federal Government Contracting,'' 20 Pub. Cont. 
L.J. 399 (1991). This confluence of trends in construction contracting 
has created significant enforcement challenges for the Department, at 
times requiring exhaustive investigations and litigation to pierce the 
corporate veil.\178\ One of the key reforms that experts analyzing 
these types of problems in the construction industry have recommended 
is a clarification of liability among upper-level entities that have 
control over the workplace.\179\
---------------------------------------------------------------------------

    \178\ See, e.g., Letter from Cheryl M. Stanton, Adm'r to Hal J. 
Perloff (Sept. 17, 2020) (piercing the veil in DBRA matter involving 
a Military Housing Privatization Initiative project).
    \179\ See, e.g., Ormiston et al. (2020), supra note 70 at 100-
101.
---------------------------------------------------------------------------

    The Department also does not agree that the proposed definition 
would cause undue burdens or introduce uncertainty for contracting 
entities. The regulations in Sec.  [thinsp]5.5(a)(6) and (b)(4) have 
long held prime contractors responsible for compliance by their 
subcontractors, and the Department has long interpreted the Act as 
allowing for piercing the corporate veil in appropriate circumstances. 
Codifying the proposed definition of prime contractor does not change 
the obligations of a prime contractor on a DBRA project; rather, it 
provides clarity on which entity or entities are properly identified as 
the prime contractor. The definition uses well understood terms, 
including ``controlling shareholders or members'' and ``joint venturers 
or partners.'' It also states that contractors have been delegated 
``all or substantially all of the responsibilities for overseeing any 
construction'' will be considered prime contractors. This language 
provides clarity so that entities can recognize ahead of time whether 
they may bear potential liability for violations on a DBRA-covered 
contract and can protect themselves by using care in the choice of 
subcontractors and using indemnification agreements and similar 
instruments that will adequately address any increased risk.
    The Department disagrees with NAHB that the liability of prime 
contractors should be limited to any liability as ``joint employers'' 
under the FLSA. Such a limitation on liability would be inconsistent 
with the longstanding interpretation of the DBRA of holding

[[Page 57608]]

prime contractors responsible for any back wages that are owed to the 
employees of subcontractors regardless of whether there is any 
employment relationship or even any knowledge of the violations that 
have taken place. See 29 CFR 5.5(a)(6); M.A. Bongiovanni, Inc., WAB No. 
91-08, 1991 WL 494751, at *1 (Apr. 19, 1991). This longstanding 
interpretation follows from the Congressional intent in the DBRA that 
the Act ensure that laborers and mechanics that are employed on the 
site of the work are paid the required prevailing wage. Bongiovanni, 
1991 WL 494751, at *1.
    The Department also does not agree with AGC that a person who may 
be a ``business owner'' under the FLSA regulations cannot be a ``prime 
contractor'' under the DBRA definition. As noted above with regard to 
the definition of ``contractor,'' AGC's comment appears to conflate two 
concepts: first, whether an individual or business is a ``prime 
contractor'' and therefore must ensure that covered workers on the 
project are paid the required prevailing wage; and second, whether an 
individual is a ``laborer or mechanic'' to whom a prevailing wage must 
be paid. The provision of the FOH referenced by the AGC in its comment 
(FOH 15f06) addresses the latter question, not the former.
    While the Department declines to limit the definition of prime 
contractor with reference to the FLSA regulations, the Department has 
decided that the definition should be amended to limit ambiguity in one 
respect. In the proposal, the definition included ``any other person or 
entity that has been delegated all or substantially all of the 
responsibility for overseeing Davis-Bacon labor standards compliance on 
a prime contract.'' This language could have extended the definition to 
cover individual employees of a contractor regardless of their 
ownership interests, which was beyond the scope that the Department 
intended for the definition. This language has been removed from the 
definition in the final rule.
    Other than the modification noted above, the final rule adopts the 
definition of prime contractor in Sec.  5.2 as proposed.
(4) Definition of ``Subcontractor''
    In addition to new definitions of ``contractor'' and ``prime 
contractor,'' the Department also proposed a new definition of the term 
``subcontractor.'' The definition, as proposed, affirmatively stated 
that a ``subcontractor'' is ``any contractor that agrees to perform or 
be responsible for the performance of any part of a contract that is 
subject wholly or in part to the labor standards provisions of any of 
the laws referenced in Sec.  5.1.'' Like the current definition of 
``contract,'' the proposed definition of ``subcontractor'' also 
reflects that the Act covers subcontracts of any tier--and thus the 
proposed definition of ``subcontractor'' stated that the term includes 
subcontractors of any tier. See 40 U.S.C. 3412; Castro v. Fid. & 
Deposit Co. of Md., 39 F. Supp. 3d 1, 6-7 (D.D.C. 2014). The proposed 
definition of ``subcontractor'' necessarily excluded material suppliers 
(except for narrow exceptions), because such material suppliers are 
excluded from the definition of ``contractor,'' as proposed, and that 
definition applies to both prime contractors and subcontractors. 
Finally, the proposed definition of ``subcontractor'' stated that the 
term did not include laborers or mechanics for whom a prevailing wage 
must be paid.
    Several commenters expressed general support for the Department's 
definition of ``subcontractor.'' The Department did not receive any 
comments expressly opposed to the definition. NAHB and AGC, however, 
expressed similar concerns about the definition as their concerns about 
the definitions of ``contractor'' and ``prime contractor.'' NAHB 
suggested that the definition removed defining lines around traditional 
concepts of subcontractor liability. AGC sought to clarify that 
``business owners'' are ``exempt'' from being considered covered 
subcontractors.
    In light of the comments from NAHB and AGC, the Department has 
reconsidered one aspect of the definition of subcontractor. The 
proposed definition excluded from inclusion as ``subcontractors'' those 
``ordinary laborers or mechanics to whom a prevailing wage must be paid 
regardless of any contractual relationship which may be alleged to 
exist between the contractor or subcontractor and the laborers and 
mechanics.'' This language was borrowed from the 1935 amendment to the 
DBA, which requires the payment of a prevailing wage ``regardless of 
any contractual relationship which may be alleged to exist between the 
contractor or subcontractor and the laborers and mechanics.'' 40 U.S.C. 
3142(c)(1). This language has been interpreted to ensure that the 
requirement to pay a prevailing wage extends beyond the traditional 
common-law employment relationship. See section III.B.3.xxii 
(discussing the definition of ``Employed'').
    Upon further consideration, the Department's recitation of this 
statutory language in the proposed definition of ``subcontractor'' 
could have been misconstrued as having the opposite of the intended 
effect. By including that language in the 1935 amendment to the DBA, 
Congress intended to emphasize that an individual could be a laborer or 
mechanic--and therefore be due a prevailing wage--regardless of whether 
they might be called a subcontractor or independent contractor. See 
Bldg. & Const. Trades Dep't, AFL-CIO v. Reich, 40 F.3d 1275, 1288 (D.C. 
Cir. 1994) (analyzing House and Senate reports for the 1935 DBA 
amendments). In other words, an individual can both be referred to as a 
``subcontractor'' who contracts for a portion of the work on the prime 
contract and also be a laborer who must be paid a prevailing wage by 
the prime contractor or upper-tier subcontractor that has brought them 
onto the project.
    The conclusion that an individual can have dual roles as 
``subcontractor'' and ``laborer or mechanic'' is consistent with the 
Department's guidance on this issue. See DBRA-185 (July 28, 1993); 
DBRA-178 (July 31, 1992). In those letters, the Department responded to 
a request concerning the payment of prevailing wages to ``independent 
contractors who are owners or working foremen.'' After analyzing the 
statutory text of the DBA, the Department concluded that ``individuals 
[or partners] who subcontract to perform a portion of a Davis-Bacon 
contract and who simultaneously meet the regulatory definition of a 
laborer or mechanic must be compensated at the prevailing wage rate by 
the prime contractor for any work so performed.'' Id.\180\
---------------------------------------------------------------------------

    \180\ The Department's guidance regarding ``working 
subcontractors'' has not been a model of clarity. In the 1950's, the 
Department concluded that the statutory language of the 1935 
amendments clearly indicated that individuals could be both owner-
operators and also ``laborers or mechanics'' owed a prevailing 
wage--a position with which the Attorney General agreed. See Federal 
Aid Highway Program-Prevailing Wage Determination, 41 U.S. Op. Atty. 
Gen. 488, 489-503 (1960). Subsequently, after issuing several 
letters with similar positions, the Department then issued an AAM 
regarding ``working subcontractors'' in 1976, see AAM 123 (May 19, 
1976), only to immediately revoke it, see AAM 125 (Aug. 30, 1976). 
The Department promised subsequent guidance, but in the meantime 
reminded contracting agencies of the statutory language that the 
DBRA requirements must be met ``regardless of any contractual 
relationship[.]'' AAM 125. The Department did not issue a new AAM, 
but instead issued the 1981-1982 rulemaking, and then the subsequent 
ruling letters that clarified that individuals can be both 
``subcontractors'' and ``laborers or mechanics.'' DBRA-185 (July 28, 
1993); DBRA-178 (July 31, 1992). See also Griffin v. Sec'y of Lab., 
ARB Nos. 00-032, 00-033, 2003 WL 21269140, at *4, *7 (May 30, 2003) 
(noting that the Department ``considers even bona fide owner-
operators performing DBA-covered work on a DBA-covered project to be 
due the prevailing rate.''), aff'd sub nom Phoenix-Griffin Grp. II, 
Ltd. v. Chao, 376 F. Supp. 2d 234, 242 (D.R.I. 2005). The 
Department, however, has also stated that ``as a matter of 
administrative policy'' the requirements of the DBRA and CWHSSA are 
not applied to the wages of truck owner-operators who are bona fide 
independent contractors, even though they are laborers or mechanics 
within the meaning of the Acts. DBRA-54 (Nov. 1, 1977). The 
Department has explained in FOH 15e17 that this policy does not 
apply to owners of other equipment such as bulldozers, and that, as 
part of the policy, any employees hired by truck owner-operators are 
subject to the DBRA in the usual manner.

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[[Page 57609]]

    AGC's comment regarding the ``business owners'' exemption in Sec.  
541.101 of the FLSA regulations throws this hypothetical circumstance 
into sharper relief. The Department's DBRA regulations explain that 
individuals ``employed in a bona fide executive, administrative, or 
professional capacity as defined in part 541 of this title are not 
deemed to be laborers or mechanics.'' 29 CFR 5.2(h). The FLSA 
``business owner'' regulation at Sec.  541.101 is one method under part 
541 of identifying an employee that fits within the FLSA's exemption 
from minimum wage and overtime pay requirements for ``executive 
employees.'' Id. Sec.  541.101(a). That FLSA regulation language 
provides that an ``employee'' falls under the executive exemption if 
the employee ``owns at least a bona fide 20-percent equity interest in 
the enterprise in which the employee is employed, regardless of whether 
the business is a corporate or other type of organization, and who is 
actively engaged in its management.'' Id. The subsequent section of the 
FLSA regulations, Sec.  541.102, defines ``management'' as 
``[g]enerally'' including a variety of different duties, largely 
(though not solely) related to hiring and supervising employees.
    The DBA statute itself provides important context for responding to 
AGC's question regarding ``business owners.'' As the Department 
highlighted in the NPRM, the DBA contains express language conveying 
Congress's concern that the payment of prevailing wages to workers on 
covered projects should not be evaded by characterizing workers as 
owner operators or subcontractors. See BCTD v. Reich, 40 F.3d at 1288; 
DBRA-185; DBRA-178. The statute requires the payment of prevailing wage 
``regardless of any contractual relationship which may be alleged to 
exist between the contractor or subcontractor and the laborers and 
mechanics.'' 40 U.S.C. 3142(c)(1). This language was intended to 
``eliminat[e] an evasive device whereby individual laborers formed 
partnerships under which the member partners received less than the 
prevailing wage.'' BCTD, 40 F.3d at 1280 (citing the 1935 House and 
Senate reports).
    Accordingly, to find that an individual is not a ``laborer or 
mechanic'' and is not due the prevailing wage, it is not sufficient to 
simply assert that an individual has an ownership interest in a 
business. Rather, to be excepted from coverage under the DBRA, an 
individual must be employed in a ``bona fide'' executive capacity under 
the FLSA part 541 regulations. 29 CFR 5.2(h). In carrying out this 
analysis, the Department is mindful of the Congressional intent 
regarding the use of corporate entities and partnerships underpinning 
the 1935 amendments to the DBA.\181\
---------------------------------------------------------------------------

    \181\ The FOH provision that AGC cites emphasizes the narrowness 
of the exemption. It states that regardless of ownership interest, 
an individual ``who is required to work long hours, makes no 
management decisions, supervises no one and has no authority over 
personnel does not qualify for the executive exemption.'' FOH 15f06.
---------------------------------------------------------------------------

    In any case, as with the definitions of ``contractor'' and ``prime 
contractor,'' AGC has conflated the question of whether an individual 
may be exempt from being paid the prevailing wage as a ``laborer or 
mechanic'' with the question of whether an individual may be a 
``subcontractor.'' The FLSA definition of ``business owner'' is 
relevant to the ``laborer or mechanic'' definition under the DBRA, but 
is wholly distinct from whether an individual or entity is a 
``subcontractor'' with associated duties under the DBRA, its 
regulations, and its contract clauses.\182\
---------------------------------------------------------------------------

    \182\ Although not for the reason AGC asserted, it may be 
unlikely that an individual may be both a ``subcontractor'' under 
the DBRA and a ``business owner'' under the FLSA regulations. This 
is because the definition of ``business owner'' in the FLSA 
regulations includes any ``employee'' who owns a bona fide interest 
of at least 20 percent in ``the enterprise in which the employee is 
employed, regardless of whether the business is a corporate or other 
type of organization[.]'' 29 CFR 541.101. Under this language, an 
individual must actually be an employee of an enterprise or 
organization for which the individual has an ownership interest for 
the exemption to apply. This is so because of the terms of the 
regulation and because the FLSA's minimum wage and overtime pay 
requirements (the requirements from which part 541 provides 
exemptions) apply only to employees and not to bona fide independent 
contractors. The ``business owner'' exemption thus does not apply to 
an individual who is in business only as a bona fide sole proprietor 
or is not otherwise an employee of the enterprise or organization in 
which the individual has the ownership interest. Thus, to the extent 
such a sole proprietor (as opposed to an LLC or corporation) may 
subcontract for a portion of the prime contract, the individual 
would not meet the requirements for exemption as a ``business 
owner'' under Sec.  541.101.
---------------------------------------------------------------------------

    Accordingly, the final rule adopts the proposed definition of 
``subcontractor,'' amended as discussed above to eliminate the 
reference to the statutory language from 40 U.S.C. 3142(c)(1).
(E) Apprentice and Helper
    The Department proposed to amend the current regulatory definition 
in Sec.  5.2(n) of ``apprentice, trainee, and helper'' to remove 
references to trainees. A trainee is currently defined as a person 
registered and receiving on-the-job training in a construction 
occupation under a program approved and certified in advance by the 
Employment and Training Administration (ETA) as meeting its standards 
for on-the-job training programs, but ETA no longer reviews or approves 
on-the-job training programs, so this definition is unnecessary. See 
section III.B.3.iii.(C) (``29 CFR 5.5(a)(4) Apprentices''). The 
Department also proposed to modify the definition of ``apprentice and 
helper'' to reflect the current name of the office designated by the 
Secretary of Labor, within the Department, to register apprenticeship 
programs.
    The Department received three comments in response to this 
proposal. CEA and SMACNA both agreed that ETA no longer reviews or 
approves on-the-job training programs and supported the Department's 
proposal to remove references to trainees. The Illinois Asphalt 
Pavement Association (IAPA) opposed the Department's proposal and 
stated that ``eliminating trainees from the Davis[-]Bacon Act may have 
unintended consequences.'' IAPA noted that the Illinois Department of 
Transportation has a ``Highway Construction Careers Training Program'' 
with the U.S. Department of Transportation's (USDOT) Federal Highway 
Administration (FHWA), in which individuals receive intensive training 
in highway construction-related skills.\183\ IAPA cautioned that these 
student trainees may not be able to work on Davis-Bacon projects if the 
trainee language is removed.
---------------------------------------------------------------------------

    \183\ See Ill. Dep't of Transp., ``Highway Construction Careers 
Training Program,'' https://idot.illinois.gov/Assets/uploads/files/About-IDOT/Pamphlets-&-Brochures/PA%20HCCTP%20story%201%20kg.pdf 
(including ``job site readiness, carpentry, concrete flatwork, 
blueprint reading orientation, introduction to tools, forklift 
operation and Occupational Safety and Health Administration 10 
certification'').
---------------------------------------------------------------------------

    The Department notes that the proposed regulatory definition in 
Sec.  5.2 retains the text currently found in Sec.  5.2(n)(3), which 
states that the regulatory provisions do not apply to trainees employed 
on projects subject to 23 U.S.C. 113 who are enrolled in programs which 
have been certified by the Secretary of Transportation in accordance 
with 23 U.S.C. 113(c). The Department believes that retention of this 
language makes clear that student

[[Page 57610]]

trainees who are enrolled in such programs may continue to work on 
Davis-Bacon projects as a recognized category of workers at wage rates 
determined by the Secretary of Transportation in accordance with 23 
U.S.C. 113(c). Accordingly, the Department adopts the change to Sec.  
5.2 as proposed.
(F) Laborer or Mechanic
(1) Gender-Neutral Terminology
    The Department proposed to amend the regulatory definition of 
``laborer or mechanic'' to remove the reference to trainees and to 
replace the term ``foremen'' with the gender-neutral term ``working 
supervisors.'' \184\ The Department received several comments on this 
proposal.
---------------------------------------------------------------------------

    \184\ The proposal addressing trainees is discussed in greater 
detail below in section III.B.3.iii.(C) (``29 CFR 5.5(a)(4) 
Apprentices.'').
---------------------------------------------------------------------------

    The General Contractors Association of New York (GCA), while 
appreciative of efforts to introduce gender-neutral terminology, 
recommended using the term ``foreperson'' instead of ``working 
supervisor'' as the latter term may be confused with managerial 
positions. ARTBA also recommended the term ``foreperson'' instead, as 
the term ``working supervisor'' is ``nebulous and could apply to 
multiple people on a construction site.'' Several commenters objected 
to the term ``working supervisor,'' noting that the term ``working 
supervisor'' does not appropriately describe the years of training and 
skill attainment necessary to achieve the stature of ``journeyperson.'' 
See, e.g., SMART and SMACNA. This commenter also noted that the word 
``supervisor'' has a specific meaning under the National Labor 
Relations Act (NLRA) and cautioned against importing the word into 
Davis-Bacon regulations.
    Having considered the comments, the final rule adopts the proposed 
revision with modification. Rather than replacing the term ``foremen'' 
with ``working supervisor,'' the Department adopts the gender-neutral 
term ``foreperson.''
(2) Survey Crews
    The Department did not propose any additional substantive changes 
to this definition, but because it frequently receives questions 
pertaining to the application of the definition of ``laborer or 
mechanic''--and thus the application of the Davis-Bacon labor 
standards--to members of survey crews, the Department provided 
information in the preamble of the NPRM to clarify when survey crew 
members are laborers or mechanics under the existing definition of that 
term. The Department adopts that guidance in the preamble to this final 
rule, with an additional clarification in response to comments 
received.
    Specifically, the NPRM stated that the Department has historically 
recognized that members of survey crews who perform primarily physical 
and/or manual work on a DBA or Related Acts covered project on the site 
of the work immediately prior to or during construction in direct 
support of construction crews may be laborers or mechanics subject to 
the Davis-Bacon labor standards.\185\ Whether or not a specific survey 
crew member is covered by these standards is a question of fact, which 
takes into account the actual duties performed and whether these duties 
are ``manual or physical in nature,'' including the ``use of tools or . 
. . work of a trade.'' When considering whether a survey crew member 
performs primarily physical and/or manual duties, it is appropriate to 
consider the relative importance of the worker's different duties, 
including (but not solely) the time spent performing these duties. 
Thus, survey crew members who spend most of their time on a covered 
project taking or assisting in taking measurements would likely be 
deemed laborers or mechanics (provided that they are not exempt as 
professional, executive, or administrative employees under part 541). 
If their work meets other required criteria (i.e., it is performed on 
the site of the work, where required, and immediately prior to or 
during construction in direct support of construction crews), it would 
be covered by the Davis-Bacon labor standards.
---------------------------------------------------------------------------

    \185\ 87 FR 15729 (citing AAM 212 (Mar. 22, 2013)).
---------------------------------------------------------------------------

    The Department sought comment on issues relevant to the application 
of the current definition to survey crew members, especially the range 
of duties performed by, and training required of, survey crew members 
who perform work on construction projects and whether the range of 
duties or required training varies for different roles within a survey 
crew based on the licensure status of the crew members, or for 
different types of construction projects.
    The Department received a number of comments in response to the 
clarifying information provided in the NPRM despite proposing no 
changes to the definition of ``laborer or mechanic'' that would impact 
the application of this term to members of survey crews. Many 
commenters misunderstood the information provided to mean that the 
Department was proposing to categorically deem members of survey crews 
to be ``laborers or mechanics'' subject to the Davis-Bacon labor 
standards and wrote to support or oppose such a change. The Department 
did not make such a proposal and reiterates that whether a specific 
survey crew member is covered by the Davis-Bacon labor standards is a 
question of fact based largely on the actual duties performed. 
Similarly, some commenters opined that the work performed by survey 
crew members is ``manual or physical in nature,'' and thus within the 
definition of ``laborer or mechanic,'' or that such work is ``mental'' 
or ``intellectual'' in nature, and thus not within the definition, 
without addressing the range of duties performed by, and training 
required of, survey crew members who perform work on construction 
projects. However, the Department has long recognized that work 
performed by survey crew members ``immediately prior to or during 
construction in direct support of construction crews'' involves a range 
of duties, which are evaluated to determine whether a specific survey 
crew member or category of survey crew members are ``laborers or 
mechanics.'' AAM 16 (July 25, 1960); AAM 39 (Aug. 6, 1962); AAM 212 
(Mar. 22, 2013).\186\
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    \186\ Commenters that characterize the Department's position as 
``flipflopping'' on the issue of survey crew coverage fail to 
recognize the fact-specific nature of this coverage question. For 
example, AGC contended that the Department extended coverage to 
survey crew members in AAM 212 and ``confirmed that surveying work 
is not covered'' when it rescinded AAM 212. While AAM 212 was 
rescinded to allow the Department to seek a broader appreciation of 
the coverage issue and due to its incomplete implementation, see AAM 
235 (Dec. 14, 2020), its rescission did not change the applicable 
standard, which is the definition of ``laborer or mechanic'' as 
currently set forth in 29 CFR 5.2(m), or the Department's position 
that coverage depends on the range of duties performed.
---------------------------------------------------------------------------

    The duties of survey crew members described by commenters varied 
widely. As a preliminary matter, several commenters distinguished 
between the surveying work that typically occurs in direct support of 
construction crews and other work that survey crews may perform. The 
California Land Surveyors Association (CLSA) noted that ``construction 
and construction-related land surveying work is a very small fraction 
of any land surveyor[']s work.'' It further noted that ``[c]onstruction 
land surveying field work is comprised of an ability to read 
engineering and architecture plans and convey this information to 
construction contractor's tradesman so they may self-perform their land 
surveying work,'' explaining that ``[c]ontractors have the full 
capacity, due to technology, to perform

[[Page 57611]]

any prospective land surveying work limited to manual or physical 
duties related to construction.'' This was echoed by III-FFC, which 
explained that ``survey work on a construction project is distinct from 
professional land surveying activities such as marking land boundaries 
or preparing a description for title or real property rights,'' and by 
ARTBA, which described the need to ``distinguish between the survey 
work performed by design professionals and the essential surveying 
tasks that take place as part of construction activities.'' GCA 
similarly ``distinguish[ed] between the survey work performed by 
licensed professionals who often work for design or consulting firms, 
and the survey work performed by construction crews that are essential 
to any construction project,'' opining that the latter should 
``continue to be covered by prevailing wage requirements.'' An 
individual commenter noted that as the technology has become more 
readily available, ``construction companies have been able to purchase 
equipment and train individuals in their rudimentary measurements 
functions.'' Another noted that many construction companies now have 
surveyors on staff.
    The Department recognizes that survey work performed ``immediately 
prior to or during construction in direct support of construction 
crews'' may differ from survey work performed in other contexts and may 
vary in complexity. The Department has kept this in mind while 
reviewing the duties described by commenters, focusing on the duties 
performed by survey crew members on Davis-Bacon covered contracts. For 
instance, several commenters described work performed off the site of 
the work, including preliminary office work, such as preparing design 
information for use in the field; uploading design information to the 
total station, GPS device, or data collector; research; and 
postliminary office work, such as downloading and reviewing information 
from that day's field work. IAPA; Illinois Professional Land Surveyors 
Association (IPLSA); IRTBA; OCA. Because such duties would not 
generally be performed on the site of the work, and thus would not be 
subject to the Davis-Bacon labor standards, the Department did not 
consider such duties to be an integral part of the work performed for 
the purposes of determining whether survey crew members are ``laborers 
or mechanics'' for the purposes of 29 CFR 5.2(m). Conversely, IAPA 
pointed out that the Department did not include in the clarifying 
information in the NPRM its previous determination from AAM 212 that 
only survey crew members employed by contractors or subcontractors on a 
project may be covered laborers or mechanics. The Department agrees 
that only survey crew members employed by contractors or subcontractors 
on a project may be covered laborers or mechanics.
    A number of commenters described the survey work performed on 
construction sites immediately prior to or during construction in 
direct support of construction crews. For instance, several commenters 
explained that this includes reestablishing land boundary monuments and 
control points, doing construction layout, and placing wooden stakes 
(known as lath and hubs) that mark the contours of the construction 
project. IAPA, IPLSA, IRTBA, Michigan Department of Transportation 
(MDOT), OCA, SIBA. ``A general description of survey work on horizontal 
construction (e.g., a highway, road, or runway project) begins with 
laying out the control points provided on the engineer's plans. Next, a 
survey crew or worker locates, marks, and installs lath and hub with a 
hammer and/or sledgehammer at certain points across the jobsite (e.g., 
every 25, 50, or 100 feet) for the initial excavation. A worker may 
initially use a GPS unit to measure for a `rough grade.' Then, after 
initial excavation, the worker may use a robotic instrument for more 
accurate positioning and elevation and continue to mark various layers 
of subgrade, including utilization of robotics and GPS positioning for 
machine control (e.g., excavation, paving, drilling, and pile driving). 
Throughout the day the worker is physically driving lath and hubs into 
the earth or carrying, setting up and using equipment around the 
construction site. From start to finish on a construction project, 
survey crew members work in direct support of construction crews.'' 
III-FFC. Of these duties, GCA explained that construction crews can 
perform duties ``essential to any construction project,'' including 
``layout for neat lines, rough excavation, footings, piers, piles, 
caissons anchor bolts, base plates, walls, major imbedded items, slurry 
walls, and other procedures that require layout of all lines and grades 
for vertical and horizonal control.''
    Some commenters emphasized aspects of the work requiring the 
exercise of professional judgment, such as the need to ``observe the 
progress of the project, read and interpret design data and methods on 
the construction plans, calculate and determine if the current site 
conditions meet the intent of the design, and recalculate and/or design 
a solution in the field that satisfies the plans.'' Michigan Society of 
Professional Surveyors (MSPS); see also MDOT. These commenters also 
emphasized the need to complete forms, perform calculations and 
technical and mentals tasks, and the need to use complex electronic 
devices. MDOT; MSPS.
    Other commenters emphasized physical and manual aspects of 
surveying work, including the use of tools. III-FFC explained: ``To 
perform their job, survey crew members use data collectors, GPS units, 
robotic instruments (i.e., robotic total stations), total stations, 
transits, drones, scanners, and ground penetrating radar. This 
equipment is used for construction purposes such as: survey control; 
building control including grid line layout, electrical, plumbing, 
communications, foundations, and heating, ventilation, and air 
conditioning (HVAC) systems; clearing; slope staking; rough grade; 
final/finish grade; drainage and utility layout; curb, sidewalk and 
other hardscape surface improvements; subdrains; structures; walks; 
channels' culverts; and stakes or measurements for other related items 
. . . . Workers on a survey crew also use a variety of tools commonly 
associated with construction work, including sledgehammers to drive 
lath and hubs into the ground, hammers, nails, shovel, folding rule, 
scribe, tool belt, spray paint and ribbon . . . . While some methods 
have changed with technical advances, the physical nature of survey 
work has not.'' Similarly, IUOE explained that ``members of Surveyor 
Crews are on their feet most of the workday, often walking several 
miles a shift up and down slope. Crew members are often expected to 
carry 30-40 lbs. worth of equipment with them to perform their task 
including but not limited to: GPS receivers [and] staff, lathe rub and 
hack bag, sledgehammer, and shovel. Additionally, Survey Crew members 
are expected to carry manual tools on utility belts including a 16 oz 
hammer, gloves, goggles, hand tape and knives. Surveyors are often 
tasked with navigating rough terrain and working with a GPS to sink 
stakes, lathes, and hubs with a sledgehammer into the ground for 
equipment operators to use as a guide for excavating or grading.'' 
Additionally, they noted that surveyors ``are often tasked with 
chiseling into concrete with steel hammers to mark where other trades 
are to locate walls and put-up machinery.'' A professional land 
surveyor and small business owner opined that ``[c]onstruction survey 
personnel's duties are considerably

[[Page 57612]]

more physically demanding and dangerous than those of power equipment 
operators who have always been considered labor. While providing 
construction surveying services does involve significant mental 
calculations in the interpretation of engineering plans, setting 100 to 
1000 stakes per day on an active construction site is nothing but 
laborious.''
    Commenters were also divided as to the impact that technological 
developments have had on survey crew members duties. IAPA, Professional 
Land Surveyors of Ohio, and several individual commenters stated that 
the use of sophisticated technology and field computers has reduced the 
amount of physical labor required and increased the intellectual 
requirements. One individual commenter noted that ``such manual labor 
is now uncommon for our crews, who by the virtue of technology spend 
nearly all their time in intellectual labor with extremely complex, 
delicate and very expensive equipment.'' CLSA explained that 
``technology has allowed contractors to perform their construction work 
with less involvement of a land surveyor. Machine guidance--GPS mounted 
to construction equipment for the purposes of determining precise 
grading--has eliminated the mass grading work and underground utilities 
staking work previously performed by land surveyors. Contractors rely 
on a land surveyor's expertise in the limited capacities of 
establishment of three-dimension project control, development of 
digital design models, specialized training and certifications of the 
contractors' work, such as building pad elevation and foundation form 
certifications.''
    The wide range of duties described, as well as the differences 
between the scope of work performed by survey crews employed by 
surveying or design firms versus survey crews employed by construction 
companies, highlights the need to evaluate the specific duties 
performed by the survey crew members on a project. The Department 
reiterates its view set forth in the NPRM that whether a specific 
survey crew member is covered by these standards is a question of fact, 
which takes into account the actual duties performed and whether these 
duties are ``manual or physical in nature,'' including the ``use of 
tools or . . . work of a trade.'' Consideration of tool use is 
particularly important given the technological developments in 
surveying. The Department notes that while the computerized equipment 
used in surveying today is more sophisticated than the hand tools of 
the past, certain uses of this new technology have made it easier for 
those with less training and academic background to perform surveying 
tasks required on construction jobsites. See ARTBA, CLSA, GCA. In light 
of these developments, the Department continues to believe that survey 
crew members who spend most of their time on a covered project taking 
or assisting in taking measurements would likely be deemed laborers or 
mechanics (provided that they are not exempt as professional, 
executive, or administrative employees under part 541, as discussed). 
If their work meets other required criteria--i.e., it is performed on 
the site of the work (where required) and immediately prior to or 
during construction in direct support of construction crews--it would 
be likely covered by the Davis-Bacon labor standards. Similarly, the 
Department considers duties such as walking and carrying equipment and 
setting stakes to be physical or manual for the purposes of determining 
whether a survey crew member is a ``laborer or mechanic.''
    A number of commenters, particularly those associated with 
professional surveying organizations, expressed strong disagreement 
with the Department's view that survey crew members who spend most of 
their time on a covered project taking or assisting in taking 
measurements would likely be deemed laborers or mechanics. See, e.g., 
CLSA, IPLSA, National Society of Professional Surveyors (NSPS). In 
support of their position, they cite AAM 39 (which they refer to as the 
``Goldberg Standard''), characterizing it as ruling that members of 
survey crews were exempt from Davis-Bacon, and that such workers are 
covered only to the extent to which they ``perform manual work, such as 
clearing brush and sharpening stakes.'' NSPS. They further asserted 
that ``[s]taking by survey crews on a job site is 1% the physical and 
manual task of putting a stake in the group and 99% collecting and 
analyzing data and making judgments for determining where to set a 
stake.'' NSPS. IPLSA contends that the NPRM was ``the first time that 
the Department has ever referenced taking measurements as a physical or 
manual task.'' IPLSA.
    These characterizations of the Department's proposal are somewhat 
overstated. Two years prior to issuing AAM 39, the Department issued 
AAM 16, in which it concluded that survey crew members who acted as 
``chainmen,'' ``rodmen,'' and ``instrument men'' were laborers or 
mechanics for the purposes of applying the Davis-Bacon labor standards 
(in contrast, the party chief was considered a bona fide supervisor 
excluded from the definition of ``laborer or mechanic''). In reaching 
its decision, the Department evaluated the duties performed by these 
survey crew members. In addition to clearing brush and sharpening 
stakes, the determination noted that ``chainmen and rodmen'' also set 
stakes, handled the rod and tape, and performed other comparable 
duties. In evaluating the ``instrument men'' role, the Department 
considered that it involved, among other physical tasks, ``occasionally 
perform[ing] the physical work of rodmen or chainmen,'' ``carry[ing] 
and plac[ing] the instruments . . . [and] operat[ing] them,'' 
``mak[ing] the sighting and tak[ing] and record[ing] the readings,'' as 
well as being required ``to exercise discretion, judgment, and skill 
involving problems encountered in the field.'' Notably, these physical 
tasks include several examples of using surveying tools.
    While AAM 39 appears to take a narrower view of the duties 
performed by laborers and mechanics, reliance on this AAM is misplaced. 
As demonstrated by the numerous comments received, the duties performed 
by survey crew members are far different from those described in AAM 39 
(even the earlier AAM 16 described a wider array of duties). Moreover, 
as several commenters indicated, the more sophisticated equipment 
available today actually makes them easier for survey crew members with 
less training and academic background to use. Finally, it is not clear 
that the narrow reading of ``laborer or mechanic'' in AAM 39 is 
consistent with the common meaning of those terms when the Davis-Bacon 
Act was enacted. While it distinguished the term ``laborer'' as ``one 
who performs manual laborer or labors at a toilsome occupation 
requiring physical strength'' from the term ``mechanic,'' a ``skilled 
worker with tools, who has learned a trade,'' it failed to articulate 
why the latter would not apply to a wider range of survey crew members 
who use tools or even to address other types of physical work performed 
by survey crew members, such as walking and carrying equipment.\187\
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    \187\ The statutory term ``laborer or mechanic'' incorporates 
the meanings of the terms ``laborer'' and ``mechanic'' as these were 
commonly understood in 1931. See SMART and cases cited therein. 
Thus, any interpretation of ``laborer or mechanic'' that focuses 
solely on the meaning of ``laborer'' is inconsistent with the 
statute. For this reason, the Department finds unpersuasive the 
point raised by several commenters, e.g., IRTBA, NSPS, that, because 
the BLS separately defines the terms ``surveyor'' and ``laborer,'' 
members of survey crews cannot be laborers or mechanics. In response 
to such narrow interpretations, including the Department's 
interpretation in AAM 39, SMART opined that the Department should 
modify the definition of ``laborer or mechanic'' to inter alia give 
effect to each of its component terms. The Department notes that it 
did not propose any substantive changes to the definition of 
``laborer or mechanic.'' Moreover, it believes that the current 
definition adequately reflects the separate characteristics of 
``laborers'' and ``mechanics.'' The Department also notes that to 
the extent SMART referred to the Department's position about 
flaggers being laborers or mechanics, as reflected in AAM 141 (Aug. 
16, 1985) since 1985, the revisions in this rule regarding flaggers 
do not address their status as laborers or mechanics, but rather 
clarify coverage of flaggers in connection with the site of the 
work.

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[[Page 57613]]

    Several commenters asserted that surveyors, or survey crew members 
more generally, should be treated as ``learned professionals'' under 29 
CFR part 541, and therefore excluded from the definition of ``laborer 
or mechanic,'' 29 CFR 5.2(m) (``Persons employed in a bona fide 
executive, administrative, or professional capacity as defined in part 
541 of this title are not deemed to be laborers or mechanics.''), 
because surveying is recognized as a ``professional service'' akin to 
architecture or engineering under the Brooks Act, 40 U.S.C. 1101 et 
seq. American Council of Engineering Companies; IAPA; IRTBA; NSPS; OCA; 
SIBA. Commenters also highlighted the training and licensure 
requirements for surveyors and expressed the view that survey crew 
members ``are either professional land surveyors or overseen by 
professional land supervisors'' and should therefore not be considered 
``laborers or mechanics.'' IAPA; IPLSA; IRTBA; OCA; SIBA. Specifically, 
NSPS noted that all 50 states license individuals to engage in the 
professional practice of surveying, and an individual commenter stated 
that most states require a 4-year college degree. CLSA explained that 
while ``[e]very state recognizes a bachelor's degree in land surveying 
as a qualification to becoming a licensed land surveyor,'' 12 states 
require a 4-year degree in land surveying or an associated field and 38 
require at least some formal education as a minimum qualification to 
becoming a licensed land surveyor. It further noted that a surveyor 
working in the field has training in engineering and that a 
construction surveyor has ``a high level of technical training anchored 
in math, related professions, construction management, and electronic 
data management.'' IAPA, IPLSA, IRTBA, OCA, and SIBA explained that 
Professional Land Surveyors licensed in Illinois must have a 
baccalaureate degree in land surveying or a related science field with 
24 credits of land surveying course from an accredited college, pass 
two licensing exams, and serve as a surveyor in training for 4 years, 
and then continue to take continuing education to remain licensed. 
Similarly, MSPS stated that survey crew members working on construction 
projects operate as ``highly knowledgeable, specially trained, 
technicians and paraprofessionals'' whose education and certificates of 
achievement ``provide advanced knowledge in the surveying profession 
necessary for taking or assisting in taking measurements and exceed the 
classification of `laborers or mechanics.' '' An individual commenter 
noted that survey crews often employ individuals with associate's or 
bachelor's degrees, while another referred to such survey technicians 
as ``future professionals.''
    III-FFC noted that licensure status is not determinative as 
``[o]ther trades have licensing requirements . . . including plumbers, 
electricians, roofing contractors, water well contractors, and water 
pump installation contractors'' and contended that ``[e]ven if work 
under a particular classification must be performed by, or under 
supervision of, a licensed individual, this requirement does not 
exclude workers from coverage, including survey crew members.''
    To the extent that licensed professional surveyors meet the 
definition of ``learned professionals'' in 29 CFR part 541, they are 
not ``laborers or mechanics'' subject to the Davis-Bacon labor 
standards. 29 CFR 5.2(m) (``Persons employed in a bona fide executive, 
administrative, or professional capacity as defined in part 541 of this 
title are not deemed to be laborers or mechanics.''); AAM 16. To 
qualify as a ``learned professional,'' for the purposes of part 541 and 
Sec.  5.2(m), one's primary duty ``must be the performance of work 
requiring advanced knowledge in a field of science or learning 
customarily acquired by a prolonged course of specialized intellectual 
instruction.'' 29 CFR 541.301(a). Work requiring ``advanced knowledge'' 
means work which is ``predominantly intellectual in character, and 
which includes work requiring the consistent exercise of discretion and 
judgment, as distinguished from performance of routine, manual, 
mechanical or physical work.'' 29 CFR 541.301(b). Thus, an employee who 
performs work requiring advanced knowledge ``generally uses the 
advanced knowledge to analyze, interpret or make deductions from 
varying facts or circumstances.'' Id. A ``field of science or 
learning'' includes ``occupations that have a recognized professional 
status as distinguished from the mechanical arts or skilled trades 
where in some instances the knowledge is of a fairly advanced type, but 
is not in a field of science or learning.'' 29 CFR 541.301(c). 
Specialized academic training must be a standard prerequisite for 
entrance into the profession (though this does not exclude the 
occasional professional who has ``substantially the same knowledge 
level and perform[s] substantially the same work as the degreed 
employees, but who obtained the advanced knowledge through a 
combination of work experience and intellectual instruction''). 29 CFR 
541.301(d). However, practitioners of occupations that customarily may 
be performed with only the general knowledge acquired by an academic 
degree in any field, with knowledge acquired through apprenticeship or 
training, will generally not be deemed ``learned professionals.'' Id.
    While state requirements vary, based on the information received 
from commenters, the Department believes licensed surveyors may in some 
cases be ``learned professionals'' and thus excluded from the 
definition of ``laborers or mechanics.'' However, this conclusion may 
vary, particularly where state licensing requirements do not 
customarily require a prolonged course of specialized intellectual 
instruction. See Goebel v. Colorado, No. 93-K-1227, 1999 WL 35141269, 
at *7 (D. Co. 1999) (concluding at summary judgment that, under state 
licensing requirements involving a combination of surveying courses and 
land surveying experience, but no college degree, that surveying did 
``not require the `advanced type of knowledge' gained through `a 
prolonged course of specialized intellectual instruction and study''' 
necessary to fall into the category of ``learned professionals'').
    However, other members of survey crews, even if working under the 
supervision of a licensed surveyor, cannot be excluded from the 
definition of ``laborer or mechanic'' on this basis. Unlicensed survey 
crew members have not completed specialized academic training or 
demonstrated ``substantially the same knowledge level'' to state 
licensing authorities to secure a professional license. See 29 CFR 
541.301(d). Because they must work under the supervision of a licensed 
surveyor, rather than independently, on any work requiring a license, 
they are generally not ``perform[ing] substantially the same work'' as 
licensed surveyors. See id. Unlicensed paraprofessionals are generally 
not considered ``learned professionals.'' See 29 CFR 541.301(e)(7) 
(paralegals are not

[[Page 57614]]

learned professionals) and (e)(2) (practical nurses and other similar 
heath care employees, even if licensed, are not learned professionals 
because ``possession of a specialized advanced academic degree is not a 
standard prerequisite for entry into such occupations''). Nor does the 
inclusion of surveying as a professional service under the Brooks Act 
suggest that unlicensed survey crew members should be deemed ``learned 
professionals'' excluded from the protections of the Davis-Bacon labor 
standards. As discussed above, whether unlicensed survey crew members 
are deemed ``laborers or mechanics'' will depend, not on the 
application of the part 541 ``learned professional'' exclusion in Sec.  
5.2(m), but on whether the specific range of duties they perform are 
``manual or physical in nature (including . . . [the] use [of] tools or 
. . . the work of a trade), as distinguished from mental or 
managerial.'' See 29 CFR 5.2(m).\188\
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    \188\ MnDOT would have the Department simplify its analysis 
under 29 CFR 5.2(m), by considering survey crew members `` `laborers 
or mechanics' subject to prevailing wage rates when performing work 
under the contract unless they are licensed surveyors.'' Given the 
range of duties performed by survey crew members on Davis-Bacon 
covered contracts, the Department does not believe it could 
implement such an approach without modifying Sec.  5.2(m), which it 
did not propose doing in the NPRM.
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    After considering the comments received, the Department adopts as 
guidance the clarifying language set forth in the NPRM with one 
modification: The Department has historically recognized that members 
of survey crews who perform primarily physical and/or manual work while 
employed by contractors or subcontractors on a DBA or Related Acts 
covered project on the site of the work immediately prior to or during 
construction in direct support of construction crews may be laborers or 
mechanics subject to the Davis-Bacon labor standards. Whether or not a 
specific survey crew member is covered by these standards is a question 
of fact, which takes into account the actual duties performed and 
whether these duties are ``manual or physical in nature'' including the 
``use of tools or . . . work of a trade.'' When considering whether a 
survey crew member performs primarily physical and/or manual duties, it 
is appropriate to consider the relative importance of the worker's 
different duties, including (but not solely) the time spent performing 
these duties. Thus, survey crew members who spend most of their time on 
a covered project taking or assisting in taking measurements would 
likely be deemed laborers or mechanics (provided that they do not meet 
the tests for exemption as professional, executive, or administrative 
employees under part 541). If their work meets other required criteria 
(i.e., it is performed on the site of the work, where required, and 
immediately prior to or during construction in direct support of 
construction crews), it would be covered by the Davis-Bacon labor 
standards.
(G) Site of the Work and Related Provisions
    In the proposed rule, the Department proposed the following 
revisions related to the DBRA's ``site of the work'' requirement: (1) 
revising the definition of ``site of the work'' to further encompass 
certain construction of significant portions of a building or work at 
secondary worksites, (2) clarifying the application of the ``site of 
the work'' principle to flaggers, (3) revising the regulations to 
better delineate and clarify the ``material supplier'' exemption, and 
(4) revising the regulations to set clear standards for DBA coverage of 
truck drivers.
    As discussed further below, having reviewed and considered the 
comments received, the Department is making certain revisions to these 
proposals in the final rule. Specifically, the final rule limits 
coverage of secondary worksites to locations where specific portions of 
a building or work are constructed and were either established 
specifically for contract performance or are dedicated exclusively or 
nearly so to the contract or project; further clarifies the material 
supplier exemption; and clarifies coverage of truck drivers employed by 
contractors or subcontractors by codifying the Department's current de 
minimis standard rather than using an analogous standard from the FLSA.
(1) Statutory and Regulatory Background
a. Site of the Work
    The DBA and Related Acts generally apply to ``mechanics and 
laborers employed directly on the site of the work'' by 
``contractor[s]'' and ``subcontractor[s]'' on contracts for 
``construction, alteration, or repair, including painting and 
decorating, of [covered] public buildings and public works.'' 40 U.S.C. 
3142(a), (c)(1). The Department's current regulations define ``site of 
the work'' as encompassing three types of locations: (1) ``the physical 
place or places where the building or work called for in the contract 
will remain,'' (2) ``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,'' and (3) 
``job headquarters, tool yards, batch plants, borrow pits, etc.'' that 
are both ``dedicated exclusively, or nearly so, to performance of the 
contract or project'' and ``adjacent or virtually adjacent to the site 
of the work'' itself. 29 CFR 5.2(l)(1), (2). The ``site of the work'' 
requirement does not apply to Related Acts that extend Davis-Bacon 
coverage to all laborers and mechanics employed in the ``development'' 
of a project; such statutes include the United States Housing Act of 
1937; the Housing Act of 1949; and the Native American Housing 
Assistance and Self-Determination Act of 1996. See id. Sec.  5.2(j)(1); 
42 U.S.C. 1437j(a); 25 U.S.C. 4114(b)(1), 4225(b)(1)(B); 42 U.S.C. 
12836(a). As the Department has previously noted, ``the language and/or 
clear legislative history'' of these statutes ``reflected clear 
congressional intent that a different coverage standard be applied.'' 
65 FR 80267, 80275 (Dec. 20, 2000) (2000 final rule); see Griffin v. 
Sec'y of Lab., ARB Nos. 00-032, 00-033, 2003 WL 21269140, at *13 n.5 
(May 30, 2003) (noting that the United States Housing Act of 1937 
``provides that all construction activity funded or assisted under its 
auspices is subject to DBA requirements if that work is performed `in 
the development' of a covered project'' and therefore ``has no `site of 
the work' restriction''); L.T.G. Constr. Co., WAB No. 93-15, 1994 WL 
764105, at *4 (Dec. 30, 1994) (noting that ``the Housing Act [of 1937] 
contains no `site of work' limitation similar to that found in the 
Davis-Bacon Act'').
b. Offsite Transportation
    The ``site of the work'' requirement is also referenced in the 
current regulation's definition of ``construction, prosecution, 
completion, or repair,'' which provides that ``the transportation of 
materials or supplies to or from the site of the work'' is not covered 
by the DBRA, except for such transportation under the statutes to which 
the ``site of the work'' requirement does not apply, as described above 
in paragraph (a). 29 CFR 5.2(j)(2). However, the regulation explains 
that transportation to or from the site of the work is covered where a 
covered laborer or mechanic employed by a contractor or subcontractor 
transports materials between an ``adjacent or virtually adjacent'' 
dedicated support site that is part of the site of the work pursuant to 
29 CFR 5.2(l)(2), or transports portions of the building or work 
between a site where a significant portion of the building or

[[Page 57615]]

work is constructed and that is established specifically for contract 
or job performance, which is part of the site of the work pursuant to 
29 CFR 5.2(l)(1), and the physical place or places where the building 
or work will remain.\189\ 29 CFR 5.2(j)(1)(iv)-(l)(2).
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    \189\ For more detail on this topic, see the section titled 
``Coverage of Construction Work at Secondary Construction Sites.''
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c. Material Supplier Exception
    While not explicitly set out in the statute, the DBA has long been 
understood to exclude from coverage employees of bona fide ``material 
suppliers'' or ``materialmen.'' See AAM 45 (Nov. 9, 1962) (enclosing 
WHD Opinion Letter DB-30 (Oct. 15, 1962)); AAM 36 (Mar. 16, 1962) 
(enclosing WHD Opinion Letter DB-22 (Mar. 12, 1962)); H.B. Zachry Co. 
v. United States, 344 F.2d 352, 359 (Ct. Cl. 1965); FOH 15e16. This 
principle has generally been understood to derive from the limitation 
of the DBA's statutory coverage to ``contractor[s]'' and 
``subcontractor[s].'' See AAM 36, WHD Opinion Letter DB-22, at 2 
(discussing ``the application of the term subcontractor, as 
distinguished from materialman or submaterialman''); cf. MacEvoy v. 
United States, 322 U.S. 102, 108-09 (1944) (distinguishing a 
``subcontractor'' from ``ordinary laborers and materialmen'' under the 
Miller Act); FOH 15e16 (``[B]ona fide material suppliers are not 
considered contractors under DBRA.''). Typically, these are companies 
whose sole responsibility under the contract or project is to furnish 
materials, such as sand, gravel, and ready-mixed concrete, rather than 
to perform construction work.
    Like the ``site of the work'' restriction, the material supplier 
exception does not apply to work under statutes that extend Davis-Bacon 
coverage to all laborers and mechanics employed in the ``development'' 
of a project, regardless of whether they are employed by 
``contractors'' or ``subcontractors.'' See 29 CFR 5.2(j)(1) (defining 
``construction, prosecution, completion, or repair'' as including 
``[a]ll types of work done on a particular building or work at the site 
thereof . . . 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)''); 29 CFR 5.2(i) 
(``The manufacture or furnishing of materials, articles, supplies or 
equipment . . . is not a building or work within the meaning of the 
regulations in this part unless conducted in connection with and at the 
site of such a building or work as is described in the foregoing 
sentence, or under the United States Housing Act of 1937 and the 
Housing Act of 1949 in the construction or development of the 
project.'').
d. Relevant Regulatory History and Case Law
    The regulatory provisions regarding the site of the work were 
revised in 1992 and 2000 in two distinct fashions.
    First, in response to a series of appellate court decisions in the 
1990s, the provisions were revised to narrow the geographic scope of 
the site of the work and to preclude coverage of offsite transportation 
in most circumstances. Specifically, the language in Sec.  5.2(l) that 
deems dedicated sites such as batch plants and borrow pits part of the 
site of the work only if they are ``adjacent or virtually adjacent'' to 
the construction site was adopted in 2000 in response to Ball, Ball & 
Brosamer, Inc. v. Reich, 24 F. 3d 1447 (D.C. Cir. 1994) and L.P. Cavett 
Company v. U.S. Department of Labor, 101 F.3d 1111 (6th Cir. 1996), 
which concluded that batch plants located only a few miles from the 
construction site (2 miles in Ball, 3 miles in L.P. Cavett) were not 
part of the ``site of the work.'' See 65 FR 80269-71.\190\ The 
``adjacent or virtually adjacent'' requirement in the current 
regulatory text is one that the courts in Ball and L.P. Cavett 
suggested, and which the ARB later concluded, to be consistent with the 
statutory ``site of the work'' requirement. See L.P. Cavett, 101 F.3d 
at 1115; Ball, Ball & Brosamer, 24 F.3d at 1452; Bechtel Constructors 
Corp., ARB No. 97-149, 1998 WL 168939, at *4 (Mar. 25, 1998). 
Similarly, the provision in Sec.  5.2(j)(2) that excludes, with narrow 
exceptions, ``the transportation of materials or supplies to or from 
the site of the work'' from coverage stems from a 1992 interim final 
rule, see 57 FR 19204 (May 4, 1992) (1992 IFR), and was adopted in 
response to Building & Construction Trades Dep't, AFL-CIO v. U.S. Dep't 
of Labor Wage Appeals Bd. (Midway), in which the D.C. Circuit held that 
drivers of a prime contractor's subsidiary who picked up supplies and 
transported them to the job site were not covered by the DBA for their 
time spent going to and from the site because ``the Act applies only to 
employees working directly on the physical site of the public building 
or public work under construction.'' 932 F.2d 985, 990 (D.C. Cir. 
1991).\191\
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    \190\ Prior to 2000, the Department had interpreted ``site of 
the work'' more broadly to include, in addition to the site where 
the work or building would remain, ``adjacent or nearby property 
used by the contractor or subcontractor in such construction which 
can reasonably be said to be included in the `site.' '' 29 CFR 
5.2(l) (1990); see 65 FR 80269; AAM 86 (Feb. 11, 1970). This 
interpretation encompassed the offsite batch plants in Ball and L.P. 
Cavett that the courts in those cases concluded were too far from 
the primary worksite. Accordingly, the Department revised the 
regulation in the 2000 final rule to adopt the ``adjacent or 
virtually adjacent'' standard.
    \191\ Prior to 1992, the Department had interpreted the DBA as 
covering the transportation of materials and supplies to or from the 
site of the work by workers employed by a contractor or 
subcontractor. See 29 CFR 5.2(j) (1990).
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    Second, as discussed in more detail below in the discussion of 
``Coverage of construction work at secondary construction sites,'' in 
response to developments in construction that had enabled companies in 
some cases to construct entire portions of public buildings or works 
offsite, the Department broadened the ``site of the work'' in the 2000 
final rule by adding the provision in Sec.  5.2(l)(1) that encompasses 
offsite locations ``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.'' 65 FR 80278.
(2) Regulatory Revisions
    In the NPRM, the Department proposed the following regulatory 
changes related to the ``site of the work'' requirement: (1) revising 
the definition of ``site of the work'' to further encompass certain 
construction of significant portions of a building or work at secondary 
worksites, (2) clarifying the application of the ``site of the work'' 
principle to flaggers, (3) revising the regulations to better delineate 
and clarify the ``material supplier'' exemption, and (4) revising the 
regulations to set clear standards for DBA coverage of truck drivers. 
The following discussion explains, with regard to each issue, the 
proposal, the comments received, and the Department's decisions in the 
final rule.
a. Coverage of Construction Work at Secondary Construction Sites
    The current regulatory definition of ``site of the work'' includes 
a site away from the location where the building or work will remain 
where a ``significant portion'' of a building or work is constructed at 
the site, provided that the site is established specifically for the 
performance of the contract or project. Sec.  5.2(l)(1). In the 2000 
final rule in which this language was added, the Department explained 
that it was intended to respond to technological

[[Page 57616]]

developments that had enabled companies in some cases to construct 
entire portions of public buildings or works offsite, leaving only 
assembly or placement of the building or work remaining. See 65 FR 
80273 (describing ``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 Department 
cited examples, including a dam project where ``two massive floating 
structures, each about the length of a football field'' were 
constructed upriver and then floated downriver and submerged; the 
construction and assembly of military housing units in Portland for 
final placement in Alaska; and the construction of modular units to be 
assembled into a mobile service tower for Titan missiles. See id. 
(citing ATCO Constr., Inc., WAB No. 86-1, 1986 WL 193113 (Aug. 22, 
1986), and Titan IV Mobile Serv. Tower, WAB No. 89-14, 1991 WL 494710 
(May 10, 1991)).
    The Department stressed that this new provision was a narrow one, 
intended to apply only to the ``rare'' situations 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.'' 65 FR 80274, 80276. It further stated that the 
limit of such coverage to facilities that are established specifically 
for the performance of a particular contract or project was necessary 
to exclude ``[o]rdinary commercial fabrication plants, such as plants 
that manufacture prefabricated housing components,'' which have long 
been understood to be outside the DBA. Id. at 80274. The Department 
explained that ``[i]t [was] the Department's intention in [that] 
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.'' Id. Consistent with this amendment, the Department 
also revised Sec.  5.2(j) to cover transportation of portion(s) of the 
building or work between such a site and the location where the 
building or work would ultimately remain, explaining that ``under these 
circumstances[,] the site of the work is literally moving between the 
two work sites,'' 65 FR 57269, 57273 (Sept. 21, 2000), and as such, 
``workers who are engaged in transporting a significant portion of the 
building or work between covered sites . . . are `employed directly 
upon the site of the work.' '' 65 FR 80276.
    In the NPRM, the Department proposed to expand this aspect of the 
definition of ``site of the work'' to include ``any . . . site(s) where 
a significant portion of the building or work is constructed, provided 
that such construction is for specific use in that building or work and 
does not simply reflect the manufacture or construction of a product 
made available to the general public.'' The NPRM explained that since 
2000, technological developments have continued to facilitate offsite 
construction that replaces onsite construction to an even greater 
degree and that the Department expects such trends to continue in the 
future, including in Federal and federally assisted construction. 87 FR 
15731 (citing Dodge Data and Analytics, ``Prefabrication and Modular 
Construction 2020'' (2020), at 4, and GSA, Sched. 56--``Building and 
Building Materials, Industrial Service and Supplies, Pre-Engineered/
Prefabricated Buildings Customer Ordering Guide'' (GSA Sched. 56), at 
5-7).\192\ The Department further stated that ``when `significant 
portions' of a building or work that historically would have been built 
where the building or work will ultimately remain are instead 
constructed elsewhere, the exclusion from the DBA of laborers and 
mechanics engaged in such construction is inconsistent with the DBA.'' 
Id. at 15732. Therefore, the Department proposed to eliminate the 
current regulation's requirement that an offsite facility at which such 
``significant portions'' are constructed must also be ``established 
specifically for the performance of a particular contract or project'' 
in order to be considered part of the ``site of the work.'' The 
Department explained that the goal of excluding ``[o]rdinary commercial 
fabrication plants'' and similar material supply facilities and 
factories could be better accomplished by elaborating on the definition 
of ``significant portion,'' which the Department proposed to define as 
``one or more entire portion(s) or module(s) of the building or work, 
as opposed to smaller prefabricated components, with minimal 
construction work remaining other than the installation and/or 
assembly.''
---------------------------------------------------------------------------

    \192\ See https://proddrupalcontent.construction.com/s3fs-public/SMR1219_Prefab_2020_small-compressed.pdf; https://www.gsa.gov/cdnstatic/SCHEDULE_56_-_ORDERING_GUIDE.pdf.
---------------------------------------------------------------------------

    The Department received numerous comments regarding the proposal 
concerning secondary construction sites.
    Most labor unions and groups representing union-affiliated 
employers supported the proposal, agreeing that the extension of 
coverage was consistent with the intent of the DBA and would prevent 
businesses from paying non-prevailing rates for work that historically 
had been performed by DBA-covered workers at the primary worksite. 
Examples of such comments included those from NABTU, LIUNA, SMART, The 
Association of Union Contractors (TAUC), UA, and MCAA.\193\
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    \193\ MCAA, a group of union-affiliated contractors, noted in 
its comment that while its support of the proposal reflected the 
view of most of its member employers, some of its members dissented 
from that view.
---------------------------------------------------------------------------

    Some commenters, such as NABTU, IBEW, LIUNA, and UA, urged the 
Department to expand coverage even further, contending that the NPRM's 
limitation of coverage to locations where ``entire portions or 
modules'' of a public work are constructed, ``as opposed to smaller 
prefabricated components,'' was unwarranted, and that the proposed 
definition of ``significant portion'' should be changed to mean ``one 
or more portion(s), module(s) and/or individualized fabricated 
component(s) that are integral to the building or public work,'' to 
include even smaller custom components like custom pipe bends. NABTU 
and several other commenters that incorporated NABTU's comments by 
reference further argued that Midway, L.P. Cavett, and Ball were 
wrongly decided and encouraged the Department to abandon the 
distinction between work performed at ``primary'' or ``secondary'' 
sites, suggesting the term ``work'' in the phrase ``site of the work'' 
does not refer to the public work or building being constructed, but to 
any work that is specific to, and customized for, a DBA project. The UA 
made similar arguments. SMART urged the Department to consider the 
impact of building information modelling (BIM), a software modeling 
process that enables ``virtual construction of a building's 
superstructure and mechanical, electrical, and plumbing systems before 
the off-site or on-site construction of the physical buildings, 
portions, modules, or components begins,'' and to integrate a reference 
to BIM and similar technologies into the definitions of ``secondary 
construction site(s).'' Some commenters supporting the proposal 
provided examples of the use of offsite construction in Federal or 
federally funded projects; LIUNA, for example, cited the FHWA's seeking 
to develop innovations in offsite bridge

[[Page 57617]]

construction, modular construction in airport expansion projects, 
prefabricated chemical storage buildings at DOE's national 
laboratories, and the use of prefabricated structures in Army Corps of 
Engineers navigation projects.
    A few commenters recommended clarifications to the proposed 
definition of ``significant portion.'' For example, the NECA and the 
New York State Metropolitan Transportation Authority (MTA) requested 
that the Department ensure the definition of ``significant portions'' 
not include smaller prefabricated components such as electrical racks, 
temporary power distribution centers, prefabricated tiled wall units, 
elevators and escalators, and bus and train wash units. NECA further 
stated that the Department should ``consider when determining 
'significant portion' that the prefabrication materials are specific 
and/or unique to the project itself and are not readily available to 
the general public or commercial market.'' The MTA also recommended 
that the Department clarify that, where required, the prevailing wage 
for offsite work should reflect the area where the offsite work is 
performed, as opposed to the area of the primary work site, and that no 
prevailing wage requirements apply to offsite fabrication that takes 
place in a foreign country. American Clean Power (ACP), while opposing 
the expansion in general, asserting that it was inconsistent with 
congressional intent, suggested in the alternative that ``significant 
portion'' be changed to eliminate any reference to size or modularity 
and instead to tie coverage or the lack thereof to a secondary site's 
``permanence, independence, and distance'' from the primary worksite.
    Except for groups representing union-affiliated employers, 
commenters representing employers generally opposed the proposed 
expansion of coverage of offsite work. Many of these commenters, 
including ABC and its member campaign comments, MBI, AGC, NAHB, OCA, 
and IRTBA, argued that the Department's proposal impermissibly exceeded 
the statutory restriction of coverage to ``site of the work'' as the 
term has been interpreted in Midway, Ball, and L.P. Cavett. Several 
commenters focused specifically on the proposal's potential impact on 
modular construction, arguing that proposed expansion would increase 
the cost of modular construction projects and imperil the modular 
industry and its workers. These commenters, including, for example, SG 
Echo, Parkline, Inc., Clark Pacific, Modular Solutions, Ltd., and IEC, 
described the modular industry as highly competitive and relatively 
low-margin, and argued that prevailing wage rates would cause modular 
companies to become less competitive in the marketplace, leading to 
increased costs to taxpayers on public buildings and works. Some 
commenters pointed to what they asserted are advantages of modular 
construction in arguing against the proposed expansion. For example, 
MBI, California Housing Consortium (CHC), and others argued that in 
addition to being more predictable and efficient, construction in a 
factory-controlled environment is safer for workers and more 
environmentally friendly than traditional construction, and that those 
priorities would be adversely affected if the industry were impacted by 
the proposed coverage expansion. Enterprise Electrical, LLC asserted 
that offsite operations provide an entry point for less experienced 
workers to be introduced to a trade that will enable them to graduate 
to onsite locations where they can earn higher wages.
    Several of these commenters, including Conscious Communities, the 
CHC, Cloud Apartments, Optimum Modular Solutions, Southeast Modular, 
The Pacific Companies, and Manufactured Housing Institute, commented 
that the ``site of the work'' expansion would negatively impact the 
affordable housing sector, noting that the efficiencies and cost 
savings of modular construction can increase the availability of 
affordable housing. They argued that by effectively removing the cost 
advantages of modular construction, the proposal will deter modular 
housing firms from working on DBRA-covered projects. One such 
commenter, The Pacific Companies, stated that if the proposed changes 
are implemented, it would cease using Federal funding that triggers 
Davis-Bacon coverage for the construction of affordable housing, and 
would shift its business to producing market-based housing or 
commercial developments.
    Some commenters opposing the proposal cited a lack of clarity with 
regard to coverage scope and impact. For example, MBI and ACP argued 
that the Department's proposed definition of ``significant portion'' 
was unclear and would cause tremendous uncertainty, and that employers 
would have to guess whether or not certain work is covered and could 
face significant liability if their interpretation is later determined 
to be incorrect. ACP specifically expressed concern that the new 
definition of ``significant portion'' would be a deviation from the 
current one on which stakeholders are relying to seek Federal funding 
under the IIJA. The SBA Office of Advocacy argued that the extent of 
the economic impact of the proposed expansion, including the number of 
small businesses that will be newly DBA-covered under the proposal, was 
unclear and that the Department should undertake further analysis of 
these issues.
    Some commenters also raised concerns regarding whether it would be 
feasible or appropriate to apply Davis-Bacon rates for onsite 
construction to an offsite environment. For example, Quartz Properties 
and Phoenix Modular Elevator argued that the tasks and skills of 
offsite factory workers differ substantially from those of onsite 
workers, and Blazer Industries contended that paying factory workers 
different rates for government contract or federally funded work that 
is otherwise identical to non-covered work would be administratively 
difficult, since such workers typically work on multiple projects in a 
given day, and could hurt employee morale if some workers earn more 
than others doing the same kind of work. FTBA similarly argued that 
construction activity will be difficult to segregate from commercial, 
non-DBA work, including work manufacturing materials covered by the 
Walsh-Healey Public Contracts Act, and that this will lead to confusion 
and inadvertent violations of law. ACP, GCA, and ARTBA noted that 
offsite work often occurs at locations far away from the public work's 
intended location and contended the Department's proposal could impose 
liability on parties who have no control over the manufacturing 
process. Two union-affiliated commenters, UBC and Signatory Wall and 
Ceiling Contractors Alliance, while not expressly opposing the 
proposal, raised concerns that it could interfere with existing 
collective-bargaining agreements that cover workers at offsite 
factories, and proposed that the site of the work not include 
facilities where in the normal course of business products are 
manufactured or fabricated for non-Federal or non-federally assisted 
projects.
    After consideration of the comments received, the Department is 
modifying its proposal to narrow the scope of coverage at secondary 
construction sites. Specifically, the final rule provides that for a 
secondary construction site to be considered part of the site of the 
work, in addition to being a location where a significant portion of a 
building or work is constructed for specific use in the designated 
building or work, the site must be either established specifically for 
the performance of the covered contract or project or dedicated

[[Page 57618]]

exclusively, or nearly so, to the covered contract or project.
    While the Department remains concerned that the trend toward 
offsite construction of portions of buildings or works that are 
otherwise covered by the DBA and its Related Acts may result in fewer 
workers earning Davis-Bacon wages, in derogation of Congress's intent 
in enacting these statutes, the Department believes that commenters 
have raised valid concerns regarding the specific proposal in the NPRM. 
Specifically, the Department agrees that further analysis of the 
potential economic impact of such a proposal is warranted, particularly 
given the concerns raised about potential adverse effects on CBAs and 
affordable housing.\194\ Additionally, while the Department maintains 
that the interpretation of the term ``site of the work'' advanced in 
the proposed rule would be a permissible construction of the language 
of the Davis-Bacon Act, the Department is cognizant that a reviewing 
court could reach a contrary conclusion based on existing circuit court 
precedent and the Department does not wish to create unnecessary legal 
uncertainty surrounding this issue at this time without further 
analysis or information about potential impacts. Finally, the 
Department recognizes that it could be challenging and resource-
intensive for companies operating what are essentially factory 
environments creating products potentially for multiple clients and 
projects to pay workers different rates depending on the particular 
project for which they are creating products at any given point in a 
day.
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    \194\ Although the Department noted above that it anticipates 
that this rule's revisions to the definition of prevailing wage will 
at most result in a limited potential increase in construction costs 
for a small percentage of the market and will not significantly 
affect overall housing prices or rents, the Department is cognizant 
that the definition of ``site of the work'' impacts the scope of 
covered employers and workers, rather than the amount of the 
prevailing wage for those already covered. The Department agrees 
that it is advisable to more closely examine the potential effects 
of a regulatory revision that could expand coverage to a category of 
employers that have generally not previously been covered by the 
Davis-Bacon labor standards. The Department also believes that such 
closer examination will inform the extent to which Davis-Bacon 
classifications can easily be applied to an offsite environment in a 
broader fashion.
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    Instead, the Department is revising this component of the 
regulation to reflect a more incremental expansion of coverage of 
secondary construction sites where significant portions of public works 
are constructed for specific use in a particular building or work. 
Specifically, whereas the current regulation includes such sites only 
if they are established specifically for a DBRA-covered project or 
contract, the revised regulation also includes any sites that are 
dedicated exclusively or nearly so to the performance of a single DBRA-
covered project or contract--i.e., sites that for a specific period of 
time are dedicated entirely, or nearly entirely, to the construction of 
one or more ``significant portions'' of a particular public building or 
work. The final rule further explains that a ``specific period of 
time'' in this context means a period of weeks, months, or more, and 
does not include circumstances where a site at which multiple projects 
are in progress is shifted exclusively or nearly so to a single project 
for a few hours or days in order to meet a deadline.
    The Department believes that this more limited approach will 
address the most significant concerns voiced by commenters. 
Specifically, as noted above, many commenters contended that tracking 
time and wage rates at facilities engaged in work on multiple projects 
at once would be infeasible and that the potential administrative costs 
would especially deter small businesses, which work on multiple 
projects at a time, from working on Federal or federally funded 
projects. MBI, for example, asserted that ``the administrative costs of 
tracking multiple rates of pay and fringe benefits based on the type of 
project'' would be ``prohibitive.'' One small business owner stated 
that ``[w]e always have multiple projects being constructed in our 
facility at any given time with man power bouncing back and forth 
between projects as needed.'' Another voiced concerns about the 
potentially ``astronomical'' ``administrative costs of tracking 
multiple rates of pay based on the type of project.'' Another noted 
that ``[i]n the plant our staff are multi-tasking all day long,'' that 
``small manufacturers everywhere . . . have cross trained employees 
that do multiple functions during the day on multiple projects,'' and 
that ``documentation of which project they worked on and which project 
is federal would be a huge undertaking that may cause our small 
minority firm to take a second look at doing any federal work.'' Along 
similar lines, UBC and Signatory Wall and Ceiling Contractors Alliance 
predicted difficulties with implementing the proposed rule at 
facilities at which workers are employed on both DBRA-covered and non-
DBRA-covered projects. These issues will no longer be significant under 
the final rule, which will only cover secondary sites established 
specifically for a particular project or that are dedicated 
exclusively, or nearly so, to a single DBRA-covered project. Thus, 
sites at which work is being performed on more than one project at a 
time--whether DBRA-covered or not--will not be considered secondary 
construction sites (except for circumstances where work on a second 
project is merely token work, in which case the site would be deemed 
``nearly'' exclusively dedicated to the main project and therefore 
covered).
    Additionally, with a narrower scope of coverage, the Department 
expects that the impact of the final rule will be in line with the more 
limited impact of the 2000 final rule that provided for coverage of 
offsite locations where ``significant portions'' of public works were 
constructed only if those locations were established specifically for 
contract performance. In that rule, the Department stated that it 
anticipated that the number of instances in which the expansion would 
be implicated would be ``rare'' and that ``the prevailing wage 
implications would not be substantial.'' 65 FR 80277. While this final 
rule expands coverage beyond the 2000 rule to include dedicated 
secondary construction sites even if they were not established for 
contract performance, the Department believes that the impact will be 
of a similarly limited order of magnitude and not of the type that will 
cause significant disruption, particularly given the numerous comments 
stating that modular construction facilities typically work on multiple 
projects at a time and would therefore be beyond the scope of this 
provision. Similarly, the Department believes that narrowing the scope 
of the rule's change largely addresses concerns noted above regarding 
stakeholders' reliance on the current definition in seeking Federal 
funding, and that any remaining such interests are outweighed by the 
benefits of ensuring that construction workers on DBRA projects are 
paid Davis-Bacon wages for time spent on the site of the work.
    The Department believes that the more limited scope of the final 
rule also addresses concerns about the potential ambiguity of the term 
``significant portion.'' While the Department recognizes that there 
will be borderline cases, the Department anticipates, as it did in the 
2000 final rule, that the distinction between a significant portion or 
module and a prefabricated component will be clear in the vast majority 
of cases. See 65 FR 80275 (stating that ``where projects are 
constructed in this manner, application of this provision should 
normally be obvious''). The Department similarly

[[Page 57619]]

agrees with its assessment in the 2000 final rule that ``a precise 
definition would be unwise because the size and nature of the project 
will dictate what constitutes a `significant portion.''' Id. However, 
the final rule adds some additional clarifying language, and now states 
that a ``significant portion'' ``means one or more entire portion(s) or 
module(s) of the building or work, such as a completed room or 
structure, with minimal construction work remaining other than the 
installation and/or final assembly of the portions or modules at the 
place where the building or work will remain.'' Given the final rule's 
more limited scope, the Department anticipates that contractors and 
subcontractors can refer close questions to the Administrator and will 
be able to do so at an early stage in the contracting process. To the 
extent that questions arise frequently, the Department will consider 
elaborating on the definition of ``significant portion'' in 
subregulatory guidance.\195\ The Department will also continue to 
solicit and review information regarding offsite construction and other 
developing trends in construction with Davis-Bacon implications.
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    \195\ The Department notes that commenters raised similar 
concerns in the 2000 rulemaking regarding the ambiguity of the term 
``significant portions,'' and that those concerns have not, to the 
Department's knowledge, resulted in significant compliance issues in 
the 2 decades since.
---------------------------------------------------------------------------

    The final rule further states explicitly that ``[a] `significant 
portion' does not include materials or prefabricated component parts 
such as prefabricated housing components.'' The Department reiterates 
that the manufacture of such items has long been understood to be 
outside the scope of the DBA since the law's inception, and the final 
rule does not alter this well-established principle. See Midway, 932 
F.2d at 991 n.12 (citing 1932 House debate on the DBA as evidence that 
its drafters understood that offsite prefabrication sites would 
generally not be considered part of the site of the work). Such 
prefabrication, however, is distinguishable from ``pre-engineering'' or 
``modular'' construction, in which significant, often-self-contained 
portions of a building or work are constructed and then simply 
assembled onsite ``similar to a child's building block kit.'' GSA 
Sched. 56 at 5.
    Under the latter circumstances, as the Department noted in 2000, 
``such a large amount of construction is taking place [at an offsite 
location] that it is fair and reasonable to view such location as a 
site where the public building or work is being constructed.'' 65 FR 
80274; see also id. at 80272 (stating that ``the Department views such 
[secondary construction] locations as the actual physical site of the 
public building or work being constructed''). The Department reached 
this conclusion in 2000 with respect to offsite locations established 
specifically for contract performance, and the Department concludes 
that it is equally consistent with the DBA, and with Midway, Ball, and 
L.P. Cavett, to apply this principle to locations dedicated exclusively 
or nearly so to contract performance. While the Department agrees that 
these appellate decisions generally place the primary focus of the 
``site of the work'' inquiry on the physical proximity of a location to 
the intended location of the building or work, throughout the DBA's 
long history the Department has recognized that under certain 
circumstances, the term can also encompass other locations with a 
sufficient nexus to a particular project based on the nature of the 
work performed there. See AAM 7 (July 18, 1958) (concluding that DBRA 
applied to sheet metal workers who alternated between the installation 
site and an off-site shop); Titan IV Mobile Serv. Tower, 1991 WL 
494710, at *7 (Rothman, J., writing separately) (opining that the 
removal of construction work from the final location ``does not by the 
fact of removal alone lose . . . Davis-Bacon Act coverage'').
    The final rule is consistent with the overarching principle, 
reflected in both the site of the work principle and the material 
supplier exemption, that Davis-Bacon coverage does not apply to 
activities that are independent of the particular contract or project. 
See United Constr. Co., Inc., WAB No. 82-10, 1983 WL 144675, at *3 
(Jan. 14, 1983) (examining, as part of an inquiry into whether support 
activities are on the ``site of the work,'' ``whether the activities 
are sufficiently independent of the primary project to determine that 
the function of the support activities may be viewed as similar to that 
of materialman''). As noted above, the Department continues to maintain 
that as a legal matter, it would be permissible for the Department to 
interpret the term ``site of the work'' to include any location where 
custom-made ``significant portions'' of a public building or work are 
constructed. However, the final rule's restriction of coverage of such 
facilities to those that are either established for, or dedicated 
exclusively or nearly exclusively to, a particular project reflects a 
reasonable balance that the Department believes is supportable as a 
matter of law and policy in light of the countervailing concerns raised 
by commenters. In particular, when an offsite location becomes 
dedicated exclusively, or nearly so, to actual construction of either 
the entirety or significant portions (as defined in the rule) of a 
single public building or public work, the character of the offsite 
location is such that it is ``fair and reasonable'' to view it as a 
construction site (and not simply a factory) and as a ``site of the 
work'' for purposes of the project to which it is exclusively (or 
nearly so) dedicated.
    While some commenters voiced concerns that it will be challenging 
to apply Davis-Bacon classifications in an offsite environment, the 
Department notes that if the classification of a worker based on the 
set of the worker's job duties is not straightforward, contractors, 
agencies, and other interested parties can bring questions to WHD and, 
if necessary, can submit conformance requests. The Department believes 
that the consultation and conformance processes, together with the 
final rule's new procedures for publishing supplemental wage rates 
under certain circumstances, will adequately address these concerns. 
The Department fully intends to work with contractors, contracting 
agencies, and other interested parties to resolve those questions as 
early in the contracting process as possible. Additionally, to the 
extent that some of these concerns are grounded in the fact that 
workers at secondary sites may work in different capacities at 
different times, this situation is not unique to offsite facilities. To 
the contrary, the Department's regulations and longstanding 
interpretation recognize that workers may perform work in more than one 
classification, and that employers may pay them at the rate for each 
classification based on the time worked therein, provided that the 
employer accurately tracks such time. See 29 CFR 5.5(a)(1)(i); 
Pythagoras Gen. Contracting Corp., ARB Nos. 08-107, 09-007, 2011 WL 
1247207, at *7 (Mar. 1, 2011), aff'd sub nom. Pythagoras Gen. 
Contracting Corp. v. U.S. Dep't of Lab., 926 F. Supp. 2d 490 (S.D.N.Y. 
2013).
    For the reasons discussed above regarding the narrowing of the 
proposed rule, the Department declines commenters' suggestions to 
expand coverage of offsite construction even further to include smaller 
custom-made components, or to reject the holdings in Midway, Ball, and 
L.P. Cavett. The principles announced by the courts in those decisions 
are now well-established, including in the Department's own case law. 
Moreover, an even broader expansion of coverage than proposed in the 
NPRM would raise

[[Page 57620]]

the concerns regarding costs and impact discussed above, but to an even 
greater degree. The Department also believes that it is reasonable to 
distinguish between exclusively-dedicated support sites like batch 
plants, borrow pits, and prefabrication sites--which under case law and 
the Department's regulations are part of the site of the work only if 
adjacent or nearly adjacent to a primary or secondary worksite--and 
exclusively-dedicated sites at which significant portions are 
constructed, which under the final rule are covered regardless of 
proximity to the primary worksite. Under the latter circumstances, the 
magnitude of construction activity taking place at the secondary 
location, and the near-completeness of the modules or portions, weigh 
much more heavily in favor of a conclusion that the secondary location 
is a ``site of the work'' and distinguish such circumstances from those 
in Midway, Ball, and L.P. Cavett.
    Finally, in response to MTA's questions, the Department agrees that 
the appropriate geographic area for the application of prevailing wages 
to secondary construction sites is the location of the secondary 
construction site, not the location of the primary worksite. The 
purpose of the Davis-Bacon labor standards is to ensure that laborers 
and mechanics are paid wages that prevail where they work; thus, it 
would not be appropriate to apply wage rates from a different area when 
there is sufficient wage data in the area in which they work. A 
contract involving both a primary and secondary construction site 
should include wage determinations for both areas. Regarding whether 
work performed outside the United States is covered, the language of 
the specific statute providing for application of the Davis-Bacon labor 
standards controls. For example, the DBA applies only within the 
geographical limits of the 50 states and the District of Columbia, as 
well as in the Commonwealth of the Northern Mariana Islands. 
Conversely, some Related Acts apply to construction in U.S. territories 
such as Guam, Puerto Rico, and the U.S. Virgin Islands.
b. Clarification of Application of ``Site of the Work'' Principle to 
Flaggers
    The Department proposed to clarify that workers engaged in traffic 
control and related activities adjacent or virtually adjacent to the 
primary construction site are working on the site of the work. Often, 
particularly for heavy and highway projects, it is necessary to direct 
pedestrian or vehicular traffic around or away from the primary 
construction site. Certain workers of contractors or subcontractors, 
typically called ``flaggers'' or ``traffic directors,'' may therefore 
engage in activities such as setting up barriers and traffic cones, 
using a flag and/or stop sign to control and direct traffic, and 
related activities such as helping heavy equipment move in and out of 
construction zones. Although some flaggers work within the confines of 
the primary construction site, others work outside of that area and do 
not enter the construction zone itself.
    The Department has previously explained that flaggers are laborers 
or mechanics within the meaning of the DBA. See AAM 141 (Aug. 16, 
1985); FOH 15e10(a); Superior Paving Materials, Inc., ARB No. 99-065, 
1999 WL 708177 (June 12, 2002). The Department proposed to clarify, in 
the definition of ``nearby dedicated support sites,'' that such 
workers, even if they are not working precisely on the site where the 
building or work would remain, are working on the site of the work if 
they work at a location adjacent or virtually adjacent to the primary 
construction site, such as a few blocks away or a short distance down a 
highway. Although the Department believes that any adjacent or 
virtually adjacent locations at which such work is performed are 
included within the current regulatory ``site of the work'' definition, 
given that questions have arisen regarding this coverage issue, the 
Department proposed to make this principle explicit.
    As the Department has previously noted, such work by flaggers and 
traffic operators is integrally related to other construction work at 
the worksite and construction at the site would not be possible 
otherwise. See AAM 141; FOH 15e10(a). Additionally, as noted above in 
section III.B.3.ii.(G).(1).(d) and as the ARB has previously explained, 
the principle of adjacency or virtual adjacency in this context is 
consistent with the statutory ``site of the work'' limitation on DBA-
covered work as interpreted by courts. See Bechtel Constructors Corp., 
ARB No. 97-149, 1998 WL 168939, at *5 (explaining that ``it 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,'' such as where a crane in an urban 
environment is positioned adjacent to the future building site). This 
proposed change therefore is consistent with the DBA and would 
eliminate any ambiguity regarding these workers' coverage.
    The Department received a number of comments about the coverage of 
flaggers under the proposed revision of the definition of site of work. 
Some of the commenters supported the proposal in its entirety, others 
opposed the proposal (including through comments submitted as part of 
an organized ABC member campaign), and a few commenters sought 
clarification on the proposal.
    Supporting commenters agreed with the proposal's intent to codify 
the Department's interpretation of adjacency to the site of the work 
and ensure that flaggers receive Davis-Bacon protections. For example, 
LIUNA stated this clarification reflects existing practice and 
therefore will ensure that laborers employed as flaggers receive the 
benefits and protections of the DBRA. LIUNA emphasized that this 
clarification is not only consistent with the original purpose of the 
DBA, but it also furthers the Secretary's 1985 coverage decision 
reflected in AAM 141.
    Both LIUNA and the NCDCL stated the work of flaggers is integrally 
related to the other construction work at the worksite, with NCDCL 
emphasizing that this is especially true on heavy and highway projects. 
LIUNA noted that construction at the site would not be possible without 
such integrally related flaggers' work and pointed to LIUNA 
apprenticeship program curricula that demonstrate the integral nature 
of traffic control to construction work. Such apprenticeship training 
encompasses safety on construction sites related to protection of 
flaggers themselves, as well as of other workers and the driving and 
pedestrian public near the site. A number of commenters including LIUNA 
noted that a flagger may need to perform work outside the precise 
confines of the work site in order for them to effectively perform 
their duties, which are integrally related to the other work at the 
construction site.
    LIUNA and NJHHCL noted that the dangerous nature of flagger work 
underscores the importance of clarifying, and thus ensuring, Davis-
Bacon coverage for flaggers. Flagger work includes keeping laborers and 
mechanics working on or near the worksite safe, as well as keeping the 
public safe and out of the work site. LIUNA cited FHWA and State 
department of transportation best practices and flagging instruction 
materials that noted that flagger stations must be located in places 
where the traveling public has sufficient distance to stop at an 
intended stopping point before entering the work space. They also noted 
that flagger stations should be preceded by advance warning signs and 
be at points of maximum visibility, such as on the shoulder of a 
highway and opposite active work areas. Another commenter echoed the 
importance of flagger work performed adjacent or

[[Page 57621]]

nearly adjacent to the construction site because flaggers are keeping 
those in and around the jobsite safe.
    NJHHCL expressed approval of the Department's recognition that 
``workers handling the traffic control near the primary construction 
site are essential personnel to these projects.'' LIUNA similarly 
emphasized that over 60 percent of all fatal injuries at road 
construction sites are a result of vehicles striking workers who are on 
foot.
    Commenters such as ABC and ARTBA opposed the proposal, 
characterizing it as an expansion of DBA coverage to flaggers whom they 
contend are not on the site of the work. In its comment, ABC argued 
that the proposed revision's ``expansion of coverage to include . . . 
flaggers who do not perform work at the site of construction'' violates 
the plain language of the DBA. ABC member campaign comments similarly 
claimed that the proposed rule would expand DBA regulations to work 
such as flaggers. These commenters also asserted that the Department's 
flagger and other proposals would increase the regulatory burden and 
costs on new industries and types of construction projects typically 
not subject to DBA regulations.
    Likewise, ARTBA claimed the Department's flagger proposal extended 
DBA coverage to ``off-site'' flaggers. ARTBA opposed the proposal, 
claiming that it failed to recognize that flaggers working onsite 
directing personnel and equipment have special training. In contrast, 
according to ARTBA, ``off-site'' flaggers do not have special training 
and their primary responsibility is pedestrian management and directing 
people away from the worksite and they ``are not physically present on 
the worksite.'' ARTBA argued that onsite flaggers are properly covered 
by the DBA while offsite flaggers should not be covered by the DBA 
because of their duties, location, and lack of specialized training.
    Various individual commenters also claimed that the proposal was an 
``expansion of DBA regulations to . . . flaggers'' who do not perform 
work on the construction sites,\196\ and voiced concerns that it would 
increase the regulatory burden and costs for industries and types of 
construction projects that these commenters claimed were not typically 
subject to DBA regulations.
---------------------------------------------------------------------------

    \196\ The Department understands that the ABC member campaign 
comments, which were ambiguous, opposed the flagger proposal on this 
basis, as did ABC.
---------------------------------------------------------------------------

    The Department reiterates that the rule does not change the meaning 
of adjacent or nearly adjacent dedicated support sites or expand 
coverage to previously non-covered workers, but rather codifies the 
Department's interpretation that the site of the work encompasses 
flagger activities performed adjacent or virtually adjacent to the 
construction site. Codifying this policy is intended to assist 
contractors and other stakeholders with accurately assessing when 
flaggers are working on the site of the work and, therefore, covered by 
the DBA.
    The Department thus disagrees with commenters who claimed the rule 
expands DBA coverage and would increase administrative burdens and 
costs on the regulated community. As explained in the NPRM, workers 
performing flagger activities adjacent or nearly adjacent to worksites 
are working on the site of the work under the DBA. Such work ensures 
that construction work in and around the active worksite proceeds in a 
safe and efficient manner, in part by protecting the laborers and 
mechanics doing the work, the flaggers themselves, and the public 
around the worksite. The Department notes that a worker's title is not 
determinative of whether the person performing flagger activities is on 
the site of the work, especially since, as LIUNA pointed out, there are 
numerous titles for people performing activities associated with 
directing vehicular or pedestrian traffic both on and around or away 
from the primary construction site.
    Furthermore, the Department disagrees with ARTBA that only flaggers 
working ``on-site directing personnel and equipment'' and who have 
received specialized training should be covered by the DBA. Such a 
position is contrary to the Department's recognition that flaggers are 
laborers, see, e.g., AAM 141, whose work, like the work of crane 
operators on building projects or of laborers setting up cones or 
cleaning up around heavy or highway projects, is ``performed outside 
the boundaries defined by the structure that remains upon completion of 
the work.'' Bechtel, ARB No. 97-149, 1998 WL 168939, at *5. These 
laborers work adjacent or virtually adjacent to the site of the work 
and are covered by the DBA. Additionally, ARTBA's emphasis on 
specialized training about directing personnel around work vehicles and 
operations that ``on-site'' flaggers receive is not relevant to whether 
a worker is performing flagger activities adjacent or virtually 
adjacent to the worksite.
    AGC did not disagree with the proposal but emphasized that the 
Department should maintain the distinction between flaggers and 
employees of traffic service companies that rent equipment to the prime 
contractor and perform only incidental functions at the site in 
connection with delivery of equipment. AGC noted that the Department's 
current guidance in FOH 15e10 and 15e16 draws this distinction, with 
15e16 further providing that traffic service company workers are not 
covered by the DBA unless they spend a substantial amount of time (20 
percent or more) in a workweek on the site.
    The Department acknowledges the distinction between flaggers and 
workers of traffic service companies. As described in section c 
(``Clarification of `material supplier' distinction''), the final rule 
codifies the distinction between contractors and subcontractors and 
material suppliers. Under the final rule, if a traffic service 
company's only contractual responsibility is to deliver equipment and 
to perform activities incidental to such delivery, such as loading and 
unloading, then assuming it meets the other enumerated criteria, it is 
considered a material supplier and its workers therefore are not 
subject to the Davis-Bacon labor standards unless the work is performed 
under a statute that applies to all work performed by laborers and 
mechanics in the development of a project. On the other hand, if the 
company's workers are engaged in construction work on the site that is 
not incidental to delivery, such as acting as flaggers, the company 
would be considered a subcontractor, and therefore, as discussed below, 
see infra section d (``Coverage of time for truck drivers''), its 
workers would be covered for any time spent in non-delivery-related 
construction work, as well as any onsite time essential or incidental 
to delivery that is not de minimis.
    Finally, the SBA commented that the proposed rule may result in 
more small businesses covered by the DBRA. The SBA recommended that the 
Department quantify the number of small businesses potentially affected 
by this and other proposals in the NPRM. The number of potentially 
affected small businesses is estimated in section VI (``Final 
Regulatory Flexibility (FRFA) Analysis'').
    For the foregoing reasons, the final rule adopts the language 
regarding flaggers as proposed.
c. Clarification of ``Material Supplier'' Distinction
    The Department also proposed to clarify the distinction between 
subcontractors and ``material suppliers'' and to make explicit that 
employees of material suppliers are not covered by

[[Page 57622]]

the DBA and most of the Related Acts. Although this distinction has 
existed since the DBA's inception, the precise line between ``material 
supplier'' and ``subcontractor'' is not always clear and is sometimes 
the subject of dispute.
    While the Davis-Bacon regulations have not previously included 
definitions of ``contractor'' or ``subcontractor,'' this rule, as 
discussed, adds such definitions into Sec.  5.2. The Department 
proposed to incorporate the material supplier exception into the 
proposed new definition of ``contractor,'' which was incorporated into 
the proposed definition of ``subcontractor.'' Specifically, the 
Department proposed to exclude material suppliers from the regulatory 
definition of ``contractor,'' with the exception of entities performing 
work under ``development statutes''--certain Related Acts that apply 
the Davis-Bacon labor standards to all laborers and mechanics employed 
in a project's development and thus are not limited to ``contractors'' 
or ``subcontractors.''
    The Department proposed three criteria for the material supplier 
exception to apply to an employer. First, that the employer's only 
obligations for work on the contract or project are the delivery of 
materials, articles, supplies, or equipment, which may include pickup 
in addition to, but not exclusive of, delivery. Second, that the 
employer also supplies materials to the general public. Third, that the 
employer's facility manufacturing the materials, articles, supplies, or 
equipment is neither established specifically for the contract or 
project nor located at the site of the work. The proposed language 
further clarified that if an employer, in addition to being engaged in 
material supply and pickup, also engages in other construction, 
prosecution, completion, or repair work at the site of the work, it is 
not a material supplier but a subcontractor. The Department explained 
that these criteria were intended to reflect case law and the 
Department's guidance. See 87 FR 15732 (citing H.B. Zachry, 344 F.2d at 
359, AAM 5 (Dec. 26, 1957), AAM 31 (Dec. 11, 1961), AAM 36, AAM 45, and 
AAM 53 (July 22, 1963)); PWRB, DBA/DBRA Compliance Principles, at 7-8; 
FOH 15e16(c)).
    The Department received comments both supporting and opposing this 
proposed change. Supportive comments generally agreed with the 
Department that a codification of the definition of material supplier 
would be helpful. III-FFC, for example, characterized the Department's 
clarification as ``commonsense,'' and SMART stated that the revisions 
would ``ensure that workers who perform construction activities on a 
primary or secondary site are not deprived of coverage simply because 
one of their employer's functions is delivery.''
    In contrast, many of the comments in opposition contended that the 
Department was proposing to significantly expand coverage to material 
suppliers. IRTBA, for example, argued that the proposed rule would 
``essentially determin[e] that material suppliers are covered by the 
Act unless'' they meet certain criteria. Several comments, including 
the Illinois Association of Aggregate Producers (IAAP), Virginia 
Asphalt Association, ABC, and a joint comment from NAPA, NRMPCA, and 
NSSGA, voiced concern that the proposed rule would cover workers at 
temporary material supply facilities that are established and located 
on the site of the work and that recycle materials onsite to produce 
materials that can then be used onsite, asserting that such locations 
are not currently covered. The SBA Office of Advocacy commented that 
small businesses at its roundtable expressed similar concerns. Other 
comments also appeared to presume that the proposal regarding material 
suppliers represented a significant expansion. See, e.g., the group of 
U.S. Senators. These commenters generally asserted that the proposed 
changes would significantly increase costs and would make it more 
difficult for small companies to compete on DBA projects.
    Some commenters' objections were more limited or specific. For 
example, FTBA and AGC requested that any regulatory clarification more 
closely align with the Department's existing guidance, including the 
20-percent threshold and the de minimis rule. IEC specifically opposed 
the proposed rule's requirement that to be a material supplier, an 
employer must supply products to ``the general public,'' contending 
that the term was ambiguous and that a supplier's ability to service 
only a few clients should not transform it into a subcontractor.
    After considering the comments received, the final rule adopts a 
regulatory definition of material supplier with certain modifications 
from the proposed rule. As an initial matter, the comments reinforced 
the Department's belief that it is necessary to codify and clarify the 
definition of ``material supplier'' in the Davis-Bacon regulations. 
Many of the comments received appeared to be premised on an overbroad 
understanding of the existing material supplier exemption, and 
therefore perceived the proposed revisions as making significant 
substantive changes when they were largely intended to clarify and 
reflect existing coverage principles. As such, explicitly delineating 
the differences between subcontractors and material suppliers in the 
regulation will ensure that workers who are employed by contractors or 
subcontractors and work on the site of the work receive Davis-Bacon 
wages as appropriate.
    Most notably, several comments contended that the proposed 
definitions would newly cover mobile or temporary materials 
manufacturing facilities located on the site of the work. These 
comments reflect a misconception that manufacturing or recycling of 
materials on the site of the work is outside the scope of the DBRA. To 
the contrary, the regulations have long covered such activities because 
the definition of ``construction, prosecution, completion, or repair'' 
explicitly includes ``[m]anufacturing or furnishing of materials, 
articles, supplies or equipment on the site of the building or work.'' 
29 CFR 5.2(j)(1)(iii) (emphasis added); see also Sec.  5.2(i) (stating 
that ``[t]he manufacture or furnishing of materials, articles, supplies 
or equipment . . . is not a building or work within the meaning of the 
regulations in this part unless conducted in connection with and at the 
site of such a building or work'') (emphasis added). The Department's 
case law is consistent with this principle. See, e.g., Forrest M. 
Sanders, ARB No. 05-107, 2007 WL 4248530, at *4 (Nov. 30, 2007) 
(``[C]ontractors who furnish materials do engage in construction, and 
thus must pay DBA wages, when their activities occur on the site of the 
building or work.''). Thus, while the commenters are correct that under 
the proposed rule, such facilities will be covered, this does not 
reflect a change from the existing framework. The Department believes 
it is important to clarify that companies supplying materials under 
such circumstances are subcontractors, not material suppliers.
    In recognition of commenters' concerns, however, the Department is 
making certain revisions to the proposed criteria for material 
suppliers.
    First, the Department is clarifying that to qualify as a material 
supplier, an employer's obligations for work on a contract must be 
limited to the supply of materials, articles, supplies, or equipment, 
which may include pickup in addition to, but not exclusive of, 
delivery,\197\ and which may also include

[[Page 57623]]

activities incidental to such delivery and/or pickup, such as delivery, 
drop off, and waiting time.\198\ This is intended to clarify that 
activities that are incidental to material supply, such as loading, 
unloading, and pickup, would not constitute construction activity that 
would render the material supply exemption inapplicable.
---------------------------------------------------------------------------

    \197\ As noted in the NPRM, an employer that contracts only for 
pickup of materials from the site of the work is not a material 
supplier but a subcontractor, and that this would be consistent with 
the plain meaning of the term ``material supplier'' and with the 
Department's case law. See Kiewit-Shea, ALJ Case No. 84-DBA-34, 1985 
WL 167240, at *2 (Sept. 6, 1985), (concluding that companies whose 
contractual duties ``called for hauling away material and not for 
its supply'' were subcontractors, not material suppliers''), aff'd, 
Md. Equip., Inc., WAB No. 85-24, 1986 WL 193110 (June 13, 1986).
    \198\ The Department notes that unloading of materials is 
considered incidental to delivery even if the materials are unloaded 
directly into a contractor's mixing facilities at the work site. See 
FOH 15e16(a). Employers and contracting agencies are encouraged to 
submit any questions regarding whether onsite construction work 
qualifies as incidental to delivery to the Administrator.
---------------------------------------------------------------------------

    Second, the Department is eliminating the criterion that the 
employer must supply materials to the ``general public'' in order to be 
a material supplier. The Department agrees with the IEC that this term 
lends itself to ambiguity. In place of this criterion, the final rule 
clarifies that for the material supplier exception to apply, the 
employer's facility or facilities being used for material supply of the 
contract either must have been established before opening of bids or, 
if it was established after bid opening, may not be dedicated 
exclusively, or nearly so, to the performance of a covered contract. 
The Department's existing regulations, guidance, and case law show that 
either of these two options is indicative of a sufficient degree of 
independence from the contract for the facility to be deemed an 
operation of a material supplier. See United Constr. Co., Inc., 1983 WL 
144675, at *3; 29 CFR 5.2(l) (describing material supplier facilities 
that were established before opening of bids, even where such 
operations for a period of time may be dedicated exclusively, or nearly 
so, to the performance of a contract); FOH 15e16(d) (same); FOH 
15e16(b) (explaining that even if a facility is set up for the purpose 
of fulfilling a contract and therefore was not established before bid 
opening, it ``may undergo a change in its character to such an extent 
that it becomes the operation of a supplier,'' such as ``if it makes a 
sufficient quantity of sales from its producing facility to the general 
public'').
    Finally, to harmonize the definition with other regulatory 
provisions, the final rule states that a material supplier's facility 
manufacturing the materials, articles, supplies, or equipment may not 
be located on the primary or secondary construction site, rather than, 
as the proposed rule stated, on the site of the work, a term that also 
encompasses adjacent or virtually adjacent dedicated support sites. The 
current regulation states that the site of the work does not include a 
material supplier's facilities that are not on the primary or secondary 
worksite, even if the operations for a period of time may be dedicated 
exclusively or nearly so to the performance of a contract. Sec.  
5.2(l). This implies two additional principles: first, that a material 
supplier may have a facility on an adjacent or virtually adjacent 
support site without losing its status as a material supplier provided 
that the other conditions of independence from the project are met, and 
second, that on the other hand, when an employer operates a 
manufacturing or supply facility on the primary or secondary worksite 
itself, it is considered a subcontractor rather than a material 
supplier. Put differently, the existence of such a facility on the 
primary or secondary worksite itself demonstrates that it is not 
sufficiently independent of the project or contract to be deemed a 
material supply facility whose workers are outside the DBRA's scope.
    The Department emphasizes that contrary to commenters' concerns, 
the only aspect of the ``material supplier'' definition in the final 
rule that arguably reflects a change from current practice is that the 
definition in the final rule strictly limits applicability of the 
exemption to companies whose only contractual responsibilities are 
material supply or activities incidental to material supply. It 
therefore excludes from the exemption companies that also perform any 
other onsite construction, alteration, or repair; such companies are 
instead deemed contractors or subcontractors even if they also engage 
in material supply. This principle is consistent with numerous 
statements in the Department's current guidance. See PWRB, DBA/DBRA 
Compliance Principles, at 7 (material suppliers are companies ``whose 
only contractual obligations for on-site work are to deliver materials 
and/or pick up materials'') (emphasis added); id. at 7-8 (``[I]f a 
material supplier, manufacturer, or carrier undertakes to perform a 
part of a construction contract as a subcontractor, its laborers and 
mechanics employed at the site of the work would be subject to Davis-
Bacon labor standards in the same manner as those employed by any other 
contractor or subcontractor.''); FOH 15e16(c) (same). However, in 
tension with this principle, the current guidance also provides that a 
company may be considered a material supplier even if its workers 
engage in some amount of non-delivery construction work onsite, such as 
a precast concrete item supplier that also repairs and cleans such 
items at the worksite or an equipment rental dealer that also repairs 
its leased equipment onsite. See FOH 15e16(c). The guidance provides 
that in such cases, the supplier's workers are covered by the Davis-
Bacon labor standards for all onsite time engaged in such non-delivery 
construction work, and that if they spend at least 20 percent of their 
workweek engaged in such work, then all of their onsite time during the 
workweek is covered. See id.; PWRB, DBA/DBRA Compliance Principles at 
7-8.
    While the Department recognizes that many stakeholders are familiar 
with the 20-percent threshold, it believes that eliminating the 20-
percent threshold for purposes of the material supplier/subcontractor 
distinction is appropriate for a number of reasons. First, the 
Department believes that by creating a bright-line rule that ties this 
determination to a company's obligations under a contract, rather than 
the amount of time its workers spend onsite engaged in particular 
activities in a given workweek, this change will reduce uncertainty 
about coverage and assist both bidders and agencies in predicting labor 
costs before bidding. Second, as noted in the proposed rule, the 
Department has observed that under its current guidance, there is 
considerable confusion regarding the 20-percent threshold and its 
application. Some employers, for example, believe that 20 percent is 
the de minimis threshold for coverage of onsite delivery work by truck 
drivers employed by contractors or subcontractors; however, the 20-
percent threshold in the Department's current guidance actually applies 
to material suppliers. Similarly, others incorrectly read the existing 
guidance as only requiring compensation for onsite non-delivery 
construction time if such time exceeds 20 percent of a workweek; 
however, the existing guidance actually requires compensation for all 
such time regardless of the amount, and additionally requires that if 
such time exceeds 20 percent of a workweek, all of a worker's onsite 
time is covered. Such confusion can deprive workers of Davis-Bacon 
wages to which they are entitled. In contrast, the clarity in the final 
rule will facilitate compliance and is more consistent with both the 
language and purpose of the Davis-

[[Page 57624]]

Bacon labor standards, as it ensures that all laborers and mechanics 
performing any non-delivery construction work on the site of the work 
will receive prevailing wages for such work. The Department therefore 
concludes that the need for clarity and predictability outweighs any 
reliance interests implicated by the final rule's change from the 
subregulatory 20-percent threshold, particularly given that in many 
cases, such reliance appears to be premised on contractors' incorrect 
application of the threshold.
    Accordingly, the Department declines to retain the 20-percent 
threshold. Rather, under the final rule, an entity is a material 
supplier if: (a) its only obligations for work on the contract or 
project are the delivery of materials, articles, supplies, or 
equipment, which may include pickup of the same in addition to, but not 
exclusive of, delivery, and which may also include activities 
incidental to such delivery and pickup; and (b) its facility or 
facilities that manufactures the materials, articles, supplies, or 
equipment used for the contract or project (1) is not located on, or 
does not itself constitute, the project or contract's primary or 
secondary construction site, and (2) either was established before 
opening of bids on the contract or project, or is not dedicated 
exclusively, or nearly so, to the performance of the contract or 
project. All other entities engaged in work on the site of the work are 
contractors or subcontractors.
    The Department also notes that the material supplier exemption 
operates in tandem with the ``site of the work'' requirement, except 
for ``development statutes'' to which neither limitation applies. Thus, 
under the final rule, a worker employed by an employer meeting the 
criteria for the material supplier exemption is not employed by a 
contractor or subcontractor, and therefore is not entitled to 
prevailing wages and fringe benefits under the Davis-Bacon labor 
standards at all even for time spent on the site of the work. In 
contrast, workers employed by contractors or subcontractors are 
entitled to Davis-Bacon wages, but only for time spent on the site of 
the work. Thus, for example, if a company establishes a facility near, 
but not on, the site of the work for the exclusive or nearly-exclusive 
purpose of furnishing materials to a particular project, even though 
the company is considered a subcontractor rather than a material 
supplier, its workers are only subject to the Davis-Bacon labor 
standards for time they spend on the site of the work as defined in 
this final rule.
    Finally, in addition to the changes described above, the Department 
is making a conforming edit to ensure that the regulation as written 
reflects the principle that employers meeting the material supplier 
exemption are not covered, with the exception of employers performing 
work under development statutes to which the exemption does not apply. 
Specifically, the Department is amending the definition of ``contract'' 
in Sec.  5.2 by adding language stating explicitly that with the 
exception of work performed under a development statute, the terms 
contract and subcontract do not include agreements with employers that 
meet the definition of a material supplier under Sec.  5.2.
d. Coverage of Time for Truck Drivers
    The Department also proposed to revise the regulations to clarify 
coverage of truck drivers under the DBRA. As explained in the proposed 
rule, the Department's current guidance differs depending on whether 
truck drivers are employed by material suppliers or contractors or 
subcontractors. As noted above, employees of material suppliers are 
only covered for onsite time engaged in non-delivery construction work, 
or for all of their time onsite if such construction work constitutes 
20 percent or more of their workweek. FOH 15e16. In contrast, truck 
drivers employed by contractors or subcontractors are covered under a 
broader range of circumstances, including: (1) performing work on the 
site of the work that is not related to offsite hauling, including 
hauling materials or supplies from one location on the site of the work 
to another location on the site of the work, see 65 FR 80275; FOH 
15e22(a)(1) (stating that drivers are covered ``for time spent working 
on the site of the work''); (2) hauling materials or supplies from a 
dedicated facility that is ``adjacent or virtually adjacent to the site 
of the work,'' 65 FR 80275-76; see also 29 CFR 5.2(j)(1)(iv)(A); FOH 
15e22(a)(3); (3) transporting ``significant portion(s)'' of the 
building or work between a secondary worksite established for contract 
performance and the primary worksite, 65 FR 80276; see also 29 CFR 
5.2(j)(1)(iv)(B); FOH 15e22(a)(4); and, finally, (4) time spent on the 
site of the work that is related to hauling materials to or from the 
site, such as loading or unloading materials, provided that such time 
is more than de minimis--a standard that as currently applied excludes 
drivers ``who come onto the site of the work for only a few minutes at 
a time merely to drop off construction materials.'' 65 FR 80276; see 
also FOH 15e22(a)(2); PWRB, DBA/DBRA Compliance Principles, at 6-7.
    As noted in the NPRM, there is significant uncertainty regarding 
this topic, including, for example: the distinction between drivers for 
material supply companies versus drivers for construction contractors 
or subcontractors; what constitutes de minimis; and whether the 20-
percent threshold for construction work performed onsite by material 
supply drivers is also applicable to delivery time spent on site by 
drivers employed by a contractor or subcontractor. Moreover, the 
Department's Administrative Law Judges (ALJs) have come to different 
conclusions on similar facts. Compare Rogers Group, ALJ No. 2012-DBA-
00005 (May 28, 2013) (concluding that a subcontractor was not required 
to pay its drivers prevailing wages for sometimes-substantial amounts 
of onsite time, as much as 7 hours 30 minutes in a day, making 
deliveries of gravel, sand, and asphalt from offsite), with E.T. 
Simonds Constr. Co., ALJ No. 2021-DBA-00001, 2022 WL 1997485 (May 25, 
2021), aff'd, ARB No. 21-054, 2022 WL 1997485 (May 13, 2022) 
(concluding that drivers employed by a subcontractor who hauled 
materials from the site of the work and spent at least 15 minutes per 
hour--25 percent of the workday--on site were covered for their onsite 
time).
    Taking this into account, the Department proposed to clarify 
coverage of truck drivers. First, as discussed above, the Department 
proposed to codify a definition of ``material supplier'' in a manner 
that would reduce ambiguity regarding the subcontractor/material 
supplier distinction by restricting the material supplier exemption to 
employers whose sole contractual responsibility is material supply and, 
in so doing, eliminate the subregulatory 20-percent threshold 
pertaining to material suppliers' drivers who engage in onsite 
construction work. Second, the Department proposed to amend its 
regulations concerning the coverage of transportation by truck drivers 
who are included within the DBA's scope generally (i.e., truck drivers 
employed by contractors and subcontractors, as well as any truck 
drivers employed in project construction or development under 
development statutes) by amending the definition of ``construction, 
prosecution, completion, or repair'' in Sec.  5.2 to include 
``transportation'' under five specific circumstances: (1) 
transportation that takes place entirely within a location meeting the 
definition of site of the work (for example, hauling materials

[[Page 57625]]

from one side of a construction site to the other side of the same 
site); (2) transportation of portion(s) of the building or work between 
a ``secondary construction site'' and a ``primary construction site''; 
(3) transportation between a ``nearby dedicated support site'' and 
either a primary or secondary construction site; (4) a driver or 
driver's assistant's ``onsite activities essential or incidental to 
offsite transportation'' where the driver or driver's assistant's time 
spent on the site of the work is not so insubstantial or insignificant 
that it cannot as a practical administrative matter be precisely 
recorded; and (5) any transportation and related activities, whether on 
or off the site of the work, by laborers and mechanics under a 
development statute. The Department explained that proposals (1), (2), 
(3), and (5) set forth principles reflected in the current regulations, 
but in a clearer and more transparent fashion, whereas proposal (4) 
sought to resolve the ambiguities discussed above regarding the 
coverage of onsite time related to offsite transportation.
    The Department received comments expressing support for these 
proposals and the ``site of the work'' proposals in general, including 
from III-FFC, REBOUND, and an individual commenter. III-FFC 
specifically emphasized that most of the proposed revisions regarding 
truck drivers reflect principles that are in the current regulations, 
interpreted in case law, and explained in WHD regulatory guidance, but 
that clarity would nonetheless be helpful given stakeholder 
uncertainty. It cited onsite loading and unloading of equipment, which 
is a several-step, time-consuming process, as one fact pattern that can 
prompt coverage disputes, and indicated that it was hopeful that 
regulatory revisions would reduce such disputes and increase 
compliance.
    The Department also received several comments opposing these 
proposals. Some appeared to argue that any coverage of material 
delivery truck drivers for onsite time is inconsistent with the D.C. 
Circuit's decision in Midway. OCA, IRTBA, SIBA, and IAPA also argued 
that case law under the NLRA supports the exclusion of delivery drivers 
from coverage even if they spend time on the site of the work. Some 
commenters similarly contended that the proposed rule's mere 
specification of ``transportation'' as a type of ``construction, 
prosecution, completion, or repair'' was itself outside the 
Department's statutory authority, whereas others suggested that while 
the DBRA covers wholly onsite transportation, such as hauling materials 
from one location on the site of the work to another, it does not cover 
any time spent onsite that is associated with delivery from offsite.
    Other commenters specifically took issue with the proposal to cover 
truck drivers employed by contractors or subcontractors for any onsite 
delivery-related time that is ``practically ascertainable,'' arguing 
that it would effectively eliminate the current de minimis principle 
and impose burdensome recordkeeping requirements. IAAP argued that the 
Department's proposed standard could compromise safety by creating 
pressure on truck drivers to perform any onsite activities as quickly 
as possible. AGC argued that the Department should instead codify its 
current guidance, including the de minimis and 20 percent principles. 
AGC also argued that the Department should expand application of the de 
minimis principles to include all covered workers and activities, not 
only truck drivers. And FTBA suggested that the proposal would in some 
cases impose burdens without benefits since many truck drivers are 
owner-operators to whom the Department, as a matter of administrative 
policy, has not applied the DBRA. See supra n. 180.\199\
---------------------------------------------------------------------------

    \199\ AGC also suggested that the final rule codify the 
Department's policy in FOH 15e17 regarding truck driver owner-
operators. Because the Department did not make any proposals along 
these lines in the NPRM, it declines to do so in the final rule.
---------------------------------------------------------------------------

    As an initial matter, the Department maintains that it is important 
to clarify the application of the DBRA to truck drivers, and to do so 
in the regulatory text. As noted above and in the discussion regarding 
the material supplier exemption, there remains considerable confusion 
about these principles, including conflation of the de minimis standard 
with the current 20-percent threshold related to material suppliers. 
Additionally, for the reasons discussed above in section 
III.B.3.ii.(G).(2).(b), the Department is retaining, with some 
clarification, its proposal to codify a definition of material supplier 
that is restricted to employers whose sole contractual responsibility 
is material supply. As such, any employer whose truck drivers engage in 
other construction activities will be considered contractors or 
subcontractors who are subject to the regulations' new provisions 
concerning transportation. This renders moot the subregulatory 20-
percent threshold pertaining to onsite time for material suppliers' 
drivers who also engage in onsite construction work.
    The Department disagrees that Midway, Ball, or L.P. Cavett preclude 
coverage of onsite time for delivery drivers employed by contractors or 
subcontractors. None of those cases speak to this precise issue; 
rather, these cases concerned the geographic scope of the ``site of the 
work'' and the coverage for time driving on locations outside the site 
of the work. As noted in the NPRM, Midway expressly declined to decide 
whether the DBA covers work that a driver performs onsite if the amount 
of such work is more than de minimis--because no party had raised it. 
Midway, 932 F.2d at 989 n.5 (``No one has argued in this appeal that 
the truckdrivers were covered because they were on the construction 
site for this brief period of the workday.''). If anything, Midway is 
best read to show that the DBA does cover non-``determinative of the 
[DBA's] coverage.'' 932 F.2d at 991.\200\ Accordingly, the Department 
has consistently maintained since Midway that truck drivers, and their 
assistants, employed by contractors or subcontractors, are covered for 
onsite work associated with offsite delivery, provided that such onsite 
time exceeds a certain threshold. See 65 FR 80276; 57 FR 19205-06; FOH 
15e22(a)(2); PWRB, DBA/DBRA Compliance Principles, at 6-7; ET Simonds, 
ALJ No. 2021-DBA-00001, 2022 WL 1997485, at *3-4.
---------------------------------------------------------------------------

    \200\ To the extent that some language in Midway could be read 
to support the notion that even onsite time of delivery drivers 
employed by contractors and subcontractors is not covered, see, 
e.g., Midway, 932 F.2d at 992 (``Material delivery truck drivers who 
come onto the site of the work merely to drop off construction 
materials are not covered by the Act.''), such language is dicta 
given the D.C. Circuit's express statement that it was not deciding 
whether the DBA covers a more than de minimis amount of work that a 
driver performs onsite, id. at 989 n.5. See Cooper Indus., Inc. v. 
Aviall Servs., Inc., 543 U.S. 157, 170 (2004) (``Questions which 
merely lurk in the record, neither brought to the attention of the 
court nor ruled upon, are not to be considered as having been so 
decided as to constitute precedents.'').
---------------------------------------------------------------------------

    The Department similarly disagrees that cases construing the NLRA 
preclude such coverage. Section 8(e) of the NLRA prohibits certain 
``contract[s] or agreement[s]'' between employers and unions but does 
not prohibit ``an agreement . . . relating to . . . work to be done at 
the site of the . . . work''). 29 U.S.C. 158(e). Some commenters 
contended that judicial and National Labor Relations Board decisions 
construing this language support a conclusion that truck drivers 
transporting materials to or from construction sites are not considered 
to be performing work on the site of construction, even if they spend 
time onsite, and that the DBA should be construed similarly. These 
cases,

[[Page 57626]]

however, hold only that a rule similar to the DBA's de minimis 
principle applies under section 8(e) of the NLRA, which excludes 
``small'' amounts of onsite work that are ``necessarily'' performed in 
delivering materials and merely ``incidental'' to a driver's primarily 
offsite work. See In re Techno Constr. Corp., 333 NLRB 75, 82 (2001) 
(``[T]hese incidental tasks do not bring the Respondent within the 
building and construction industry as contemplated by [the NLRA].''); 
Teamsters Loc. 957, 298 N.L.R.B. 395, 399 (1990) (ALJ Op.) 
(``[E]mployees involved in such work have only `incidental contact with 
the site.' . . . With rare exception, the haulage of [material] by the 
[drivers] in the instant case involves such `incidental contact' with 
job sites.''), aff'd, Gen. Truck Drivers, Chauffeurs, Warehousemen & 
Helpers of Am., Loc. No. 957 v. NLRB, 934 F.2d 732, 737 (6th Cir. 1991) 
(quoting ALJ with approval); Joint Council of Teamsters No. 42, 248 
NLRB 808, 816 (1980) (``[T]he Board has repeatedly held that the 
proviso does not apply to jobsite deliveries (or, by logical inference, 
pickups) which are only a small part of basically offsite 
transportation activity.''); Drivers, Salesmen, Warehousemen, Milk 
Processors, Cannery, Dairy Emp. & Helpers Loc. Union No. 695 v. NLRB, 
361 F.2d 547, 552 (D.C. Cir. 1966) (Section 8(e) does not cover work a 
delivery driver ``necessarily'' performs onsite). Thus, these cases 
stand only for the idea that section 8(e) of the NLRA apparently does 
not cover de minimis onsite work, the same principle that the 
Department has applied under the DBRA.\201\ None of these cases held 
that the NLRA excludes work that a driver performs onsite that is more 
than de minimis.\202\
---------------------------------------------------------------------------

    \201\ In Local No. 957, the Sixth Circuit emphasized that the 
drivers performed only 10 percent of their work onsite--the same 
amount as in Midway. Loc. No. 957, 934 F.2d at 737; see also Midway, 
932 F.2d at 989 n.5.
    \202\ The Department also notes that even if section 8(e) of the 
NLRA were construed to have a narrower scope, the DBA's ``site of 
the work'' language would nonetheless be consistent with the 
Department's interpretation here. Section 8(e) concerns an 
``agreement'' for work done onsite, a term the DBA does not use. 29 
U.S.C. 158(e). Even if an ``agreement'' which is primarily for 
offsite delivery work, which necessarily entails some incidental 
onsite work, does not necessarily ``relat[e] to'' onsite work under 
the NLRA, id., any onsite work performed is still done at the ``site 
of the work'' under the DBA. Accord Smith v. Berryhill, 139 S. Ct. 
1765, 1776 (2019) (``[they] are different statutes, and courts must 
remain sensitive to their differences'').
---------------------------------------------------------------------------

    The Department also rejects the notion that it is improper to 
include ``transportation'' as a covered activity under the specific 
circumstances listed in the regulation. It has never been in serious 
dispute that the transportation of materials, equipment, and the like 
is within the scope of the types of activities covered by the DBRA. 
Rather, in cases where workers performing these activities have been 
determined not to be covered, the basis for such determinations has 
been either because they were deemed employees of bona fide material 
suppliers or because they were not working on the site of the work. The 
current regulations expressly recognize that transportation and the 
furnishing of materials are covered construction activities, either if 
they take place on the site of the work or if they are performed as 
part of work under a development statute. See Sec.  5.2(j)(1)(iii), 
(iv), 5.2(j)(2). The proposed rule did not reflect any expansion of 
coverage in this regard.
    However, after considering the comments received, the Department is 
not adopting the NPRM's proposal to require compensation for onsite 
time related to offsite delivery as long as it is not ``so 
insubstantial or insignificant that it cannot as a practical 
administrative matter be precisely recorded.'' While the Department 
maintains that such a standard would be consistent with the DBA's 
``site of the work'' principle, see 65 FR 80275-76 (explaining that the 
Department does not understand Midway as precluding coverage of any 
time that drivers spend on the site of the work, ``no matter how 
brief''), the Department also recognizes that it could impose 
unnecessary burdens on contractors for comparatively marginal benefits.
    Instead, the final rule codifies the Department's current guidance 
by requiring contractors and subcontractors to pay Davis-Bacon wages to 
delivery drivers for onsite time related to offsite delivery if such 
time is not de minimis. The Department believes it is important to 
codify this principle, as commenters agreed that depending on the 
circumstances, including what is being delivered, traffic, and other 
factors, such drivers can spend significant portions of their day on 
the site of the work. Consistent with its pronouncements since Midway, 
the Department believes that such time is compensable under the DBRA.
    However, whereas the proposed rule sought to borrow language from 
the Department's regulatory definition of de minimis under the FLSA, 
see 29 CFR 785.47, the final rule is not defining de minimis in the 
regulation for several reasons. First, the Department did not propose a 
definition for the term in the NPRM. Second, the Department's 
historical practice has been to evaluate de minimis under the DBRA on a 
case-by-case basis, and a recent decision by the ARB suggests that such 
an approach is reasonable. See ET Simonds, ARB No. 2021-0054, 2022 WL 
1997485, at *8 (concluding that ``the analysis of whether a material 
transportation driver is covered is contextual in nature and should 
include a discussion of the totality of the circumstances''). To the 
extent warranted, the Department will consider whether to further 
elaborate on the definition of de minimis in subregulatory guidance. 
However, the Department notes two general principles here.
    First, the de minimis standard under the DBRA is independent of the 
de minimis standard under the FLSA. As noted in the NPRM, the FLSA de 
minimis rule ``applies only where there are uncertain and indefinite 
periods of time involved of a few seconds or minutes duration, and 
where the failure to count such time is due to considerations justified 
by industrial realities.'' 29 CFR 785.47. Moreover, under the FLSA, 
``an employer may not arbitrarily fail to count as hours worked any 
part, however small, of the employee's fixed or regular working time or 
practically ascertainable period of time he is regularly required to 
spend on duties assigned to him.'' Id. This strict standard is suitable 
for the FLSA, a statute that requires payment of a minimum wage for 
every hour worked. The DBRA's de minimis principle, on the other hand, 
informs the different inquiry of whether a worker is ``employed 
directly on the site of the work.'' Thus, the Department has generally 
held that it excludes periods of ``a few minutes'' onsite just to drop 
off materials, even though such time generally is considered hours 
worked under the FLSA.
    Second, the Department intends that under circumstances where 
workers spend a significant portion of their day or week onsite, short 
periods of time that in isolation might be considered de minimis may be 
aggregated. For example, in its recent decision in ET Simonds, the ARB 
concluded that it was reasonable for the Administrator to aggregate 
such periods throughout a workday where the record showed that workers 
spent a total of 15 minutes per hour on the website. Thus, the 
Department's position is that the total amount of time a driver spends 
on the site of the work during a typical day or workweek--not just the 
amount of time that each delivery takes--is relevant to a determination 
of whether the onsite time is de minimis.
    The Department declines AGC's suggestion to expand the de minimis 
principle beyond the context of truck

[[Page 57627]]

drivers. First, such a change would be beyond the scope of the proposed 
rule. Second, the Department developed the de minimis principle for 
truck drivers given that such workers frequently alternate between time 
spent on and off the worksite. The Department does not believe it is 
necessary to extend the principle to other types of workers. 
Additionally, while FTBA expressed concern that truck drivers that are 
owner-operators might have to be added to certified payrolls even 
though DOL policy does not require that they be compensated at DBRA 
rates, this is not a consequence of the final rule; as discussed above, 
even under the guidance in place prior to this rule, truck drivers 
employed by contractors or subcontractors have been subject to the DBRA 
for time spent on the site of the work that is not de minimis.
e. Non-Substantive Changes for Conformance and Clarity
    The Department proposed to amend Sec.  5.2 to use the term 
``secondary construction sites'' to describe the covered locations at 
which ``significant portions'' of public buildings and works are 
covered provided all of the conditions discussed above are met and to 
use the term ``primary construction sites'' to describe the place where 
the building or work will remain. Although, as discussed above in 
``Coverage of Construction Work at Secondary Construction Sites,'' the 
Department received numerous comments on the substance of these 
proposals, the Department did not receive comments on this conforming 
change, and the final rule retains these descriptive terms.
    The Department additionally proposed to use the term ``nearby 
dedicated support site'' to describe locations such as flagger sites 
and batch plants that are part of the site of the work because they are 
dedicated exclusively, or nearly so, to the project, and are adjacent 
or nearly adjacent to a primary or secondary construction site. AGC 
voiced concern that the term ``nearby'' was confusing and could be read 
to indicate a broader geographic scope of coverage than the ``adjacent 
or nearly adjacent'' standard permits. As such, the final rule instead 
adopts the term ``adjacent or nearly adjacent dedicated support site.''
    The Department also proposed to define the term ``development 
statute'' to mean a statute that requires payment of prevailing wages 
under the Davis-Bacon labor standards to all laborers and mechanics 
employed in the development of a project, and to make conforming 
changes to Sec.  5.5 to incorporate this new term. The Department noted 
that the current regulations reference three specific statutes--the 
United States Housing Act of 1937; the Housing Act of 1949; and the 
Native American Housing Assistance and Self-Determination Act of 1996--
that fit this description, but do not consistently reference all three, 
and that replacing those references with the defined term ``development 
statute'' would improve regulatory clarity and ensure that the 
regulations would not become obsolete if existing statutes meeting this 
description are revised or if new statutes meeting this description are 
added.
    Regarding this proposal, AGC commented that the Sixth Circuit in 
L.P. Cavett concluded that coverage principles such as site of the work 
applicable to the Davis-Bacon Act apply to the Related Acts even if the 
Related Acts may contain different wording. See 101 F.3d at 1116. It 
stated that if the Department nonetheless wishes to apply a different 
coverage standard to Related Acts, it should engage in separate 
rulemaking. However, while the Department has previously voiced 
agreement with the general conclusion in L.P. Cavett regarding coverage 
principles under the vast majority of the Related Acts, it has 
explained that the three housing statutes noted above are 
distinguishable because their ``language and/or clear legislative 
history'' ``reflected clear congressional intent that a different 
coverage standard be applied.'' 65 FR 80275. The current regulations 
reflect this conclusion, as its references to both the site of the work 
and the material supplier exemption specifically exempt these statutes 
(though, as noted above, the regulations do not do so consistently in 
every instance). See Sec. Sec.  5.2(i), (j)(1), (j)(1)(iii), (j)(2); 
5.5(a)(1)(i), (a)(2), (a)(3)(i). Thus, the proposed rule's use of the 
defined term ``development statute'' does not make any substantive 
change from the current regulations with respect to these three 
statutes. However, to ensure that the revision is faithful to the 
Department's previous statements agreeing that identical coverage 
principles apply to all of the Related Acts except the above three, the 
final rule specifically names the three housing statutes in the 
definition of ``development statute,'' and requires that for any other 
statute to be deemed a development statute, the Administrator must make 
an affirmative determination that the statute's language and/or 
legislative history reflected clear congressional intent to apply a 
coverage standard different from the Davis-Bacon Act itself.
    In addition to the above changes, the Department proposed a number 
of revisions to the regulatory definitions related to the ``site of the 
work'' and ``material supplier'' principle to conform to the above 
substantive revisions and for general clarity. The Department proposed 
to delete from the definition of ``building or work'' the language 
explaining that, in general, ``[t]he manufacture or furnishing of 
materials, articles, supplies or equipment . . . is not a building or 
work,'' and proposed instead to clarify in the definition of the term 
``construction (or prosecution, completion, or repair)'' that 
``construction, prosecution, completion, or repair'' only includes 
``manufacturing or furnishing of materials, articles, supplies or 
equipment'' under certain limited circumstances, namely, either on the 
site of the work or under development statutes. Along the lines of its 
comments noted above, FTBA expressed concern that this change could 
expand coverage to include material suppliers. While no substantive 
change was intended, in recognition of this concern, the Department is 
clarifying the definition of ``construction, prosecution, completion, 
or repair'' to read that such activities are only covered if done by 
laborers or mechanics who are employed by a contractor or subcontractor 
(i.e., not a material supplier) on the site of the work, or who are 
working in the construction or development of a project under a 
development statute.
    Additionally, the Department proposed to remove the citation to 
Midway from the definition of the term ``construction (or prosecution, 
completion, or repair).'' Finally, the Department proposed several 
linguistic changes to defined terms in Sec.  5.2 to improve clarity and 
readability. Apart from the numerous substantive comments regarding 
these terms discussed at length above, the Department did not receive 
comments on these proposed conforming and clarifying changes and the 
final rule therefore adopts them as proposed.
(H) Paragraph Designations
    The Department also proposed to amend Sec.  5.2 to remove paragraph 
designations of defined terms and instead to list defined terms in 
alphabetical order. The Department proposed to make conforming edits 
throughout parts 1, 3, and 5 in any provisions that currently reference 
lettered paragraphs of Sec.  5.2.
    The Department received no comments on this proposal. The final

[[Page 57628]]

rule therefore adopts this change as proposed.
iii. Section 5.5 Contract Provisions and Related Matters
    The Department proposed to remove the table at the end of Sec.  5.5 
related to the display of OMB control numbers. The Department maintains 
an inventory of OMB control numbers on https://www.reginfo.gov under 
``Information Collection Review,'' and this table is no longer 
necessary to fulfill the requirements of the Paperwork Reduction Act. 
This website is updated regularly and interested persons are encouraged 
to consult this website for the most up-to-date information.
    The Department received no comments on this proposal. The final 
rule therefore adopts this change as proposed.
    The final rule includes a number of technical changes and other 
minor revisions to Sec.  5.5, including to the proposed regulatory text 
of the DBRA and CWHSSA contract clauses, that were not in the proposed 
rule. The final rule adds a parenthetical to Sec.  5.5(a) that 
clarifies that the requirement in the FAR is to incorporate contract 
clauses by reference, as distinguished from the non-FAR-covered 
contracts into which the contract clauses must be inserted ``in full.''
    The final rule also updates the Sec.  5.5(b) contract clauses by 
adding a reference to the new anti-retaliation provision at Sec.  
5.5(b)(5) and using gender neutral terminology (``watchpersons''). The 
term ``watchpersons'' has been substituted for ``watchmen'' in this and 
various other regulations. This change in terminology is not a 
substantive change.
    Additional minor changes to Sec.  5.5 include that Sec.  5.5(b)(2) 
has been updated to reflect the Department's Civil Penalties Inflation 
Adjustment Act Annual Adjustment for 2023, which was published in the 
January 13, 2023 Federal Register. This adjustment is required by the 
Federal Civil Penalties Inflation Adjustment Act Improvements Act of 
2015. Section 5.5(c) has also been revised so that the CWHSSA-required 
records are referred to in terms that conform with the new terminology 
for different types of records in Sec.  5.5(a)(3). That section refers 
to basic records (including regular payroll) and certified payroll. See 
also Sec.  3.3. Finally, ``CWHSSA'' has been added to the heading in 
Sec.  5.5(b) to identify the acronym for the Contract Work Hours and 
Safety Standards Act.
(A) 29 CFR 5.5(a)(1)
    The Department's proposed changes to this section are discussed 
above in section III.B.1.xii (``Frequently conformed rates'').
(B) 29 CFR 5.5(a)(3)
    The Department proposed a number of revisions to Sec.  5.5(a)(3) to 
enhance Davis-Bacon compliance and enforcement by clarifying and 
supplementing existing recordkeeping requirements. Conforming changes 
to Sec.  5.5(c) are also discussed here.\203\
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    \203\ As an initial matter, the Department proposed to replace 
all references to employment (e.g., employee, employed, employing, 
etc.) in Sec.  5.5(a)(3) and (c), as well as in Sec.  5.6 and 
various other sections, with references to ``workers'' or ``laborers 
and mechanics.'' These proposed changes are discussed in greater 
detail in section III.B.3.xxii (``Employment Relationship Not 
Required'').
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    The Department received many comments supporting the proposed 
changes to Sec.  5.5(a)(3) and the corresponding changes to Sec.  
5.5(c). These comments generally expressed the view that the proposed 
changes would enhance transparency and improve enforcement of Davis-
Bacon labor standards requirements. Conversely, the Department received 
comments from the group of U.S. Senators and a few contractor 
associations expressing the view that the proposed changes were unduly 
burdensome to contractors. Specifics of these comments are addressed in 
the discussion below.
(1) 29 CFR 5.5(a)(3)(i)
    The Department proposed to amend Sec.  5.5(a)(3)(i) to clarify this 
recordkeeping regulation, consistent with its longstanding 
interpretation and enforcement, as requiring contractors to maintain 
and preserve basic records and information, as well as certified 
payrolls. The Department explained that required basic records include, 
but are not limited to, regular payroll (sometimes referred to as ``in-
house'' payroll) and additional records relating to fringe benefits and 
apprenticeship. The Department similarly explained that the term 
``regular payroll'' refers to any written or electronic records that 
the contractor uses to document workers' days and hours worked, rate 
and method of payment, compensation, contact information, and other 
similar information that provides the basis for the contractor's 
subsequent submission of certified payroll.
    The Department also proposed changes to Sec.  5.5(a)(3)(i) to 
clarify that regular payrolls and other basic records required by this 
section must be preserved for a period of at least 3 years after all 
the work on the prime contract is completed. The proposed change was 
intended to make it clear that even if a project takes more than 3 
years to complete, contractors and subcontractors must keep payroll and 
basic records for work on the project for at least 3 years after all 
the work on the prime contract has been completed. For example, a 
subcontractor that performed work during the second year of a 5-year 
project would need to keep their payroll and basic records for at least 
3 years after all work on the project had been completed, even though 
that may be 6 years after the subcontractor completed their own work on 
the project. This revision expressly stated the Department's 
longstanding interpretation and practice concerning the period of time 
that contractors and subcontractors must keep payroll and basic records 
required by Sec.  5.5(a)(3).
    The Department also proposed a new requirement that records 
required by Sec.  5.5(a)(3) and (c) must include last known worker 
telephone numbers and email addresses, reflecting more modern and 
efficient methods of communication between workers and contractors, 
subcontractors, contracting agencies, and the Department's authorized 
representatives.
    Another proposed revision in this section, as well as in Sec.  
5.5(c), clarified the Department's longstanding interpretation that 
these recordkeeping provisions require contractors and subcontractors 
to maintain records of each worker's correct classification or 
classifications of work actually performed and the hours worked in each 
classification. See, e.g., Pythagoras Gen. Contracting Corp., ARB Nos. 
08-107, 09-007, 2011 WL 1247207, at *7 (``If workers perform labor in 
more than one job classification, they are entitled to compensation at 
the appropriate wage rate for each classification according to the time 
spent in that classification, which time the employer's payroll records 
must accurately reflect.''). Current regulations permit contractors and 
subcontractors to pay ``[l]aborers or mechanics performing work in more 
than one classification . . . at the rate specified for each 
classification for the time actually worked therein,'' but only if 
``the employer's payroll records accurately set forth the time spent in 
each classification in which work is performed.'' 29 CFR 5.5(a)(1)(i). 
The proposed revisions similarly recognized that laborers or mechanics 
may perform work in more than one classification and more expressly 
provided that, in such cases, it is the obligation of contractors and 
subcontractors to accurately record information required by this 
section for each separate classification of work performed.
    By proposing these revisions to the language in Sec.  5.5(a)(3)(i) 
and (c) to

[[Page 57629]]

explicitly require records of the ``correct classification(s) of work 
actually performed,'' the Department intended to clarify the 
requirements consistent with its longstanding interpretation of the 
current recordkeeping regulations that contractors and subcontractors 
must keep records of (and include on certified payrolls) hours worked 
segregated by each separate classification of work performed. The 
Department noted that it would continue to be the case that if a 
contractor or subcontractor fails to maintain such records of actual 
daily and weekly hours worked and correct classifications, then it must 
pay workers the rates of the classification of work performed with the 
highest prevailing wage and fringe benefits due.
    Current Sec.  5.5 expressly states that records that contractors 
and subcontractors are required to maintain must be accurate and 
complete. See also 40 U.S.C. 3145(b). The Department proposed to put 
contractors and subcontractors on further notice of their statutory, 
regulatory, and contractual obligations to keep accurate, correct, and 
complete records by adding the term ``actually'' in Sec.  5.5(a)(3)(i) 
and (c) to modify ``hours worked'' and ``work performed.'' The current 
regulations require maintenance of records containing ``correct 
classifications'' and ``actual wages paid,'' and this proposed revision 
did not make any substantive change to the longstanding requirement 
that contractors and subcontractors keep accurate, correct, and 
complete records of all the information required in these sections.
    Several commenters specifically noted that the clarification that 
contractors are required to maintain the required records for at least 
3 years after work on the prime contract has been completed will reduce 
wage underpayment and enable more efficient enforcement of Davis-Bacon 
labor standards. See LIUNA, Electrical Training Alliance (Alliance), 
NCDCL, TAUC. LIUNA further noted that requiring all contractors to 
maintain required records for 3 years past the completion of work on 
the prime contract is particularly important in enforcing compliance 
standards when some or all of the workers may no longer be onsite, 
while NCDCL expressed the view that the proposed requirement would 
reduce the likelihood that records would be created or even falsified 
after the work has been performed. NECA similarly generally supported 
the proposed changes, though they also requested that the Department 
establish a cutoff time period for subcontractors to maintain the 
required records, as some projects may continue for several years after 
a subcontractor has performed any work on the project, thereby making 
it potentially burdensome for subcontractors to maintain the required 
records for such an extended period.
    III-FFC and Alliance also specifically expressed support for the 
clarification that contractors must maintain accurate records of 
workers' classifications and the number of hours worked in each 
classification, indicating that misclassification of workers is a 
serious problem that would be reduced by the proposed clarification. 
III-FFC also commented favorably on the proposal to require contractors 
to maintain a record of workers' last known telephone numbers and email 
addresses, noting that this information is particularly important when 
the Department must interview workers as part of the enforcement 
process. Another commenter suggested that the Department should add to 
Sec.  5.5(a)(3) a requirement that contractors maintain contact 
information for workers. The Department notes that such a requirement 
was part of its proposal and that the current regulations require that 
contractor records contain worker addresses. UBC also noted that 
contractors do not always maintain the required records for workers who 
have been classified, correctly or not, as independent contractors, and 
requested that language be added to the regulations requiring 
contractors to maintain time records for workers, jobsite orientation 
information, contact information for workers, names, contact 
information of subcontractors, and records of payments to independent 
contractors and/or subcontractors.
    The Department also received two comments from contractor 
associations opposing the proposed requirement that contractors 
maintain a record of workers' last known telephone numbers and email 
addresses. ABC expressed the view that such a requirement would be an 
invasion of privacy and would increase the risk of identity theft and 
that the regulations should at least require that the phone numbers and 
email addresses be redacted, a position that appears to reflect the 
misimpression that the proposed change would require the worker phone 
numbers and email addresses to be included on the certified payrolls 
submitted to contracting agencies. IEC stated that ``it is one thing to 
maintain this contact information so that a contractor can contact its 
employees, and yet quite another to make this a regulatory 
requirement.'' IEC also noted that workers may not want to provide 
telephone numbers or email addresses or even might not have them. IEC 
further stated that the proposed requirement conflicts with the Privacy 
Act of 1974, as the information would not be relevant or necessary to 
accomplish the DBA's statutory purposes.
    After consideration of the comments on this topic, the Department 
is adopting the changes to Sec.  5.5(a)(3)(i) as proposed. As the 
various comments in support indicate, the proposed changes will clarify 
the recordkeeping requirements for contractors, discourage 
misclassification of workers, and increase the efficiency of the 
Department's enforcement. While the Department appreciates ABC's 
concerns for workers' privacy and the need to protect workers from the 
risk of identity theft, the change will not require contractors to 
provide workers' telephone numbers or emails on certified payrolls or 
post them on a publicly available database. The contractor will merely 
have to maintain records of the workers' last known telephone numbers 
and email addresses in the contractor's own internal records in the 
workers' personnel files or other suitable location, and to make that 
information available to the Department or the contracting agency upon 
request. Contractors will typically already have contact information, 
including phone numbers and email addresses, stored in their records in 
whatever manner the contractor has deemed appropriate in light of 
privacy concerns. The proposed requirement to maintain such a record 
for those workers who perform work on Davis-Bacon contracts for at 
least 3 years after work has concluded on the project and allow 
authorized representatives of the Department or the contracting agency 
access to that information on request, should not pose a material 
increased risk of identity theft for workers.
    The Department acknowledges IEC's point that on occasion there may 
be workers who do not have telephone numbers or email addresses or who 
would prefer not to provide them to the contractor. However, workers 
also may prefer not to provide their home address, or may not have a 
permanent home address, but contractors have nevertheless been required 
to maintain a record of workers' last known home address and have 
generally done so without issue. Moreover, on the rare occasions when 
the contractor is unable to obtain a worker's telephone number or email 
address despite diligent efforts to do so, and has noted that fact in 
their records, the contractor will have satisfied this requirement by, 
in effect, documenting the worker's ``last known''

[[Page 57630]]

telephone number and email address. As discussed below, having a record 
of workers' telephone numbers and email addresses is extremely useful 
for enforcement purposes. The Department believes that these benefits 
outweigh any slight additional administrative or privacy burden that 
this requirement may impose.
    The Department does not agree with IEC's claim that this 
information is not necessary or relevant to the DBA's statutory 
purposes. The Department, as well as the contracting agencies, is 
responsible for enforcing the Davis-Bacon prevailing wage requirements 
on covered contracts. Enforcement of prevailing wage requirements for a 
Davis-Bacon project requires the Department to obtain accurate and 
detailed information as to workers' classifications, hours of work, and 
wages paid at all stages of a project. Interviews are necessary to, 
among other reasons, confirm that the information provided on certified 
payrolls and basic records is correct and to fill in any gaps in a 
contractor's records. However, worksite interviews may not be possible 
(or suitable) for a variety of reasons: some workers may not be onsite 
at the time an investigation is conducted; some subcontractors may have 
already completed their portion of the work; certain work crews may not 
be necessary at that stage of construction; some contractors may 
attempt to interfere with WHD's investigation by, for example, telling 
workers to leave the worksite or lie to investigators; or some workers 
may have voluntarily separated from employment or been terminated. 
Information that can be obtained from such workers may be valuable or 
even necessary to determine whether contractors are in compliance with 
the Davis-Bacon labor standards. The requirement to maintain a record 
of workers' telephone numbers and email addresses should make it 
considerably easier and more efficient for the Department--and 
contracting agencies--to reach workers who are not on the worksite at 
the time of the Department's investigation and will therefore increase 
the effectiveness of the Department's enforcement efforts.
    The Department also understands NECA's concern that the requirement 
to maintain the required records for at least 3 years after all the 
work on the prime contract is completed may be more burdensome for 
subcontractors that may complete work on their subcontract well before 
all work on the prime contract has been completed. However, allowing 
subcontractors to maintain the required records for a shorter period of 
time would be inconsistent with the Department's longstanding 
interpretation and practice concerning the period of time that 
contractors and subcontractors must keep payroll and basic records 
required by Sec.  5.5(a)(3), and could impede enforcement of the Davis-
Bacon labor standards. The obligation to ensure that the Davis-Bacon 
labor standards have been met and workers have received the applicable 
prevailing wage rates does not end when a subcontractor completes their 
portion of work on the project, and the Department may investigate 
compliance with the Davis-Bacon labor standards after a subcontractor 
is no longer working onsite. The required records are a key component 
in the Department's enforcement efforts. Such records are particularly 
helpful when workers are no longer working on the project, as other 
commenters noted. Accordingly, the Department does not believe it is 
appropriate to only require subcontractors to maintain records for a 
more limited period of time. The Department notes that nothing in the 
regulations prohibits a prime contractor from requesting, or requiring, 
its subcontractors provide a copy of the required records to the prime 
contractor, so that the prime contractor can ensure that these records 
are available for the required timeframe, as the prime contractor is 
responsible for ensuring subcontractor compliance under Sec.  
5.5(a)(6). Such an approach does not relieve subcontractors of their 
obligations to maintain the required records. If they also provide 
those records to the prime contractor, however, required records may be 
more readily available when needed by the Department or the contracting 
agency.
    The Department also appreciates UBC's concerns that contractors may 
not maintain adequate records for workers when the contractor considers 
the workers to be independent contractors or subcontractors, making it 
more difficult to determine whether such workers were paid the 
applicable prevailing wage rates for their hours worked. Contractors 
are required to pay applicable prevailing wage rates for hours worked 
by laborers and mechanics on the site of work, regardless of any 
contractual relationship which may be alleged to exist between the 
contractor and those workers. A worker's classification as an 
independent contractor, even where such a classification is correct, 
does not relieve a contractor of the obligation to pay prevailing wages 
to that worker. Therefore, the regulatory language as proposed already 
requires that contractors keep all of the required records described in 
Sec.  5.5(a)(3) for such workers, unless such workers meet the 
requirements for the executive, administrative, or professional 
exemption as defined in 29 CFR 541. These required records therefore 
already include time records for all workers (including workers' 
attendance at jobsite orientation, as this would be considered hours 
worked), contact information for all workers, and a record of payments 
made to all workers, including individuals classified as independent 
contractors.
(2) 29 CFR 5.5(a)(3)(ii)
    The Department proposed to revise the language in Sec.  
5.5(a)(3)(ii) to expressly apply to all entities that might be 
responsible for maintaining the payrolls a contractor is required to 
submit weekly when a Federal agency is not a party to the contract. 
Currently, the specified records must be submitted to the ``applicant, 
sponsor, or owner'' if a Federal agency is not a party to the contract. 
The proposed revision added the language ``or other entity, as the case 
may be, that maintains such records'' to clarify that this requirement 
applies regardless of the role or title of the recipient of Federal 
assistance (through grants, loans, loan guarantees or insurance, or 
otherwise) under any of the statutes referenced by Sec.  5.1.
    The Department also proposed to revise Sec.  5.5(a)(3)(ii) by 
replacing the phrase ``or audit of compliance with prevailing wage 
requirements'' with ``or other compliance action.'' This proposed 
revision clarified that compliance actions may be accomplished by 
various means, not solely by an investigation or audit of compliance. A 
similar change was proposed in Sec.  5.6. Compliance actions include, 
without limitation, full investigations, limited investigations, office 
audits, self-audits, and conciliations. The proposed revision expressly 
set forth the Department's longstanding practice and interpretation of 
this current regulatory language to encompass all types of Davis-Bacon 
compliance actions currently used by the Department, as well as 
additional compliance tools the Department may use in the future. The 
proposed revision did not impose any new or additional requirements 
upon Federal agencies, applicants, sponsors, owners, or other entities, 
or on the Department, contractors, or subcontractors.
    The Department also proposed to add language to Sec.  
5.5(a)(3)(ii)(A) to codify the Department's longstanding policy that 
contracting agencies and prime contractors can permit or require 
contractors to submit their certified

[[Page 57631]]

payrolls through an electronic system, provided that the electronic 
submission system requires a legally valid electronic signature, as 
discussed below, and the contracting agency or prime contractor permits 
other methods of payroll submission in situations where the contractor 
is unable or limited in its ability to use or access the electronic 
system. See generally PWRB, DBA/DBRA Compliance Principles, at 26. As 
noted in the proposal, the Department encourages all contracting 
agencies to permit submission of certified payrolls electronically, so 
long as all of the required information and certification requirements 
are met. Nevertheless, contracting agencies determine which, if any, 
electronic submissions systems they will use, as certified payrolls are 
submitted directly to the contracting agencies. The Department 
explained that electronic submission systems can reduce the 
recordkeeping burden and costs of record maintenance, and many such 
systems include compliance monitoring tools that may streamline the 
review of such payrolls.\204\
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    \204\ The Department explained that it does not endorse or 
approve the use of any electronic submission system or monitoring 
tool(s). Although electronic monitoring tools can be a useful aid to 
compliance, successful submission of certified payrolls to an 
electronic submission system with such tools does not guarantee that 
a contractor is in compliance, particularly since not all violations 
can be detected through electronic monitoring tools. Contractors 
that use electronic submission systems remain responsible for 
ensuring compliance with Davis-Bacon labor standards provisions.
---------------------------------------------------------------------------

    However, under the proposed revisions, agencies that require the 
use of an electronic submission system would be required to allow 
contractors to submit certified payrolls by alternative methods when 
contractors are not able to use the agency's electronic submission 
system due to limitations on the contractor's ability to access or use 
the system. For example, if a contractor does not have internet access 
or is unable to access or use the electronic submission system due to a 
disability, the contracting agency would be required to allow such a 
contractor to submit certified payrolls in a manner that accommodates 
these circumstances.
    The Department also proposed a new paragraph, Sec.  
5.5(a)(3)(ii)(E), to reiterate the Department's longstanding policy 
that, to be valid, the contractor's signature on the certified payroll 
must either be an original handwritten signature or a legally valid 
electronic signature. Both of these methods are sufficient for 
compliance with the Copeland Act. See WHD Ruling Letter (Nov. 12, 2004) 
(``Current law establishes that the proper use of electronic signatures 
on certified payrolls . . . satisfies the requirements of the Copeland 
Act and its implementing regulations.'').\205\ The proposal specified 
that valid electronic signatures include any electronic process that 
indicates acceptance of the certified payroll record and includes an 
electronic method of verifying the signer's identity. Valid electronic 
signatures do not include a scan or photocopy of a written signature. 
The Department recognized that electronic submission of certified 
payroll expands the ability of contractors and contracting agencies to 
comply with the requirements of the Davis-Bacon and Copeland Acts. The 
proposal noted that as a matter of longstanding policy, the Department 
has considered an original signature to be legally binding evidence of 
the intention of a person with regard to a document, record, or 
transaction. In its proposal, the Department acknowledged that modern 
technologies and evolving business practices are rendering the 
distinction between original paper and electronic signatures nearly 
obsolete.
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    \205\ https://www.fhwa.dot.gov/construction/cqit/111204dol.cfm.
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    Several commenters expressed support for the proposed language 
clarifying that agencies may permit or require electronic submission of 
certified payrolls, indicating that this method would result in more 
streamlined and efficient submission and maintenance of certified 
payrolls. See, e.g., COSCDA, MnDOT, UBC, REBOUND. MnDOT also requested 
that the Department provide a process by which wage determination data 
could be incorporated into an electronic payroll system to more 
effectively ensure compliance with prevailing wage requirements. 
Although MnDOT's request is outside the scope of this rulemaking, as 
the NPRM did not refer to or otherwise address the possibility of 
incorporating wage determination data into electronic payroll systems, 
the Department appreciates MnDOT's request and will consider as a 
separate, subregulatory matter whether wage determination data can be 
provided in a format that would enable it to be readily incorporated 
into electronic payroll systems.
    Although comments on the proposed revisions were generally 
supportive, several commenters suggested further additions or 
revisions. Smith, Summerset & Associates pointed out that contractors 
rarely print out or electronically save copies of certified payrolls 
that they have entered into an electronic submission system, generally 
assuming that they will always be able to obtain their certified 
payrolls from the system itself, but that certified payrolls are often 
archived when a project is complete and may therefore not be readily 
accessible to the contractor after that point. They therefore suggested 
adding language to the regulation to require any electronic certified 
payroll software provider to provide access to archived certified 
payrolls to the contractor, the contracting agency, and the Department 
upon request for at least 3 years after the work on the prime contract 
has been completed. The Department agrees that where a contracting 
agency encourages or requires contractors to submit their certified 
payroll through a particular electronic submission system, it is 
important that the contracting agency, the Department, and the 
contractors are easily able to access the certified payrolls in that 
system for the entire time period that such records must be maintained. 
The Department has therefore added language to Sec.  5.5(a)(3)(ii)(A) 
of the final rule clarifying that where a contracting agency encourages 
or requires contractors to submit their certified payroll through a 
particular electronic submission system, the contracting agency must 
also ensure that the system allows the contractor, the contracting 
agency, and the Department to access the certified payrolls upon 
request for at least 3 years after the work on the prime contract has 
been completed.
    Smith, Summerset & Associates also recommended that the Department 
add language to the regulations specifically authorizing contracting 
agencies to provide copies of certified payrolls to other labor or tax 
enforcement agencies, noting that in their review of certified 
payrolls, contracting agencies may frequently find issues, such as 
violations of state or local wage and hour laws or misclassification of 
employees as independent contractors, that should be reported to the 
relevant enforcement agency. They indicated that including such 
language would encourage contracting agencies to provide certified 
payrolls to other enforcement agencies while putting contractors on 
notice that the agencies might choose to do so. The Department 
recognizes that contracting agencies may frequently be in a position to 
identify potential violations of laws enforced by other agencies as the 
result of their certified payroll reviews and agrees that reporting 
such potential violations to the appropriate enforcement agencies can 
positively impact enforcement in these other areas and enhance workers' 
welfare. As the

[[Page 57632]]

certified payrolls are records submitted to and maintained by the 
contracting agencies, contracting agencies are free to provide 
certified payrolls to other enforcement agencies without the 
Department's authorization or permission, where the contracting agency 
has determined that such a submission is appropriate and is in 
accordance with all relevant legal obligations. Therefore, the 
Department does not believe that regulatory language expressly 
directing such submissions or providing a blanket authorization for 
such submissions is currently necessary. However, the Department 
strongly encourages contracting agencies to provide certified payrolls 
and other related information to other law enforcement agencies when 
they determine they can and should appropriately do so.
    MnDOT stated that contractors should be required to include 
addresses and Social Security numbers on electronically submitted 
certified payrolls, as the electronic submissions would be very secure, 
protecting workers' personally identifiable information while still 
allowing workers to be more easily identified and traced. Two other 
commenters requested adding a requirement to include an identifying 
number or similar identifier on certified payrolls that would not need 
to be redacted when certified payrolls are requested and obtained by 
third parties, apparently unaware that the current regulations already 
contain a requirement (which this rulemaking does not alter) that the 
contractor include an individual identifying number for each worker on 
the certified payrolls. As the proposed language maintains the current 
requirement that contractors include an individually identifying number 
for each worker, the Department believes that this is sufficient to 
allow workers to be identified and tracked across multiple certified 
payrolls. Although the Department acknowledges that electronic 
certified payroll submission systems will generally use secure online 
portals, the Department's experience has shown that the potential risk 
of unauthorized disclosure of workers' personally identifiable 
information outweighs any additional benefit that might be incurred by 
requiring the addition of an address and full Social Security number, 
instead of the current requirement for an individual identifying 
number, on certified payrolls.
    One commenter objected to the proposed language explicitly 
permitting contracting agencies to permit or require the submission of 
certified payrolls through an electronic system, so long as the 
electronic system requires a legally valid signature, on the grounds 
that the Department prohibits submission of certified payrolls by 
email, even though having to use an electronic submission system is 
just as burdensome to small contractors as submitting certified 
payrolls by email. However, the Department does not in fact prohibit 
submission of certified payrolls by email. Contracting agencies may 
permit submission of certified payrolls by email so long as the 
certified payrolls submitted in such a manner have a legally valid 
electronic signature, as required for all forms of electronic 
submission. Certified payrolls that do not have an original or a 
legally valid electronic signature, but rather are unsigned or merely 
have a scan or copy of a signature, do not meet the requirements of the 
Copeland Act regardless of the method of submission. Many payroll 
software options provide a method of adding a valid electronic 
signature to payroll documents; even a widely used Portable Document 
Format (PDF) platform has a digital signature option that can meet this 
requirement. Accordingly, the Department declines to adopt this 
suggestion because the Department does not believe that the requirement 
to append a legally valid electronic signature to any certified 
payrolls submitted electronically will be burdensome to contractors, 
even where such signatures must be added to certified payrolls that are 
submitted by email.
    COSCDA and NCSHA also indicated that the requirement to submit 
weekly certified payrolls imposes significant administrative costs on 
contractors, particularly as many contractors have to adjust their 
usual biweekly or bimonthly payroll to meet the weekly submission 
requirement. These commenters requested that the Department revise the 
regulations to permit greater flexibility in the frequency of certified 
payroll submissions. While the Department appreciates these commenters' 
concerns regarding the weekly payment of prevailing wages and weekly 
submission of certified payroll, both requirements are statutory, not 
regulatory. The DBA itself states that contracts must include 
stipulations requiring contractors and subcontractors to pay applicable 
prevailing wages ``unconditionally and at least once per week.'' 40 
U.S.C. 3142(c)(1) (emphasis added). The Copeland Act similarly states 
that the Department's implementing regulations ``shall include a 
provision that each contractor and subcontractor each week must furnish 
a statement on the wages paid to each employee during the prior week.'' 
40 U.S.C. 3145(a) (emphasis added). Therefore, the Department cannot 
promulgate regulations allowing contractors to pay required prevailing 
wages or submit certified payrolls on any basis less frequent than 
weekly.
    Smith, Summerset & Associates noted that the language at 29 CFR 
5.5(a)(3)(ii)(A) stating that ``[t]he prime contractor is responsible 
for the submission of copies of certified payrolls by all 
subcontractors'' is unnecessarily confusing, as prime contractors are 
responsible for ensuring that subcontractors submit all required 
certified payrolls, and recommended that the words ``copies of'' be 
replaced with ``all'' to eliminate this confusion. They also noted a 
citation error in the proposed regulatory text. The Department agrees 
with these suggestions and has made these non-substantive changes in 
the final rule.
    After consideration of these comments and for the reasons discussed 
above, the Department is adopting the changes to this paragraph as 
proposed, except that the Department is also adding language regarding 
access to electronic certified payroll submission systems and the minor 
non-substantive edits described above. In addition, the Department has 
added a new paragraph (a)(3)(ii)(G) to Sec.  5.5 that expressly states 
that contractors and subcontractors must preserve all certified 
payrolls during the course of the work and for a period of 3 years 
after all the work on the prime contract is completed. This length-of-
record-retention requirement, which is the same as for other required 
records in Sec.  5.5(a)(3), was implicit in the proposed regulatory 
text and is explicit in the existing regulatory text, but the express 
inclusion in the regulation will provide clarity for the regulated 
community.
(3) 29 CFR 5.5(a)(3)(iii)-(iv)
    The Department proposed to add paragraph (a)(3)(iii) to Sec.  5.5 
to require all contractors, subcontractors, and recipients of Federal 
assistance to maintain and preserve Davis-Bacon contracts, 
subcontracts, and related documents for 3 years after all the work on 
the prime contract is completed. The Department explained that these 
related documents include, without limitation, contractors' and 
subcontractors' bids and proposals, as well as amendments, 
modifications, and extensions to contracts, subcontracts, or 
agreements.
    The proposal explained that WHD routinely requests these contract 
documents in its DBRA investigations.

[[Page 57633]]

In the Department's experience, contractors and subcontractors that 
comply with the Davis-Bacon labor standards requirements usually, as a 
good business practice, maintain these contracts and related documents. 
The Department noted that adding an express regulatory requirement that 
contractors and subcontractors maintain and provide these records to 
WHD would bolster enforcement of the labor standards provisions of the 
statutes referenced by Sec.  5.1. This requirement would not relieve 
contractors or subcontractors from complying with any more stringent 
record retention requirements (e.g., longer record retention periods) 
imposed by contracting agencies or other Federal, State, or local law 
or regulation.
    The Department also indicated that this proposed revision could 
help ensure uniform compliance with Davis-Bacon labor standards and 
prevent non-compliant contractors from underbidding law-abiding 
contractors. Like the current recordkeeping requirements, non-
compliance with this new proposed requirement may result in the 
suspension of any further payment, advance, or guarantee of funds and 
may also be grounds for debarment action pursuant to 29 CFR 5.12.
    The Department proposed to renumber current Sec.  5.5(a)(3)(iii) as 
Sec.  5.5(a)(3)(iv). In addition, the Department proposed to revise 
this re-numbered paragraph to clarify the records contractors and 
subcontractors are required to make available to the Federal agency (or 
applicant, sponsor, owner, or other entity, as the case may be) or the 
Department upon request. Specifically, the proposed revisions to Sec.  
5.5(a)(3)(ii) and (iv), and the proposed new Sec.  5.5(a)(3)(iii), 
expanded and clarified the records contractors and subcontractors are 
required to make available for inspection, copying, or transcription by 
authorized representatives specified in this section. The Department 
also proposed an additional requirement that contractors and 
subcontractors must make available any other documents deemed necessary 
to determine compliance with the labor standards provisions of any of 
the statutes referenced by Sec.  5.1.
    Current Sec.  5.5(a)(3)(iii) requires contractors and 
subcontractors to make available the records set forth in Sec.  
5.5(a)(3)(i) (Payrolls and basic records). The proposed revisions to 
re-numbered Sec.  5.5(a)(3)(iv) would ensure that contractors and 
subcontractors are aware that they are required to make available not 
only payrolls and basic records, but also the payrolls actually 
submitted to the contracting agency (or applicant, sponsor, owner, or 
other entity, as the case may be) pursuant to Sec.  5.5(a)(3)(ii), 
including the Statement of Compliance, as well as any contracts and 
related documents required by proposed Sec.  5.5(a)(3)(iii). The 
Department explained that these records help WHD determine whether 
contractors are in compliance with the labor standards provisions of 
the statutes referenced by Sec.  5.1, and what the appropriate back 
wages and other remedies, if any, should be. The Department believed 
that these clarifications would remove doubt or uncertainty as to 
whether contractors are required to make such records available to the 
Federal agency (or applicant, sponsor, owner, or other entity, as the 
case may be) or the Department upon request. The proposed revisions 
made explicit the Department's longstanding practice and did not impose 
any new or additional requirements upon a Federal agency (or applicant, 
sponsor, owner, or other entity, as the case may be).
    The proposal stated that the new or additional recordkeeping 
requirements in the proposed revisions to Sec.  5.5(a)(3) should not 
impose an undue burden on contractors or subcontractors, as they likely 
already maintain worker telephone numbers and email addresses and may 
already be required by contracting agencies to keep contracts and 
related documents. These proposed revisions also enhance the 
Department's ability to provide education, outreach, and compliance 
assistance to contractors and subcontractors awarded contracts subject 
to the Davis-Bacon labor standards provisions.
    Finally, the Department proposed to add a sanction in re-numbered 
Sec.  5.5(a)(3)(iv)(B) for contractors and other persons that fail to 
submit the required records in Sec.  5.5(a)(3) or make those records 
available to WHD within the timeframe requested. Specifically, the 
Department proposed that contractors that fail to comply with WHD 
record requests would be precluded from introducing as evidence in an 
administrative proceeding under 29 CFR part 6 any of the required 
records that were not provided or made available to WHD despite WHD's 
request for such records. The Department proposed this sanction to 
enhance enforcement of recordkeeping requirements and encourage 
cooperation with its investigations and other compliance actions. The 
proposal provided that WHD would take into consideration a reasonable 
request from the contractor or person for an extension of the time for 
submission of records. WHD would determine the reasonableness of the 
request and may consider, among other things, the location of the 
records and the volume of production.
    In addition to the general support for the proposed recordkeeping 
changes mentioned above, III-FFC, LIUNA, and TAUC specifically 
mentioned the proposal to require the maintenance of Davis-Bacon 
contracts, subcontracts, and related documents for 3 years after all 
the work on the prime contract is completed, noting that it would help 
ensure that contractors are acting responsibly and would improve and 
strengthen enforcement, particularly when workers or contractors have 
already completed their work on a project. In contrast, FTBA, ABC, and 
the group of U.S. Senators objected to those proposed changes. FTBA 
also argued that the proposed requirement that contractors and 
subcontractors must make available ``any other documents deemed 
necessary to determine compliance with the labor standards provisions 
of any of the statutes referenced by Sec.  5.1'' was overly broad and 
would require contractors to comply with potentially burdensome, 
varied, and unreasonable requests. FTBA also stated that the Department 
did not provide justification or state a need for adding this 
requirement, and that the Department should instead have proposed 
specific additional records, which would have provided an opportunity 
to comment on each specific additional record. ABC and the group of 
U.S. Senators stated that the proposed requirement that all 
contractors, subcontractors, and recipients of Federal assistance 
maintain and preserve Davis-Bacon contracts, subcontracts, and related 
documents for 3 years after all the work on the prime contract is 
completed is unduly burdensome, further stating that the Department did 
not provide sufficient justification for the requirement. ABC also 
objected to the proposed language prohibiting contractors that fail to 
comply with record requests from later introducing the specified 
records during administrative proceedings as arbitrary, coercive, and 
likely to violate contractors' due process rights, particularly since 
contractors may have many legitimate reasons for being unable or 
unwilling to comply immediately with the Department's record requests.
    The Department agrees with commenters' statements that requiring 
contractors, subcontractors, and funding recipients to maintain Davis-
Bacon contracts, subcontracts, and related documents will help ensure 
that

[[Page 57634]]

contractors are aware of their obligations and will strengthen 
enforcement. While the Department appreciates some commenters' concerns 
that maintaining copies of Davis-Bacon contracts, subcontracts, and 
related documents might be burdensome, particularly to small or mid-
sized contractors, this requirement is not likely to result in any 
significant administrative burden or costs to contractors that 
contractors are not already incurring. Contractors would only be 
required to maintain contracts that they have been awarded or that they 
in turn have awarded to others. As the Department indicated in the 
NPRM, contractors will already have many sound business reasons for 
maintaining these contracts. The contracts awarded to the contractor 
(and subcontracts awarded to subcontractors) typically set forth the 
work that the contractor is obligated to perform, the terms and 
procedures of payment, and information as to what would be considered a 
breach of any of their contract obligations, including the specific 
Davis-Bacon obligations contained in their contract clauses. The 
subcontracts similarly typically state the subcontractor's scope of 
work, the financial terms under which the work will be performed, and 
what remedies exist if a subcontractor fails to perform as contracted. 
With these and many other sensible business reasons for maintaining a 
record of Davis-Bacon contracts and subcontracts, it is not surprising 
that, in the Department's experience, most contractors already maintain 
records of these contracts and subcontracts. The proposed regulatory 
language merely requires such records to be maintained for the same 
period of time as other required records, and that such records must 
similarly be provided to the Department upon request, as there are also 
several reasons why such records are particularly useful for 
enforcement purposes. Not only does the Department's experience 
indicate that contractors who fail to maintain these records are more 
likely to disregard their obligations to workers and subcontractors, as 
noted in the NPRM, but these records are critical for enforcement of 
the prevailing wage requirements. The information provided by these 
records assists the Department to make accurate coverage 
determinations, establish the extent of the site(s) of work, determine 
whether the contract included the required clauses and all applicable 
wage determinations (particularly where there is a dispute between the 
contracting agency and the contractor as to what was provided to the 
contractor), and verify whether the prime contractor and upper-tier 
contractors have met their obligations to lower-tier subcontractors and 
their workers. The advantages of ensuring that contractors maintain a 
record of the contracts that set out their Davis-Bacon obligations for 
a reasonable period of time and enabling the Department to more easily 
enforce those obligations clearly outweigh the minor additional 
recordkeeping burden, if any, that contractors may incur.
    Similarly, the Department does not agree that the proposed 
requirement that contractors and subcontractors must make available 
``any other documents deemed necessary to determine compliance with the 
labor standards provisions of any of the statutes referenced by Sec.  
5.1'' is overly broad, or that the Department instead should list all 
possible types of records that may be created during the course of a 
construction project and may be necessary to determine compliance. 
Davis-Bacon labor standards apply to a wide variety of projects, 
contractors, and worker classifications, resulting in a correspondingly 
wide variety of relevant records, such that it would not be possible to 
list every conceivable type of record that may be needed to verify 
hours worked, wages rates paid, and fringe benefits provided. 
Particularly where a contractor has not maintained an accurate or 
complete record of daily and weekly hours worked and wages paid as 
required, the Department may need to look at records ranging from daily 
construction reports or security sign-in sheets to drivers' trip 
tickets or petty cash logs to determine whether laborers and mechanics 
received the applicable prevailing wage rates for all hours worked. It 
would significantly hamper enforcement if the Department could not 
require contractors to provide existing--not create new--relevant 
records that would help determine compliance merely because it is not 
possible to list every conceivable form of relevant record. Moreover, 
to the extent that such records, or the failure to provide them, 
results in a determination that a contractor is not in compliance with 
the Davis-Bacon labor standards, the contractor will have the 
opportunity to raise the issue of the reasonableness of the 
Department's request for such records during the enforcement process, 
including any administrative proceedings, if the contractor wishes to 
do so.
    For similar reasons, the Department does not believe that 
prohibiting contractors that fail to comply with record requests from 
later introducing the specified records during administrative 
proceedings is arbitrary, coercive, or likely to violate contractors' 
due process rights. While contractors may have valid reasons for being 
unable or unwilling to comply immediately with the Department's 
request, it is difficult to discern why contractors would be unable to 
provide those reasons to the Department in a request for an extension 
of time to provide such records, as provided for in the proposed 
provision. In addition, if the contractor believes that the requested 
records are relevant evidence in administrative proceedings relating to 
violations, the records would presumably also be relevant to the 
Department's investigation of those potential violations. Moreover, if 
a contractor believes that the Department's request for the records was 
arbitrary or unreasonable despite the contractor's belief that the 
records should be admitted as evidence during administrative 
proceedings, the contractor will have the opportunity to raise that 
issue during the administrative proceedings themselves.
    For these reasons, the Department adopts Sec.  5.5(a)(3)(iii) and 
(a)(3)(iv) as proposed.
(C) 29 CFR 5.5(a)(4) Apprentices
    The Department proposed to reorganize Sec.  5.5(a)(4)(i) so that 
each of the four apprentice-related topics it addresses--rate of pay, 
fringe benefits, apprenticeship ratios, and reciprocity--are more 
clearly and distinctly addressed. These proposed revisions are not 
substantive. In addition, the Department proposed to revise the 
paragraph of Sec.  5.5(a)(4)(i) regarding reciprocity to better align 
with the purpose of the DBA and the Department's ETA regulation at 29 
CFR 29.13(b)(7) regarding the applicable apprenticeship ratios and wage 
rates when work is performed by apprentices in a different State than 
the State in which the apprenticeship program was originally 
registered.
    Section 5.5(a)(4)(i) provides that apprentices may be paid less 
than the prevailing rate for the work they perform if they are employed 
pursuant to, and individually registered in, a bona fide apprenticeship 
program registered with ETA's Office of Apprenticeship (OA) or with a 
State Apprenticeship Agency (SAA) recognized by the OA. In other words, 
in order to employ apprentices on a Davis-Bacon project at lower rates 
than the prevailing wage rates applicable to journeyworkers, 
contractors must ensure that the apprentices are participants in a 
federally registered

[[Page 57635]]

apprenticeship program or a State apprenticeship program registered by 
a recognized SAA. Any worker listed on a payroll at an apprentice wage 
rate who is not employed pursuant to and individually registered in 
such a bona fide apprenticeship program must be paid the full 
prevailing wage listed on the applicable wage determination for the 
classification of work performed. Additionally, any apprentice 
performing work on the site of the work in excess of the ratio 
permitted under the registered program must be paid not less than the 
full wage rate listed on the applicable wage determination for the 
classification of work performed.
    In its current form, Sec.  5.5(a)(4)(i) further provides that when 
a contractor performs construction on a project in a locality other 
than the one in which its program is registered, the ratios and wage 
rates (expressed in percentages of the journeyworker's hourly rate) 
specified in the contractor's or subcontractor's registered program 
will be observed. Under this provision, the ratios and wage rates 
specified in a contractor's or subcontractor's registered program are 
``portable,'' such that they apply not only when the contractor 
performs work in the locality in which the program was originally 
registered (sometimes referred to as the contractor's ``home State'') 
but also when a contractor performs work on a project located in a 
different State (sometimes referred to as the ``host State''). In 
contrast, as part of a 1979 NPRM, the Department proposed essentially 
the opposite approach, i.e., that apprentice ratios and wage rates 
would not be portable and that, instead, when a contractor performs 
construction on a project in a locality other than the one in which its 
program was originally registered, ``the ratios and wage rates 
(expressed in percentages of the journeyman's hourly rate) specified in 
plan(s) registered for that locality shall be observed.'' \206\
---------------------------------------------------------------------------

    \206\ 44 FR 77085.
---------------------------------------------------------------------------

    In a final rule revising 29 CFR part 5, issued in 1981, the 
Department noted that several commenters had objected to the 1979 
NPRM's proposal to apply the apprentice ratios and wage rates in the 
location where construction is performed, rather than the ratios and 
wage rates applicable in the location in which the program is 
registered.\207\ The Department explained that, in light of these 
comments, ``[u]pon reconsideration, we decided that to impose different 
plans on contractors, many of which work in several locations where 
there could be differing apprenticeship standards, would be adding 
needless burdens to their business activities.'' \208\
---------------------------------------------------------------------------

    \207\ 46 FR 4383.
    \208\ Id. The 1981 final rule revising 29 CFR part 5 was 
withdrawn, but the apprenticeship portability provision in Sec.  5.5 
was ultimately proposed and issued unchanged by a final rule issued 
in 1982. See Final Rule, Labor Standards Provisions Applicable to 
Contracts Covering Federally Financed and Assisted Construction, 47 
FR 23658, 23669 (May 28, 1982).
---------------------------------------------------------------------------

    In 2008, ETA amended its apprenticeship regulations in a manner 
that is seemingly in tension with the approach to Davis-Bacon 
apprenticeship ``portability'' reflected in the 1981 final rule 
revising 29 CFR part 5. Specifically, in December 2007, ETA issued an 
NPRM to revise the agency's regulations governing labor standards for 
the registration of apprenticeship programs.\209\ One of the NPRM 
proposals was to expand the provisions of then-existing 29 CFR 
29.13(b)(8), which at that time provided that in order to be recognized 
by ETA, an SAA must grant reciprocal recognition to apprenticeship 
programs and standards registered in other States--except for 
apprenticeship programs in the building and construction trades.\210\ 
ETA proposed to move the provision to 29 CFR 29.13(b)(7) and to remove 
the exception for the building and construction trades.\211\ In the 
preamble to the final rule issued on October 29, 2008, ETA noted that 
several commenters had expressed concern that it was ``unfair and 
economically disruptive to allow trades from one State to use the pay 
scale from their own State to bid on work in other States, particularly 
for apprentices employed on projects subject to the Davis-Bacon Act.'' 
\212\ The preamble explained that ETA ``agree[d] that the application 
of a home State's wage and hour and apprentice ratios in a host State 
could confer an unfair advantage to an out-of-state contractor bidding 
on a Federal public works project.'' \213\ Further, the preamble noted 
that, for this reason, ETA's negotiations of memoranda of understanding 
with States to arrange for reciprocal approval of apprenticeship 
programs in the building and construction trades have consistently 
required application of the host State's wage and hour and 
apprenticeship ratio requirements. Accordingly, the final rule added a 
sentence to 29 CFR 29.13(b)(7) to clarify that the program sponsor 
seeking reciprocal approval must comply with the host State's 
apprentice wage rate and ratio standards.\214\
---------------------------------------------------------------------------

    \209\ See NPRM, Apprenticeship Programs, Labor Standards for 
Registration, Amendment of Regulations Notice of Proposed 
Rulemaking, 72 FR 71019 (Dec. 13, 2007).
    \210\ Id. at 71026.
    \211\ Id. at 71029.
    \212\ Final Rule, Apprenticeship Programs, Labor Standards for 
Registration, Amendment of Regulations, 73 FR 64402, 64419 (Oct. 29, 
2008).
    \213\ Id.
    \214\ Id. at 64420. See 29 CFR 29.13(b)(7).
---------------------------------------------------------------------------

    In order to better harmonize the Davis-Bacon regulations and ETA's 
apprenticeship regulations, the Department proposed in its NPRM to 
revise 29 CFR 5.5(a)(4)(i) to reflect that contractors employing 
apprentices to work on a DBRA project in a locality other than the one 
in which the apprenticeship program was originally registered must 
adhere to the apprentice wage rate and ratio standards of the project 
locality. As noted above, the general rule in Sec.  5.5(a)(4)(i) is 
that contractors may pay less than the prevailing wage rate for the 
work performed by an apprentice employed pursuant to, and individually 
registered in, a bona fide apprenticeship program registered with ETA 
or an OA-recognized SAA. Under ETA's regulation at 29 CFR 29.13(b)(7), 
if a contractor has an apprenticeship program registered in one State 
but wishes to employ apprentices to work on a project in a different 
State with an SAA, the contractor must seek and obtain reciprocal 
approval from the project State SAA and adhere to the wage rate and 
ratio standards approved by the project State SAA. Accordingly, upon 
receiving reciprocal approval, the apprentices in such a scenario would 
be considered to be employed pursuant to and individually registered in 
the program in the project State, and the terms of that reciprocal 
approval would apply for purposes of the DBRA. The Department's 
proposed revision requiring contractors to apply the ratio and wage 
rate requirements from the relevant apprenticeship program for the 
locality where the laborers and mechanics are working therefore better 
aligns with ETA's regulations on recognition of SAAs and is meant to 
eliminate potential confusion for Davis-Bacon contractors subject to 
both ETA and WHD rules regarding apprentices. The proposed revision 
also better comports with the DBA's statutory purpose to eliminate the 
unfair competitive advantage conferred on contractors from outside of a 
geographic area bidding on a Federal construction contract based on 
lower wage rates (and, in the case of apprentices, differing ratios of 
apprentices paid a percentage of the journeyworker rate for the work 
performed) than those that prevail in the location of the project.
    The Department noted that multiple apprenticeship programs may be

[[Page 57636]]

registered in the same State, and that such programs may cover 
different localities of that State and require different apprenticeship 
wage rates and ratios within those separate localities. If apprentices 
registered in a program covering one State locality will be doing 
apprentice work in a different locality of the same State, and 
different apprentice wage and ratio standards apply to the two 
different localities, the proposed rule would require compliance with 
the apprentice wage and ratio standards applicable to the locality 
where the work will be performed. The Department encouraged comments as 
to whether adoption of a consistent rule, applicable regardless of 
whether the project work is performed in the same State as the 
registered apprenticeship program, best aligns with the statutory 
purpose of the DBA and would be less confusing to apply.
    Lastly, the Department proposed to remove the regulatory provisions 
regarding trainees currently set out in Sec. Sec.  5.2(n)(2) and 
5.5(a)(4)(ii), and to remove the references to trainees and training 
programs throughout parts 1 and 5. Current Sec.  5.5(a)(4)(ii) permits 
``trainees'' to work at less than the predetermined rate for the work 
performed, and Sec.  5.2(n)(2) defines a trainee as a person registered 
and receiving on-the-job training in a construction occupation under a 
program approved and certified in advance by ETA as meeting its 
standards for on-the-job training programs. Sections 5.2(n)(2) and 
5.5(a)(4)(ii) were originally added to the regulations over 50 years 
ago.\215\ However, ETA no longer reviews or approves on-the-job 
training programs and, relatedly, WHD has found that Sec.  
5.5(a)(4)(ii) is seldom if ever applicable to DBRA contracts. The 
Department therefore proposed to remove the language currently in 
Sec. Sec.  5.2(n)(2) and 5.5(a)(4)(ii), and to retitle Sec.  5.5(a)(4) 
``Apprentices.'' The Department also proposed a minor revision to Sec.  
5.5(a)(4)(ii) to align with the gender-neutral term of 
``journeyworker'' used by ETA in its apprenticeship regulations. The 
Department also proposed to rescind and reserve Sec. Sec.  5.16 and 
5.17, as well as delete references to such trainees and training 
programs in Sec. Sec.  1.7, 5.2, 5.5, 5.6, and 5.15. The Department 
encouraged comments on this proposal, including any relevant 
information about the use of training programs in the construction 
industry.
---------------------------------------------------------------------------

    \215\ See Final Rule, Labor Standards Applicable to Contracts 
Covering Federally Financed and Assisted Construction, 36 FR 19304 
(Oct. 2, 1971) (defining trainees as individuals working under a 
training program certified by ETA's predecessor agency, the Manpower 
Administration's Bureau of Apprenticeship and Training).
---------------------------------------------------------------------------

    The Department received no comments on its technical, non-
substantive proposal to reorganize Sec.  5.5(a)(4)(i) so that each of 
the four apprentice-related topics it addresses are more clearly and 
distinctly addressed. The final rule therefore adopts this change as 
proposed.
    The Department received several comments on its proposal regarding 
reciprocity of ratios and wage rates where a contractor performs 
construction in a locality other than that in which its apprenticeship 
program is registered. The majority of the comments expressed support 
for the proposal. Several commenters, such as CEA, NECA, and SMACNA, 
supported the proposal, saying that requiring contractors to apply the 
apprenticeship ratio and wage rate standards of the locality where the 
project is being performed better aligns with ETA's apprenticeship 
regulations and eliminates potential confusion. The UA and NCDCL also 
stated that the proposal would help prevent non-local contractors from 
gaining an unfair economic advantage over local contractors and that it 
comports with the purpose of the DBA.
    MCAA commended the proposal as constructive and sought 
clarification on ``where the apprentice must . . . be registered.'' In 
response to the question raised, the Department notes that nothing in 
the existing regulation or proposal purports to define where 
apprentices should be registered. Section 5.5(a)(4)(i) only provides 
that in order for contractors to employ apprentices on a Davis-Bacon 
project at lower rates than the prevailing wage rates applicable to 
journeyworkers, the apprentices must be participants in a federally 
registered apprenticeship program, or a State apprenticeship program 
registered by a recognized SAA. The ETA regulation at 29 CFR 29.3 
governs the ``[e]ligibility and procedure for registration of an 
apprenticeship program'' and Sec.  29.3(c) addresses individual 
registration.
    CC&M, while supporting the proposal, recommended an additional 
change to the regulation to clarify that contractors employing 
apprentices outside of the locality in which the apprenticeship program 
is registered should apply the wage rate and ratio of the locality of 
the project ``or apply the wage rates and ratio of the actual program 
in which the apprentice is enrolled, whichever is higher and more 
restrictive.'' The Department's intent for the proposed revision, in 
part, was to harmonize the Davis-Bacon regulations with ETA's 
apprenticeship regulations requiring contractors to adhere to the host 
State's apprentice wage and ratio standards when employing apprentices 
in a State different from where the apprenticeship program is 
registered. In its existing form, Sec.  5.5(a)(4)(i) is in tension with 
ETA regulations because it explicitly allows contractors to apply the 
apprentice ratio and wage rates under their registered program even 
where a different apprentice ratio and/or wage rate may apply pursuant 
to ETA's reciprocity rule. CC&M's recommended approach of applying the 
more restrictive apprenticeship ratio and wage rate would not 
sufficiently alleviate this tension and could cause further confusion 
for contractors subject to both ETA and WHD rules regarding 
apprentices. Therefore, the Department declines to adopt CC&M's 
recommendation.
    On the other hand, IEC asserted that the proposed revision would 
impose an undue burden on apprenticeship programs by causing them ``to 
register in additional localities in order for apprenticeship to 
journeyman ratios to be reliable'' and by imposing ``locality-specific 
rules.'' While IEC did not elaborate on how the proposal would cause 
apprenticeship programs to register in additional localities, the 
Department does not agree that it would have that effect. Neither the 
proposal nor the existing regulations address where an apprenticeship 
program needs to be registered. Rather, the rules establish a framework 
for determining the applicable apprentice ratio and wage rate when a 
contractor seeks to employ apprentices in a locality different from 
that in which the program is registered. The Department also disagrees 
with the comment that the proposal would impose an undue burden on 
apprenticeship programs by imposing locality specific rules. Rather, 
the Department believes the proposal avoids confusion and creates a 
consistent framework for ETA registered apprenticeship programs by 
requiring, at a minimum, the application of local wage rates and ratios 
consistent with ETA's apprenticeship regulations.
    IEC further stated that the Department provided no guidance for 
situations where localities have no apprenticeship program and asked 
what should be done in those circumstances. In response, the Department 
recognized the need for clarification and made revisions to the final 
rule accordingly. Specifically, the Department revised Sec.  
5.5(a)(4)(i)(D) to clarify that the apprenticeship ratio and wage rates 
under the contractor's registered program would apply in the

[[Page 57637]]

event there is no program in the project locality establishing the 
applicable ratio and rates.
    Finally, the Department received a few comments in response to its 
proposal to remove the reference to the regulatory provisions regarding 
trainees set out in existing Sec. Sec.  5.2(n)(2) and 5.5(a)(4)(ii). 
See section III.B.3.ii (``29 CFR 5.2 Definitions''). Two commenters, 
CEA and SMACNA, supported the proposal, recognizing that ETA no longer 
reviews or approves on-the-job training programs. On the other hand, 
IAPA opposed the proposal and stated that ``eliminating trainees from 
the Davis[-]Bacon Act may have unintended consequences.'' IAPA 
contended that student trainees such as those receiving training under 
the Illinois Department of Transportation's program with the USDOT's 
FHWA may not be able to work on Davis-Bacon projects if the trainee 
language is removed.
    IAPA's comment perhaps reflects a misunderstanding of the proposal. 
The existing regulation under Sec.  5.5(a)(4)(ii) stated that trainees 
must not be paid at less than the predetermined rate for the work 
performed unless they are employed pursuant to and individually 
registered in a program which has received prior approval from the ETA. 
Given that the ETA no longer reviews or approves on-the-job training 
programs, the allowance to pay trainees less than the predetermined 
rate under the existing Sec.  5.5(a)(4)(ii) also no longer applied. The 
proposal to remove the regulatory provisions pertaining to trainees 
would not prohibit trainees from working on Davis-Bacon projects. 
Rather, the proposal makes it clear that the trainees should be paid 
the full prevailing wage listed on the applicable wage determination 
for the work performed.
    Moreover, as discussed in section III.B.3.ii (``29 CFR 5.2 
Definitions''), the proposed regulatory definition in Sec.  5.2 retains 
the text currently found in Sec.  5.2(n)(3), which provides an 
exception for trainees employed on projects subject to 23 U.S.C. 113 
who are enrolled in programs which have been certified by the Secretary 
of Transportation in accordance with 23 U.S.C. 113(c). Trainees under 
23 U.S.C. 113(c) are subject to wage rates and conditions set by the 
USDOT pursuant to 23 CFR 230.111, and thus, may be paid less than the 
full prevailing wage for the work performed.
    The Department received no specific comments on its proposal to 
rescind and reserve Sec. Sec.  5.16 and 5.17, as well as delete 
references to such trainees and training programs in Sec. Sec.  1.7, 
5.2, 5.5, 5.6, and 5.15. The Department also received no comments 
regarding its proposal to revise current Sec.  5.5(a)(4)(ii) to align 
with the gender-neutral term of ``journeyworker'' used by ETA in its 
apprenticeship regulations.
    For the foregoing reasons, the final rule adopts the proposal to 
remove the regulatory provisions regarding trainees set out in existing 
Sec. Sec.  5.2(n)(2) and 5.5(a)(4)(ii), and to remove the references to 
trainees and training programs throughout parts 1 and 5 as proposed. 
The final rule also adopts the changes proposed regarding reciprocity 
under Sec.  5.5(a)(4)(i)(D) with minor clarifications as discussed in 
this section.
(D) Flow-Down Requirements in Sec.  5.5(a)(6) and (b)(4)
    The Department proposed to add clarifying language to the DBRA- and 
CWHSSA-specific contract clause provisions at Sec.  5.5(a)(6) and 
(b)(4), respectively. Currently, these contract clauses contain 
explicit contractual requirements for prime contractors and upper-tier 
subcontractors to flow down the required contract clauses into their 
contracts with lower-tier subcontractors. The clauses also explicitly 
state that prime contractors are ``responsible for [the] compliance by 
any subcontractor or lower tier subcontractor.'' 29 CFR 5.5(a)(6) and 
(b)(4). The Department proposed changes that would affect these 
contract clauses in several ways.
(1) Flow-Down of Wage Determinations
    The Department proposed adding language to Sec.  5.5(a)(6) to 
clarify that the flow-down requirement also requires the inclusion in 
such subcontracts of the appropriate wage determination(s).
(2) Application of the Definition of ``Prime Contractor''
    As noted in the discussion of Sec.  5.2, the Department is 
codifying a definition of ``prime contractor'' in Sec.  5.2 to include 
controlling shareholders or members, joint venturers or partners, and 
any contractor (e.g., a general contractor) that has been delegated all 
or substantially all of the construction anticipated by the prime 
contract. These entities, having notice of the definitions, these 
regulations, and the contract clauses, would therefore also be 
``responsible'' under Sec.  5.5(a)(6) and (b)(4) for the same 
violations as the legal entity that signed the prime contract. As the 
Department explained, the change is intended to ensure that contractors 
do not interpose single-purpose corporate entities as the nominal 
``prime contractor'' to escape liability or responsibility for the 
contractors' Davis-Bacon labor standards compliance duties.
(3) Responsibility for the Payment of Unpaid Wages
    The proposal included new language underscoring that being 
``responsible for . . . compliance'' means the prime contractor has the 
contractual obligation to cover any unpaid wages or other liability for 
contractor or subcontractor violations of the contract clauses. This is 
consistent with the Department's longstanding interpretation of this 
provision. See M.A. Bongiovanni, Inc., WAB No. 91-08, 1991 WL 494751, 
at *1 (Apr. 19, 1991); see also All Phase Elec. Co., WAB No. 85-18, 
1986 WL 193105, at *1-2 (June 18, 1986) (withholding contract payments 
from the prime contractor for subcontractor employees even though the 
labor standards had not been flowed down into the subcontract).\216\ 
Because such liability for prime contractors is contractual, it 
represents strict liability and does not require that the prime 
contractor knew of or should have known of the subcontractors' 
violations. Bongiovanni, 1991 WL 494751, at *1. As the WAB explained in 
Bongiovanni, this rule ``serves two vital functions.'' Id. First, ``it 
requires the general contractor to monitor the performance of the 
subcontractor and thereby effectuates the Congressional intent embodied 
in the Davis-Bacon and Related Acts to an extent unattainable by 
Department of Labor compliance efforts.'' Id. Second, ``it requires the 
general contractor to exercise a high level of care in the initial 
selection of its business associates.'' Id.
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    \216\ The new language also clarifies that, consistent with the 
language in Sec.  5.10, such responsibility also extends to any 
interest assessed on back wages or other monetary relief.
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(4) Potential for Debarment for Disregard of Responsibility
    The Department proposed new language to clarify that in certain 
circumstances, underpayments of a subcontractor's workers may subject 
the prime contractor to debarment for violating the responsibility 
provision. Under the existing regulations, there is no reference in the 
Sec.  5.5(a)(6) or (b)(4) responsibility clauses to a potential for 
debarment. However, the existing Sec.  5.5(a)(7) currently explains 
that ``[a] breach of the contract clauses in 29 CFR 5.5''--which thus 
includes the responsibility clause at Sec.  5.5(a)(6)--``may be grounds 
. . . for debarment[.]'' 29 CFR 5.5(a)(7). The new language provides 
more explicit notice (in Sec.  5.5(a)(6) and (b)(4) themselves) that a 
prime contractor may be debarred where

[[Page 57638]]

there are violations on the contract (including violations perpetrated 
by a subcontractor) and the prime contractor has failed to take 
responsibility for compliance.
(5) Responsibility and Liability of Upper-Tier Subcontractors
    The Department also proposed language in Sec.  5.5(a)(6) and (b)(4) 
to eliminate confusion regarding the responsibility and liability of 
upper-tier subcontractors. The existing language in Sec.  5.5(a)(6) and 
(b)(4) creates express contractual responsibility of upper-tier 
subcontractors to flow down the required contract clauses to bind their 
lower-tier subcontractors. See Sec.  5.5(a)(6) (stating that the prime 
contractor ``or subcontractor'' must insert the required clauses in 
``any subcontracts''); Sec.  5.5(b)(4) (stating that the flow-down 
clause must ``requir[e] the subcontractors to include these clauses in 
any lower tier subcontracts''). The Department has long recognized that 
with this responsibility comes the potential for sanctions against 
upper-tier subcontractors that fail to properly flow down the contract 
clauses. See AAM 69 (DB-51), at 2 (July 29, 1966).\217\
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    \217\ In AAM 69, the Department noted that ``the failure of the 
prime contractor or a subcontractor to incorporate the labor 
standards provisions in its subcontracts may, under certain 
circumstances, be a serious violation of the contract requirements 
which would warrant the imposition of sanctions under either the 
Davis-Bacon Act or our Regulations.''
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    The current contract clauses in Sec.  5.5(a)(6) and (b)(4) do not 
expressly identify further contractual responsibility or liability of 
upper-tier subcontractors for violations their lower-tier 
subcontractors commit. However, although the Department has not had 
written guidance to this effect, it has in many circumstances held 
upper-tier subcontractors responsible for the failure of their lower-
tier subcontractors to pay required prevailing wages. See, e.g., Ray 
Wilson Co., ARB No. 02-086, 2004 WL 384729, at *6 (Feb. 27, 2004); see 
also Norsaire Sys., Inc., WAB No. 94-06, 1995 WL 90009, at *1 (Feb. 28, 
1995).
    In Ray Wilson Co., for example, the ARB upheld the debarment of an 
upper-tier subcontractor because its lower-tier subcontractor 
misclassified its workers. As the ARB held, the upper-tier 
subcontractor had an ``obligation[ ] to be aware of DBA requirements 
and to ensure that its lower-tier subcontractor . . . properly complied 
with the wage payment and record keeping requirements on the project.'' 
2004 WL 384729, at *10. The Department sought debarment because the 
upper-tier subcontractor discussed the misclassification scheme with 
the lower-tier subcontractor and thus ``knowingly countenanced'' the 
violations. Id. at *8.
    In the NPRM, the Department proposed to clarify that upper-tier 
subcontractors (in addition to prime contractors) may be responsible 
for the violations committed against the employees of lower-tier 
subcontractors. The Department's proposal also clarified that this 
responsibility requires upper-tier subcontractors to pay back wages on 
behalf of their lower-tier subcontractors and subjects upper-tier 
subcontractors to debarment in appropriate circumstances (i.e., where 
the lower-tier subcontractor's violation reflects a disregard of 
obligations by the upper-tier subcontractor to workers of their 
subcontractors). In the contract clauses at Sec.  5.5(a)(6) and (b)(4), 
the Department proposed to include language adding that ``any 
subcontractor[ ] responsible'' for the violations is also liable for 
back wages and potentially subject to debarment. This language is 
intended to place liability not only on the lower-tier subcontractor 
that is directly employing the worker who did not receive required 
wages, but also on the upper-tier subcontractors that may have 
disregarded their obligations to be responsible for compliance.
    A key principle in enacting regulatory requirements is that 
liability should, to the extent possible, be placed on the entity that 
can best control whether a violation occurs. See Bongiovanni, 1991 WL 
494751, at *1.\218\ For this reason, the Department proposed language 
assigning liability to upper-tier subcontractors that can choose the 
lower-tier subcontractors they hire, notify lower-tier subcontractors 
of the prevailing wage requirements of the contract, and take action if 
they have any reason to believe there may be compliance issues. By 
clarifying that upper-tier subcontractors may be liable under 
appropriate circumstances--but are not strictly liable as are prime 
contractors--the Department believes that it has struck an appropriate 
balance that is consistent with historical interpretation, the 
statutory language of the DBA, and the feasibility and efficiency of 
future enforcement.
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    \218\ Cf. Am. Soc'y of Mech. Eng'rs, Inc. v. Hydrolevel Corp., 
456 U.S. 556, 572-73 (1982) (``[A] rule that imposes liability on 
the standard-setting organization--which is best situated to prevent 
antitrust violations through the abuse of its reputation--is most 
faithful to the congressional intent that the private right of 
action deter antitrust violations.''). The same principle supports 
the Department's codification of the definition of ``prime 
contractor.'' Where the nominal prime contractor is a single-purpose 
entity with few actual workers, and it contracts with a general 
contractor for all relevant aspects of construction and monitoring 
of subcontractors, the most reasonable enforcement structure would 
place liability on both the nominal prime contractor and the general 
contractor that actually has the staffing, experience, and mandate 
to assure compliance on the job site.
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    The Department received many comments from unions, contractor 
associations, and worker advocacy groups supporting the proposed 
changes to Sec.  5.5(a)(6) and (b)(4). These comments stated generally 
that greater clarity and stronger enforcement mechanisms are necessary 
to increase compliance by contractors and protect vulnerable workers 
who may otherwise have no recourse against unscrupulous practices such 
as wage theft. Several contractor associations, including SMACNA, NECA, 
and CEA, supported the changes as reasonable clarifications of existing 
interpretations.
    Several commenters in support of the proposal stated that the new 
language would help to ensure workers have a recourse regardless of 
which entity is their direct employer. The LCCHR letter, for example, 
stated that ``up-the-chain liability'' for DBRA violations is 
particularly important in the construction industry because large-scale 
construction is an inherently fissured operation, with multiple 
specialized subcontractors retained to complete discrete aspects of a 
project. Under these circumstances, strengthening and clarifying the 
longstanding principles of contractors' liability throughout the 
contracting chain reinforces accountability in taxpayer-funded 
construction and helps ensure workers will receive the wages they have 
earned, consistent with the purpose of the DBRA.\219\
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    \219\ A number of commenters supporting the proposal cited to a 
publication summarizing the evidence of widespread unlawful labor 
practices in the residential construction industry in particular. 
See Ormiston et al., supra note 70, at 75-113. The authors of this 
meta-analysis noted that one of the most effective methods of 
ensuring compliance in such circumstances is the appropriate 
allocation of liability on upper-tier subcontractors. Id. at 100.
---------------------------------------------------------------------------

    Several commenters, including UBC and III-FFC, stated that 
appropriate liability is important to promote self-policing by 
contractors. These commenters stated that the clarification of 
responsibility and potential accountability will further incentivize 
prime contractors and upper-tier subcontractors to choose lower-tier 
subcontractors wisely and encourage them to police compliance. Several 
commenters supporting the proposal, including UA, III-FFC, MCAA, NECA, 
and CEA, noted that enhanced oversight, enforcement, and vulnerability 
to penalties would close

[[Page 57639]]

loopholes, deter bad actors, and ensure that contractors do not shirk 
their responsibilities through subcontracting arrangements. This would 
also remove competitive disadvantages for high-road contractors bidding 
on covered projects. Several dozen contractors and state-level 
contractor associations that are members of SMACNA wrote letters, as 
part of a campaign, that expressed general support of the revisions to 
Sec.  5.5(a)(6) and (b)(4).
    NECA and CEA, while supporting the proposal, urged that the 
contract clauses should include compliance language, including 
timetables, directing the prime contractor to expedite any new wage 
changes and contract modifications so they quickly and appropriately 
reach the lower-tier subcontractors and the workforce entitled to them.
    The Department also received a few comments opposing the proposed 
changes. The SBA Office of Advocacy conveyed comments from small 
businesses that it would be especially difficult for subcontractors to 
keep track of their lower-tiered subcontractors and material suppliers 
because of the lack of clarity and vague definitions in the rulemaking. 
Three contractor associations, the OCA, SIBA, and IRTBA, commented that 
the current Davis-Bacon enforcement mechanisms are working and should 
not be changed. IEC stated that the Department's proposed language was 
``overly harsh'' and would greatly increase the compliance costs of 
upper-tier contractors that would have to expend significant costs to 
audit subcontractors.
    NAHB stated that subcontracting is ubiquitous in the residential 
construction industry, and in particular for multifamily residential 
building. NAHB likened the proposed language in this section and 
elsewhere in this rulemaking to a proposed expansion of joint employer 
liability. NAHB stated that construction sites are unique examples of 
multiemployer worksites and that many of the usual factors for 
establishing a joint employer relationship are not applicable in this 
setting. But NAHB also urged that WHD should clarify in the final rule 
that ``joint employer'' status will be governed by case law under the 
FLSA.
    IEC stated that the cases the Department cited in support of its 
proposal ``do not support a blanket liability provision.'' IEC 
specifically pointed to the ARB decision in Ray Wilson Co., in which, 
according to IEC, the vice-president of ``a prime [contractor], Aztec'' 
had prepared the subcontract with a lower-tier subcontractor that had 
violated the DBA, and the subcontract did not include DBA 
provisions.\220\ IEC stated that in that instance it ``may have been 
appropriate'' to hold Aztec responsible, but that these ``specific 
issues govern the case'' and should be used to interpret the Board's 
finding that Aztec violated the requirement to ensure that its lower-
tier subcontractor properly complied with the Act's requirements. ARB 
No. 02-086, 2004 WL 384729, at *6. IEC also emphasized that the ARB in 
Ray Wilson Co. and WAB in Norsaire Systems, 1995 WL 90009, at *1, did 
not cite any provision of the DBA or regulations to support the 
Department's actions.
---------------------------------------------------------------------------

    \220\ This description misstates the role of the company Aztec 
in Ray Wilson Co. Aztec was an upper-tier subcontractor, not the 
prime contractor. A lower-tier subcontractor of Aztec misclassified 
its workers as ``partners'' allegedly exempt from the Act's wage 
requirements. ARB No. 02-086, 2004 WL 384729, at *3, *5.
---------------------------------------------------------------------------

    IEC recommended that the Department follow the approach of other 
regulations applicable to government contractors by explicitly allowing 
upper-tier contractors to rely on the certifications of lower-tier 
subcontractors with respect to certain compliance obligations. IEC gave 
the example of the SBA, which allows upper-tier contractors to rely on 
the size certifications of small business with no duty to inquire 
unless there was a reason to believe the certification was inaccurate. 
Similarly, the ARTBA recommended that the DBA rule should include a 
``good faith'' standard for prime contractors that would relieve the 
prime contractor of liability for a subcontractor's violation if the 
prime contractor has established a compliance program, the 
transgression was beyond their reasonable scope of knowledge, and they 
did not willfully participate in the violation.
    The Department has considered the comments received on this 
proposal. Both the comments for and against the proposal emphasize that 
subcontracting is a critical aspect of the construction industry and 
that the allocation of liability between upper-tiered and lower-tiered 
subcontractors is an issue of particular interest to contractors, 
subcontractors, and workers. The Department generally agrees with the 
commenters that supported the proposal that the failure to 
appropriately allocate responsibility has consequences for the 
construction workers for whom the Act was enacted. See Binghamton 
Constr. Co., 347 U.S. at 178. The LCCHR letter emphasized that one of 
the letter's signatory organizations represents a construction 
workforce in Texas and pointed to the crucial role ``up-the-chain 
liability'' plays in enabling these workers to secure redress from 
prime and general contractors for wage theft committed by 
subcontractors. The Department agrees with the LCCHR letter that 
clarity in the allocation of ``up-the-chain'' responsibility is 
consistent with the purpose of the Act to protect prevailing wages for 
these and other local construction workers.
    The Department agrees with NECA and CEA that the contract clause 
language in Sec.  5.5(a)(6) would be strengthened through the inclusion 
of a requirement that any DBRA-related contract modifications must also 
be flowed down. The Department therefore has amended the Sec.  
5.5(a)(6) contract clause language in the final rule to cover, along 
with the enumerated contract clauses and applicable wage 
determination(s), such other clauses ``or contract modifications'' as 
the Federal agency may by appropriate instructions require. The 
Department does not believe it is necessary to impose a specific 
timetable for such incorporation in Sec.  5.5(a)(6), as the Department 
or relevant Federal agency can specify the timetable in the 
modification with the prime contractor, and the prime contractor will 
already be liable for the effect of any modification on the prevailing 
wages of the employees of lower-tier subcontractors during any delay in 
the flowing down of the required modification.
    The Department has considered, but declines to adopt, the 
suggestions from IEC and ARTBA regarding certifications and ``good 
faith'' defenses. As the NPRM explained, the Department has long 
interpreted the DBRA to place strict liability on prime contractors to 
account for all unpaid back wages. This is because prime contractors 
are entering into a contract with the government agency that requires 
that all workers on the project be paid the prevailing wage in 
compliance with the Act. As explained in the Restatement (Second) of 
Contracts, ``[c]ontract liability is strict liability'' and ``[t]he 
obligor is therefore liable in damages for breach of contract even if 
he is without fault[.]'' Restatement, ch. 11, intro. note (Am. Law 
Inst. 1981). Allocating liability in this manner is appropriate given 
the prime contractor's ability to choose which subcontractors to hire, 
provide adequate notice and instruction to subcontractors of their 
responsibilities, and inquire into their compliance or audit them as 
appropriate. Creating a good faith defense to basic back wage or other 
contractual liability in this context is not consistent with common law 
of

[[Page 57640]]

contract or with the purpose of the statute.
    For the same reason, the Department does not believe that NAHB's 
comparison to joint employer liability under the FLSA is helpful. The 
DBA and Related Acts, like other statutes and executive orders 
governing Federal contracting, are not general regulatory statutes. 
Rather, they seek to impose conditions solely on entities involved in 
contracts for construction with a Federal agency or construction 
contracts receiving Federal assistance. The relevant question is not 
whether the common law would consider one entity to be liable for the 
other under a vicarious liability theory, or whether other statutes 
like the FLSA might impose liability depending on the wording of those 
statutes. Rather, the question the Department seeks to address is how 
best to ensure that the congressional purpose of the DBRA--the 
protection of the prevailing wages of workers on covered contracts--is 
satisfied.
    Notwithstanding the above, the Department emphasized in the 
proposal that it does not intend to place the same strict liability on 
upper-tier subcontractors for back wages recoverable by the Department 
as it does on prime contractors. The Department also emphasized that it 
did not intend for the proposed new language in Sec.  5.5(a)(6) to 
impose a new strict liability standard for debarment for either prime 
contractors or upper-tier subcontractors for violations involving the 
workers of lower-tier contractors. Some of the critical comments that 
the Department received overlooked these points in the NPRM. For 
example, OCA, SIBA, and IRTBA characterized the proposal as 
``[e]ssentially . . . impos[ing] strict, vicarious liability on 
contractors, to the point of debarment.'' They opposed this, saying 
that it would place an undue burden and risk on contractors and would 
discourage contractors from bidding on work covered by the DBA.
    OCA, SIBA, and IRTBA's recitation of the proposed changes blurs the 
Department's distinction between prime contractors and upper-tier 
subcontractors and also suggests confusion regarding the applicable 
debarment standard. The strict liability for covering unpaid back wages 
only applies to prime contractors, for the reasons articulated above. 
The new contract language in Sec.  5.5(a)(6) will only impose back wage 
liability on upper-tier subcontractors to the extent they are 
``responsible'' for the violations of their lower-tier subcontractors. 
As the Department stated in the NPRM, this language should not be read 
to place the same strict liability responsibility on all upper-tier 
subcontractors that the existing language already places on prime 
contractors. Rather, the new language clarifies that, in appropriate 
circumstances, such as in Ray Wilson Co., upper-tier subcontractors may 
be held responsible for paying back wages jointly and severally with 
the prime contractor and the lower-tier subcontractor that directly 
failed to pay the prevailing wages. This standard is intended to 
provide the potential for back wage liability for an upper-tier 
subcontractor that, for example, repeatedly or in a grossly negligent 
manner fails to flow down the required contract clause, or has 
knowledge of violations by lower-tier subcontractors and does not seek 
to remedy them, or is otherwise purposefully inattentive to Davis-Bacon 
labor standards obligations of lower-tier subcontractors.
    Regarding debarment, OCA, SIBA, and IRTBA's implication that there 
could be a strict liability standard requiring the Department to debar 
a prime contractor or any upper-tier subcontractor for the violations 
of a lower-tier subcontractor is misplaced. In proposing this 
additional notice of the potential for debarment, the Department stated 
that it did not intend to change the core standard for when a prime 
contractor or upper-tier subcontractor may be debarred for the 
violations of a lower-tier subcontractor. The potential for debarment 
for a violation of the responsibility requirement, unlike the 
responsibility for back wages, is not subject to a strict liability 
standard--even for prime contractors. Rather, in the cases in which 
prime contractors have been debarred for the underpayments of 
subcontractors' workers, they were found to have some level of intent 
that reflected a disregard of their own obligations. See, e.g., H.P. 
Connor & Co., WAB No. 88-12, 1991 WL 494691, at *2 (Feb. 26, 1991) 
(affirming ALJ's recommendation to debar prime contractor for 
``run[ning] afoul'' of 29 CFR 5.5(a)(6) because of its ``knowing or 
grossly negligent participation in the underpayment'' of the workers of 
its subcontractors).\221\ The Department does not intend to change this 
debarment standard.
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    \221\ See also Martell Constr. Co., ALJ No. 86-DBA-32, 1986 WL 
193129, at *9 (Aug. 7, 1986), aff'd, WAB No. 86-26, 1987 WL 247045 
(July 10, 1987). In Martell, the prime contractor had failed to flow 
down the required contract clauses and investigate or question 
irregular payroll records submitted by subcontractors. The ALJ 
explained that the responsibility clause in Sec.  5.5(a)(6) places a 
burden on the prime contractor ``to act on or investigate irregular 
or suspicious situations as necessary to assure that its 
subcontractors are in compliance with the applicable sections of the 
regulations.'' 1986 WL 193129, at *9.
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    The Department believes it has appropriately relied on the 
precedent reflected in Ray Wilson Co. and Norsaire Systems to explain 
these liability principles. The lesson of Ray Wilson Co.--as IEC points 
out--is not that an upper-tier subcontractor will be debarred in any 
case in which a lower-tier subcontractor violates the DBRA. Rather, it 
is an example of a set of factual circumstances in which debarment of 
an upper-tier subcontractor was appropriate because it disregarded its 
obligations to employees of its own lower-tier subcontractor.
    Although the Department declines to adopt IEC's suggestion that 
contractors should be allowed to escape liability if they rely on 
certifications of compliance by lower-tier subcontractors, this 
decision is not intended to limit the ways in which prime contractors, 
upper-tier subcontractors, and lower-tier subcontractors may agree 
among themselves to allocate liability. For example, a small business 
prime contractor or upper-tier subcontractor may wish to limit its 
exposure to back wage liability by requiring lower-tier subcontractors 
to enter into indemnification agreements with them for any back wage 
liability for the workers of lower-tier subcontractors. The Department 
believes that these types of agreements can address some of the 
concerns conveyed by SBA's Office of Advocacy about the potential 
burdens on small business subcontractors.
    In general, however, the Department believes that the proposed 
changes to Sec.  5.5(a)(6) and (b)(4) are consistent with the governing 
case law and represent a balanced compromise by allocating strict 
contractual liability only on the prime contractor and not on upper-
tier subcontractors. The Department adopts the changes as proposed, 
with the limited addition of the language requiring the flow down of 
DBRA-related contract modifications.
(E) 29 CFR 5.5(d)--Incorporation of Contract Clauses and Wage 
Determinations by Reference
    New paragraph at Sec.  5.5(d) clarifies that, notwithstanding the 
continued requirement at Sec.  5.5(a) that agencies incorporate 
contract clauses and wage determinations ``in full'' into contracts not 
awarded under the FAR, the clauses and wage determinations are equally 
effective if they are incorporated by reference. This new paragraph is 
discussed further below in section III.B.3.xx (``Post-award 
determinations and operation-of-law''), together with

[[Page 57641]]

proposed changes to Sec. Sec.  1.6(f), 3.11, 5.5(e), and 5.6.
(F) 29 CFR 5.5(e)--Operation of Law
    In a new paragraph at Sec.  5.5(e), the Department proposed 
language making effective by operation of law a contract clause or wage 
determination that was wrongly omitted from the contract. This 
paragraph is discussed below in section III.B.3.xx (``Post-award 
determinations and operation-of-law''), together with changes to 
Sec. Sec.  1.6(f), 3.11, 5.5(d), and 5.6(a).
iv. Section 5.6 Enforcement
(A) 29 CFR 5.6(a)(1)
    The Department proposed to revise Sec.  5.6(a)(1) by renumbering 
the existing regulatory text Sec.  5.6(a)(1)(i), and adding an 
additional paragraph, Sec.  5.6(a)(1)(ii), to include a provision 
clarifying that where a contract is awarded without the incorporation 
of the required Davis-Bacon labor standards clauses required by Sec.  
5.5, the Federal agency must incorporate the clauses or require their 
incorporation. This paragraph is discussed further below in section 
III.B.3.xx (``Post-award determinations and operation-of-law''), 
together with changes to Sec. Sec.  1.6(f), 3.11, 5.5(d), and 5.5(e).
(B) 29 CFR 5.6(a)(2)
    The Department proposed to amend Sec.  5.6(a)(2) to reflect the 
Department's longstanding practice and interpretation that certified 
payrolls submitted by the contractor as required in Sec.  5.5(a)(3)(ii) 
may be requested--and Federal agencies must produce such certified 
payrolls--regardless of whether the Department has initiated an 
investigation or other compliance action. The term ``compliance 
action'' includes, without limitation, full investigations, limited 
investigations, office audits, self-audits, and conciliations.\222\ The 
Department further proposed revising this paragraph to clarify that, in 
those instances in which a Federal agency does not itself maintain such 
certified payrolls, it is the responsibility of the Federal agency to 
ensure that those records are provided to the Department upon request, 
either by obtaining and providing the certified payrolls to the 
Department, or by requiring the entity maintaining those certified 
payrolls to provide the records directly to the Department.
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    \222\ See 2020 GAO Report, note 14, supra, at 6 tbl.1, for 
descriptions of WHD compliance actions.
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    The Department also proposed to replace the phrase ``payrolls and 
statements of compliance'' with ``certified payrolls'' to continue to 
more clearly distinguish between certified payrolls and regular payroll 
and other basic records and information that the contractor is also 
required to maintain under Sec.  5.5(a)(3), as discussed above.
    The proposed revisions were intended to clarify that an 
investigation or other compliance action is not a prerequisite to the 
Department's ability to obtain from a Federal agency certified payrolls 
submitted pursuant to Sec.  5.5(a)(3)(ii). The proposed revisions also 
were intended to remove any doubt or uncertainty that each Federal 
agency has an obligation to produce or ensure the production of such 
certified payrolls, including in those circumstances in which it may 
not be the entity maintaining the requested certified payrolls. As the 
Department noted in the NPRM, these proposed revisions will make 
explicit the Department's longstanding practice and interpretation of 
this provision, and do not place any new or additional requirements or 
recordkeeping burdens on contracting agencies, as they are already 
required to maintain these certified payrolls and provide them to the 
Department upon request.
    The Department believes that these revisions will enhance the 
Department's ability to provide compliance assistance to various 
stakeholders, including Federal agencies, contractors, subcontractors, 
sponsors, applicants, owners, or other entities awarded contracts 
subject to the provisions of the DBRA. Specifically, these revisions 
are expected to facilitate the Department's review of certified 
payrolls on covered contracts where the Department has not initiated 
any specific compliance action. Conducting such reviews promotes the 
proper administration of the DBRA because, in the Department's 
experience, such reviews often enable the Department to identify 
compliance issues and circumstances in which additional outreach and 
education would be beneficial.
    The Department received no specific comments on these proposed 
revisions. III-FFC generally supported clarifying and strengthening the 
recordkeeping requirements as a means of ensuring that contractors 
remain responsible and that workers are paid the correct prevailing 
wage, without specifically discussing Sec.  5.6(a)(2). The final rule 
therefore adopts these changes as proposed.
(C) 29 CFR 5.6(a)(3)-(5), 5.6(b)
    The Department proposed revisions to Sec.  5.6(a) and (b), similar 
to the proposed changes to Sec.  5.6(a)(2), to clarify that an 
investigation is only one method of assuring compliance with the labor 
standards clauses required by Sec.  5.5 and the applicable statutes 
referenced in Sec.  5.1. The Department proposed to supplement the term 
``investigation,'' where appropriate, with the phrase ``or other 
compliance actions.'' The proposed revisions align with all the types 
of compliance actions currently used by the Department, as well as any 
additional types that the Department may use in the future. These 
proposed revisions made explicit the Department's longstanding practice 
and interpretation of these provisions and did not impose any new or 
additional requirements upon a Federal agency.
    Proposed revisions to Sec.  5.6(a)(3) clarified the records and 
information that contracting agencies should include in their DBRA 
investigations. These proposed changes conformed to proposed changes in 
Sec.  5.5(a)(3).
    The Department also proposed renumbering current Sec.  5.6(a)(5) as 
a stand-alone new Sec.  5.6(c) and updating that paragraph to reflect 
its practice of redacting portions of confidential statements of 
workers or other informants that would tend to reveal those informants' 
identities. This proposed change was made to emphasize--without making 
substantive changes--that this regulatory provision mandating 
protection of information that identifies or would tend to identity 
confidential sources, applies to both the Department's and other 
agencies' confidential statements and other related documents. The 
proposed revisions codify the Department's longstanding position that 
this provision protects workers and other informants who provide 
information or documents to the Department or other agencies from 
having their identities disclosed.
    The Department received few comments about these proposals. Two 
comments supported the proposed revisions. III-FFC generally supported 
clarifying and strengthening the recordkeeping requirements. The UA 
also supported the safeguards the Department proposed to make it 
possible for underpaid or misclassified workers to report violations, 
starting with the Department's clear commitment in Sec.  5.6(c) to 
expressly protect the identity of workers or other informants who 
provide information in connection with a complaint or investigation.
    In addition, the Department received a comment from NFIB 
recommending two limiting changes to Sec.  5.6(b)(2) and (c). First, 
NFIB requested that the Department revise Sec.  5.6(b)(2) by inserting 
``consistent with applicable law,'' after ``cooperate.'' NFIB requested 
this regulatory change based on its concern that the existing 
regulatory

[[Page 57642]]

requirement that private entities or citizens cooperate with Department 
investigations creates a legal duty that potentially conflicts with the 
legal rights of private entities or citizens to invoke evidentiary 
privileges against document production and the privilege against self-
incrimination, and a right to refrain from answering questions absent 
service of compulsory process.
    Second, NFIB recommended that the Department revise Sec.  5.6(c) by 
inserting ``unless otherwise directed by a final and unappealable order 
of a federal court'' after ``without the prior consent of the 
informant'' and by inserting ``or by the terms of such final and 
unappealable order of the court'' at the end of the paragraph. NFIB 
asserted that the Department's privilege to withhold the identity of 
confidential sources in investigations or other compliance actions is a 
qualified, not absolute, privilege, and that the Department should not 
``make[] a promise of confidentiality to confidential sources that, in 
certain circumstances, the Department cannot keep.'' In support of this 
recommendation, NFIB cited a seminal U.S. Supreme Court decision, 
Roviaro v. United States, 353 U.S. 53, 60-61 (1957), that addresses the 
common law government informer's privilege standard that applies to the 
FLSA, among other statutes.
    After consideration, the Department declines to adopt NFIB's 
proposed limiting changes. First, the Department did not propose any 
substantive changes to the language in Sec.  5.6(b)(2) that NFIB 
recommended qualifying. Second, the Davis-Bacon regulations have 
required cooperation since 29 CFR part 5 was added in 1951. See 16 FR 
4432. Specifically, the paragraph then numbered Sec.  5.10(a) provided 
that ``the Federal agencies, contractors, subcontractors, sponsors, 
applicants or owners, shall cooperate with any authorized 
representative of the Department of Labor in the inspection of records, 
interviews with workers, and in all other aspects of the 
investigation.'' Id. (emphasis added). This duty to cooperate, which 
has been reflected in the DBRA's implementing regulations for more than 
70 years with only minor, technical changes to the operative language, 
has coexisted and will continue to coexist with other legal rights, 
such as the Fifth Amendment right against self-incrimination, and other 
privileges. The Department is not aware of any instances (and NFIB 
points to none) in which the regulatory language of Sec.  5.6(b)(2) and 
its predecessor provisions have caused confusion or been interpreted as 
compelling contractors or other entities to, in NFIB's words, ``forfeit 
their legal rights in case of an investigation as a condition of 
working on federal construction projects.'' Particularly in the absence 
of any such evidence, and given that the Department did not propose any 
substantive changes to Sec.  5.6(b)(2), the Department declines to 
adopt NFIB's suggested regulatory change.
    Similarly, the Department declines to add NFIB's proposed 
qualification to the confidentiality protections codified in current 
Sec.  5.6(a)(5) (renumbered as Sec.  5.6(c)) in the case of ``final and 
unappealable order[s] of the court'' overriding these protections 
because that qualification is implicit and therefore unnecessary. The 
Department will continue to defend existing regulatory informant's 
privilege provisions which are currently codified in 29 CFR 5.6(a)(5) 
and 6.5 \223\ and discussed further in the following paragraphs. The 
Department would, however, also abide by a higher court's final and 
unappealable order to the contrary.
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    \223\ In 1984, the Department added the following sentence to 
Sec.  6.5 (previously numbered Sec.  6.33): ``In no event shall a 
statement taken in confidence by the Department of Labor or other 
Federal agency be ordered to be produced prior to the date of 
testimony at trial of the person whose statement is at issue unless 
the consent of such person has been obtained.'' 49 FR 10626, 10628 
(Mar. 21, 1984) (final rule). The companion regulations in 29 CFR 
part 6, subparts A (general) and C (DBRA enforcement proceedings), 
are authorized by various sources, including the DBA and 
Reorganization Plan No. 14 of 1950.
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    The Department has long taken the position that protecting the 
identities of confidential informants is essential for enforcement. As 
explained in sections II.A (``Statutory and regulatory history'') and 
III.B.3.xix (``Anti-Retaliation''), the Department has broad authority 
to enact regulations like this one, which enhance enforcement and 
administration of the Act's worker protections. Decades ago, the 
Department exercised this authority by, among other measures, extending 
protections to confidential informants. The first iteration of current 
Sec.  5.6(a)(5) was added in 1951 in the then new 29 CFR part 5. See 16 
FR 4432 (``Complaints of alleged violations shall be given priority and 
statements, written or oral, made by an employee shall be treated as 
confidential and shall not be disclosed to his employer without the 
consent of the employee.''). The current regulations, 29 CFR 5.6(a)(5) 
and 6.5, prohibit disclosing, without the informer's consent, the 
identities of such people who have provided information to the 
Department in confidence. Specifically, Sec. Sec.  5.6(c) and 6.5 
direct that when an informant provides statements or information in 
confidence, in no event will the identity of such an informant, or any 
portions of their statements, or other information provided that would 
tend to reveal their identity, be ordered to be produced before the 
date of that person's testimony. In the case of non-testifying 
informants, such information may not be disclosed at all, unless the 
person has consented to such disclosure. These DBRA regulatory 
informant's provisions, currently codified in Sec. Sec.  5.6(a)(5) and 
6.5--unlike the common law government informer's privilege discussed in 
Roviaro, which is derived from judicial decisions, not regulations--
prohibit disclosure (absent consent) of information that would tend to 
identify non-testifying informants and, for testifying informants, does 
not permit such disclosure until the date of the informant's testimony 
at trial.
    Absent these controlling regulations, application of the common law 
government informant's privilege alone, which, as NFIB asserts, is a 
qualified privilege, would be appropriate. But even if that common law 
government informant's privilege alone were applicable, it would be 
unnecessary to codify. WHD's current and longstanding practice is to 
let workers know that their identities will be kept confidential to the 
maximum extent possible under the law.
v. Section 5.10 Restitution, Criminal Action
    To correspond with proposed new language in the contract clauses, 
the Department proposed to add references to monetary relief and 
interest to the description of restitution in Sec.  5.10, as well as an 
explanation of the method of computation of interest applicable 
generally to any circumstance in which there has been an underpayment 
of wages under a covered contract.
    The Department also proposed new anti-retaliation contract clauses 
at Sec.  5.5(a)(11) and (b)(5), along with a new related section of the 
regulations at Sec.  5.18. Those clauses and section provide for 
monetary relief that would include, but not be limited to, back wages. 
Reference to this relief in Sec.  5.10 was proposed to correspond to 
those proposed new clauses and section. For further discussion of those 
proposals, see section III.B.3.xix (``Anti-Retaliation'').
    The reference to interest in Sec.  5.10 was similarly intended to 
correspond to proposed new language requiring the payment of interest 
on any underpayment of wages in the contract clauses at Sec.  
5.5(a)(1)(vi), (a)(2) and (6), and (b)(2) through (4), and on any other

[[Page 57643]]

monetary relief for violations of the proposed anti-retaliation 
clauses. The current Davis-Bacon regulations and contract clauses do 
not specifically provide for the payment of interest on back wages. The 
ARB and the Department's ALJs, however, have held that interest 
calculated to the date of the underpayment or loss is generally 
appropriate where back wages are due under other similar remedial 
worker protection statutes enforced by the Department. See, e.g., Lawn 
Restoration Serv. Corp., ALJ No. 2002-SCA-00006, slip op. at 74 (Dec. 
2, 2003) (awarding prejudgment interest under the SCA).\224\ Under the 
DBRA, as under the INA and SCA and other similar statutes, an 
assessment of interest on back wages and other monetary relief will 
ensure that the workers Congress intended to protect from substandard 
wages will receive the full compensation that they were owed under the 
contract.
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    \224\ See also Greater Mo. Med. Pro-care Providers, Inc., ARB 
No. 12-015, 2014 WL 469269, at *18 (Jan. 29, 2014) (approving of 
pre-judgment and post-judgment interest on back pay award for H-1B 
visa cases under the Immigration and Nationality Act (INA)), aff'd 
sub nom. Greater Mo. Med. Pro-care Providers, Inc. v. Perez, No. 
3:14-CV-05028, 2014 WL 5438293 (W.D. Mo. Oct. 24, 2014), rev`d on 
other grounds, 812 F.3d 1132 (8th Cir. 2015).
---------------------------------------------------------------------------

    The proposed language established that interest would be calculated 
from the date of the underpayment or loss, using the interest rate 
applicable to underpayment of taxes under 26 U.S.C. 6621, and would be 
compounded daily. Various Occupational Safety and Health Administration 
(OSHA) whistleblower regulations use the tax underpayment rate and 
daily compounding because that accounting best achieves the make-whole 
purpose of a back-pay award. See Procedures for the Handling of 
Retaliation Complaints Under Section 806 of the Sarbanes-Oxley Act of 
2002, as Amended, Final Rule, 80 FR 11865, 11872 (Mar. 5, 2015).
    The Department received one comment in opposition to its proposal. 
ABC noted that contractors may be unaware of any wage underpayments 
until they are notified by the Department at or near the end of a 
construction project, and that--absent knowledge and/or willful 
underpayment--interest compounding should not begin to be accrue until 
after the Department notifies a contractor of an unremedied liability.
    However, the majority of commenters on this topic supported the 
Department's proposal. The UA stated that the chances of underpaid or 
misclassified workers coming forward to report violations--and in turn, 
employers paying employees swiftly--are improved by requiring employers 
to pay interest if they fail to pay required wages. PAAG and PADLI also 
supported the proposal to calculate interest from the date of the 
underpayment or loss, and to be compounded daily, which it noted would 
ensure that the workers whom Congress intended to protect from 
substandard wages would receive the full compensation that they were 
owed. UBC stated that such language will improve deterrence and 
compliance. CC&M also supported the Department's proposal, noting that 
misclassification of workers as independent contractors amounts to wage 
theft and that protocols for workers to receive restitution are needed 
in the regulations.
    Although in some cases the requirement to pay interest may act as 
an additional deterrent, the reason why the Department believes the 
requirement is necessary is its function in providing make-whole relief 
to workers who have not timely received the full prevailing wages that 
they were due under the statute and the regulations. The requirement to 
pay interest is not intended as a penalty on contractors or 
subcontractors that are responsible for violations. Accordingly, the 
requirement to provide interest outweighs the expressed concern about 
whether contractors and subcontractors have acted knowingly or 
willfully. The final rule adopts this change as proposed.
vi. Section 5.11 Disputes Concerning Payment of Wages
    The Department proposed minor revisions to Sec.  5.11(b)(1) and 
(c)(1), to clarify that where there is a dispute of fact or law 
concerning payment of prevailing wage rates, overtime pay, or proper 
classification, the Administrator may notify the affected contractors 
and subcontractors, if any, of the investigation findings by means 
other than registered or certified mail, so long as those other means 
would normally assure delivery. Examples of such other means include, 
but are not limited to, email to the last known email address, delivery 
to the last known address by commercial courier and express delivery 
services, or by personal service to the last known address. The 
Department explained that while registered or certified mail may 
generally be a reliable means of delivery, other delivery methods may 
be just as reliable or even more successful at assuring delivery, as 
has been demonstrated during the COVID-19 pandemic. The proposed 
revisions would therefore allow the Department to choose methods to 
ensure that the necessary notifications are delivered to the affected 
contractors and subcontractors.
    In addition, the Department proposed similar changes to allow 
contractors and subcontractors to provide their response, if any, to 
the Administrator's notification of the investigative findings by any 
means that would normally assure delivery. The Department also proposed 
replacing the term ``letter'' with the term ``notification'' in this 
section, as the proposed changes would allow the notification of 
investigation findings to be delivered by letter or other means, such 
as email. Similarly, the Department proposed to replace the term 
``postmarked'' with ``sent'' to reflect that various means may be used 
to confirm delivery depending upon the method of delivery, such as by 
the date stamp on an email or the delivery confirmation provided by a 
commercial delivery service.
    The Department received no comments on this proposal. The final 
rule therefore adopts this change as proposed.
    For additional discussion related to Sec.  5.11, see section 
III.B.3.xxi (``Debarment'').
vii. Section 5.12 Debarment Proceedings
    The Department proposed minor revisions to Sec.  5.12(b)(1) and 
(d)(2)(iv) (renumbered as Sec.  5.12(c)(2)(iv)(A)) to clarify that the 
Administrator may notify the affected contractors and subcontractors, 
if any, of the investigation findings by means other than registered or 
certified mail, so long as those other means would normally assure 
delivery. As discussed above in reference to identical changes proposed 
to Sec.  5.11, these revisions would allow the Department to choose the 
most appropriate method to confirm that the necessary notifications 
reach their recipients. The Department proposed similar changes to 
allow the affected contractors or subcontractors to use any means that 
would normally assure delivery when making their response, if any, to 
the Administrator's notification.
    The Department also proposed a slight change to Sec.  5.12(b)(2), 
which stated that the Administrator's findings would be final if no 
hearing were requested within 30 days of the date the Administrator's 
notification is sent, as opposed to the current language, which states 
that the Administrator's findings shall be final if no hearing is 
requested within 30 days of receipt of the Administrator's 
notification. This proposed change would align the time period 
available for requesting a hearing in Sec.  5.12(b)(2) with similar 
requirements

[[Page 57644]]

in Sec.  5.11 and other paragraphs in Sec.  5.12, which state that such 
requests must be made within 30 days of the date of the Administrator's 
notification.
    For additional discussion related to Sec.  5.12, see section 
III.B.3.xxi (``Debarment'').
    The Department received no comments on this proposal. The final 
rule therefore adopts these changes as proposed.
viii. Section 5.16 Training Plans Approved or recognized by the 
Department of Labor Prior to August 20, 1975
    As noted (see III.B.3.ii.(E) ``29 CFR 5.5(a)(4) Apprentices.''), 
the Department proposed to rescind and reserve Sec.  5.16. Originally 
published along with Sec.  5.5(a)(4)(ii) in a 1975 final rule, Sec.  
5.16 is essentially a grandfather clause permitting contractors, in 
connection with certain training programs established prior to August 
20, 1975, to continue using trainees on Federal and federally assisted 
construction projects without seeking additional approval from the 
Department pursuant to Sec.  5.5(a)(4)(ii). See 40 FR 30480. Since 
Sec.  5.16 appears to be obsolete more than four decades after its 
issuance, the Department proposed to rescind and reserve the section. 
The Department also proposed several technical edits to Sec.  
5.5(a)(4)(ii) to remove references to Sec.  5.16.
    The Department received no comments on this proposal. The final 
rule therefore adopts this change as proposed.
ix. Section 5.17 Withdrawal of Approval of a Training Program
    As already discussed, the Department proposed to remove references 
to trainees and training programs throughout parts 1 and 5 (see 
III.B.3.ii.(E) ``29 CFR 5.5(a)(4) Apprentices.'') as well as rescind 
and reserve Sec.  5.16 (see III.B.3.viii ``Section 5.16 Training plans 
approved or recognized by the Department of Labor prior to August 20, 
1975.''). Accordingly, the Department also proposed to rescind and 
reserve Sec.  5.17.
    The Department received no comments on the proposal to rescind and 
reserve Sec.  5.17. The final rule therefore adopts this change as 
proposed.
x. Section 5.20 Scope and Significance of This Subpart
    The Department proposed two technical corrections to Sec.  5.20. 
First, the Department proposed to correct a typographical error in the 
citation to the Portal-to-Portal Act of 1947 to reflect that the 
relevant section of the Portal-to-Portal Act is codified at 29 U.S.C. 
259, not 29 U.S.C. 359. Second, the last sentence of Sec.  5.20 
currently states, ``Questions on matters not fully covered by this 
subpart may be referred to the Secretary for interpretation as provided 
in Sec.  5.12.'' However, the regulatory provision titled ``Rulings and 
Interpretations,'' which this section is meant to reference, is 
currently located at Sec.  5.13. The Department therefore proposed to 
replace the incorrect reference to Sec.  5.12 with the correct 
reference to Sec.  5.13.
    The Department received no comments on this proposal. The final 
rule therefore adopts this change as proposed, with minor technical 
edits to improve readability, none of which are intended to reflect a 
change in the substance of this section.
xi. Section 5.23 The Statutory Provisions
    The Department proposed to make technical, non-substantive changes 
to Sec.  5.23. The existing text of Sec.  5.23 primarily consists of a 
lengthy quotation of a particular fringe benefit provision of the 1964 
amendments to the DBA. The Department proposed to replace this text 
with a summary of the statutory provision at issue for two reasons. 
First, due to a statutory amendment, the quotation set forth in 
existing Sec.  5.23 no longer accurately reflects the statutory 
language. Specifically, on August 21, 2002, Congress enacted 
legislation which made several non-substantive revisions to the 
relevant 1964 DBA amendment provisions and recodified those provisions 
from 40 U.S.C. 276a(b) to 40 U.S.C. 3141.\225\ The Department proposed 
to update Sec.  5.23 to include a citation to 40 U.S.C. 3141(2). 
Second, the Office of the Federal Register disfavors lengthy block 
quotations of statutory text.\226\ In light of this drafting 
convention, and because the existing quotation in Sec.  5.23 no longer 
accurately reflects the statutory language, the Department proposed to 
revise Sec.  5.23 so that it paraphrases the statutory language set 
forth at 40 U.S.C. 3141(2).
---------------------------------------------------------------------------

    \225\ See Revision of Title 40, U.S.C., ``Public Buildings, 
Property, and Works,'' Public Law 107-217, sec. 3141, 116 Stat. 
1062, 1150 (Aug. 21, 2002).
    \226\ See Off. of the FR, ``Document Drafting Handbook'' section 
3.6 (Aug. 2018 ed., rev. Mar. 24, 2021), https://www.archives.gov/files/Federal-register/write/handbook/ddh.pdf.
---------------------------------------------------------------------------

    The Department received no comments on this proposal. The final 
rule therefore adopts this change as proposed.
xii. Section 5.25 Rate of Contribution or Cost for Fringe Benefits
    The Department proposed to add new paragraph (c) to existing Sec.  
5.25 to codify the principle of annualization used to calculate the 
amount of Davis-Bacon credit that a contractor may receive for 
contributions to a fringe benefit plan when the contractor's workers 
perform work on both DBRA-covered projects (referred to as ``DBRA-
covered'' work or projects) and projects that are not subject to DBRA 
requirements (referred to as ``private'' work or projects) in a 
particular year or other shorter time period. While existing guidance 
generally requires the use of annualization to compute the hourly 
equivalent of fringe benefits, annualization is not currently addressed 
in the regulations. The Department's proposal provided for 
annualization of fringe benefits unless a contractor obtained an 
exception with respect to a particular fringe benefit plan and also 
addressed how to properly annualize fringe benefits. The proposal also 
set forth an administrative process for obtaining approval by the 
Administrator for an exception from the annualization requirement.
    Consistent with the Secretary's authority to set the prevailing 
wage, WHD has long concluded that a contractor generally may not take 
Davis-Bacon credit for all its contributions to a fringe benefit plan 
based solely upon the workers' hours on a DBRA-covered project when the 
workers also work on private projects for the contractor in that same 
time period. See, e.g., Miree Constr. Corp. v. Dole, 930 F.2d 1536, 
1545-46 (11th Cir. 1991) (adopting the Administrator's contention that 
``[i]f an employer chooses to provide a year-long fringe benefit, 
rather than cash or some other fringe benefit, the annualization 
principle simply ensures that a disproportionate amount of that benefit 
is not paid for out of wages earned on Davis-Bacon work''); see also, 
e.g., Indep. Roofing Contractors v. Chao, 300 Fed. Appx. 518, 521 (9th 
Cir. 2008) (noting the Department's ``long history of applying 
annualization,'' including when an ``employer provides a year-long 
benefit'' so as to ``ensure `that a disproportionate amount of that 
fringe benefit is not paid out of wages earned on . . . Davis-Bacon 
work' '') (citation omitted); In re Cody-Zeigler, ARB Nos. 01-014, 01-
015, 2003 WL 23114278, at *13 (Dec. 19, 2003); WHD Opinion Letter DBRA-
72 (June 5, 1978); WHD Opinion Letter DBRA-134 (June 6, 1985); WHD 
Opinion Letter DBRA-68 (May 22, 1984); FOH 15f11(b). Contributions made 
to a fringe benefit

[[Page 57645]]

plan for DBRA-covered work generally may not be used to fund the plan 
for periods of private work. A contractor therefore typically must 
convert its total annual contributions to the fringe benefit plan to an 
hourly cash equivalent by dividing the cost of the fringe benefit by 
the total number of hours worked (DBRA-covered and private work) to 
determine the amount creditable towards meeting its obligation to pay 
the prevailing wage under the DBRA. See FOH 15f11(b) (``Normally, 
contributions made to a fringe benefit plan for government work 
generally may not be used to fund the plan for periods of non-
government work.''); see also FOH 15f12(b).
    This principle, which is referred to as ``annualization,'' 
effectively prohibits contractors from using fringe benefit plan 
contributions attributable to work on private projects to meet their 
prevailing wage obligation for DBRA-covered work. See, e.g., Miree 
Constr., 930 F.2d at 1545 (annualization ensures receipt of the 
prevailing wage by ``prevent[ing] employers from receiving Davis-Bacon 
credit for fringe benefits actually paid to employees during non-Davis-
Bacon work''). Annualization is intended to prevent the use of DBRA-
covered work as the disproportionate or exclusive source of funding for 
benefits that are continuous in nature and that constitute compensation 
for all the worker's work, both DBRA-covered and private.
    For many years, WHD has required contractors to annualize 
contributions for most types of fringe benefit plans, including health 
insurance plans, apprenticeship training plans, vacation plans, and 
sick leave plans. See, e.g., Rembrant, Inc., WAB No. 89-16, 1991 WL 
494712, at *1 (Apr. 30, 1991) (noting WHD Deputy Administrator's 
position that ``fringe benefit contributions creditable for Davis-Bacon 
purposes may not be used to fund a fringe benefit plan for periods of 
non-government work''); PWRB, sec. 9, p. 21 (noting that the 
Administrator originally applied annualization to health insurance 
plans in the 1970s). WHD's rationale for requiring annualization is 
that such contributions finance benefits that are continuous in nature 
and reflect compensation for all of the work performed by a laborer or 
mechanic, including work on both DBRA-covered and private projects. One 
exception to this general rule compelling the annualization of fringe 
benefit plan contributions has been that annualization is not required 
for defined contribution pension plans (DCPPs) that provide for 
immediate participation and essentially immediate vesting (e.g., 100 
percent vesting after a worker works 500 or fewer hours). See WHD 
Opinion Letter DBRA-134 (June 6, 1985); see also FOH 15f14(f)(1). 
However, WHD does not currently have public guidance explaining the 
extent to which other plans may also warrant an exception from the 
annualization principle.
    To clarify when an exception to the general annualization principle 
may be appropriate, the Department proposed language stating that 
contributions to a fringe benefit plan may only qualify for such an 
exception when three requirements are satisfied: (1) the benefit 
provided is not continuous in nature; (2) the benefit does not provide 
compensation for both public and private work; and (3) the plan 
provides for immediate participation and essentially immediate vesting. 
In accordance with the Department's longstanding guidance, under the 
proposal, a plan would generally be considered to have essentially 
immediate vesting if the benefits vest after a worker works 500 or 
fewer hours. These proposed criteria were not necessarily limited to 
DCPPs. However, to ensure that the criteria were applied correctly and 
that workers' Davis-Bacon wages were not disproportionately used to 
fund benefits during periods of private work, the Department proposed 
that such an exception could only apply when the plan in question had 
been submitted to the Department for review and approval. As proposed, 
such requests could be submitted by plan administrators, contractors, 
or their representatives. However, to avoid any disruption to the 
provision of worker benefits, the Department also proposed that any 
plan that is not subject to annualization under the Department's 
existing guidance could continue to use such an exception until the 
plan had either requested and received a review of its exception status 
under the proposed process, or until 18 months had passed from the 
effective date of this rule, whichever came first.
    The Department noted that by requiring annualization, the proposal 
furthered the policy goal of protecting the fringe benefit component of 
workers' Davis-Bacon prevailing wage compensation from dilution by 
preventing contractors from taking credit for fringe benefits 
attributable to work on private projects against their fringe 
obligations on DBRA-covered work. The proposed exception also provided 
the flexibility for certain fringe benefit plan contributions to be 
excepted from the annualization requirement if they met the proposed 
criteria.
    The Department received a wide variety of comments on the 
Department's proposal to codify the annualization principle. All of the 
commenters appeared to recognize that the Department has long required 
most fringe benefits to be annualized. They also appeared to accept 
that annualization of fringe benefits is at least typically warranted 
and that codification of the annualization principle in regulations 
would be appropriate. However, some commenters that were generally 
supportive of annualization advocated that the Department modify the 
proposal to more broadly require annualization, whereas others 
(including through comments submitted as part of an organized ABC 
member campaign) opposed the proposed exception approval process, 
questioned or opposed the criterion that annualization apply to any 
fringe benefit that is continuous in nature, and/or proposed that 
contributions to specific types of fringe benefit plans such as DCPPs 
and supplemental unemployment benefit (SUB) \227\ plans be excepted 
from annualization.
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    \227\ Under SUB plans, contractors typically make payments to 
worker-specific supplemental unemployment insurance accounts. The 
terms and conditions of SUB plans vary, but contractors often 
contribute an amount equal to the difference between the fringe 
benefit amount listed on an applicable Davis-Bacon wage 
determination and the fringe benefit amount that the contractor 
would have provided in the absence of DBRA requirements. 
Participating contractors generally are not required to make 
contributions to SUB plans for hours worked on private projects, but 
plan benefits may be available to workers when they experience 
``involuntary work interruptions'' on both DBRA-covered and private 
projects. Under some SUB plans, for example, work interruptions such 
as layoffs, inclement weather, illness, or equipment down time can 
all render a participant eligible to receive benefits. Under other 
SUB plans, a participant may be eligible to receive payouts if the 
worker qualifies to receive state unemployment benefits.
---------------------------------------------------------------------------

    Many commenters, including III-FFC, Alaska District Council of 
Laborers, LIUNA Laborers' Local 341, PAAG and PADLI, NABTU, and an 
individual commenter, expressed general support for the Department's 
proposal to codify the Davis-Bacon annualization principle. These 
commenters agreed that annualization prevents the use of DBRA work as 
the disproportionate or exclusive source of funding for benefits that 
are continuous in nature and that constitute compensation for all the 
worker's work, both DBRA-covered and private. Commenters such as PAAG 
and PADLI also supported the Department's explanation of the method for 
annualizing fringe benefit contributions, commenting that codifying and 
explaining annualization would assist

[[Page 57646]]

contractors in complying with the Davis-Bacon annualization and fringe 
benefit requirements.
    Although NABTU, the III-FFC, and the IUOE expressed strong support 
for the annualization principle, they commented that the Department 
should revise the proposed regulation to strengthen the annualization 
requirement. In particular, NABTU and the III-FFC recommended adopting 
an express presumption in favor of annualization, claiming that without 
such an express presumption and the other revisions they proposed, 
contractors would be free to front-load benefit costs on DBRA projects 
instead of spreading them out across DBRA-covered and private work, 
thereby effectively paying for fringe benefits used by workers during 
periods of private work with Davis-Bacon contributions. NABTU, the III-
FFC, and the IUOE also recommended that the phrase ``essentially 
immediate vesting'' in the Department's third proposed criterion for an 
exception from annualization be changed to ``immediate vesting.'' In 
longstanding subregulatory guidance, as well as in its proposed rule, 
the Department has interpreted ``essentially immediate vesting'' to 
refer to 100 percent vesting after a worker works 500 or fewer hours. 
See, e.g., FOH 15f14(f)(1). An exception from annualization therefore 
is available when a worker becomes 100 percent vested in their DCPP 
benefit after working 500 or fewer hours, if all other criteria \228\ 
for the exception are satisfied. Under these commenters' recommended 
approach, by contrast, the exception from annualization would not be 
available unless a worker's fringe benefit vested beginning with their 
first hour of work.\229\
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    \228\ In this final rule the Department has made a non-
substantive change by referring to the requirements for the 
annualization exception as ``criteria'' instead of ``factors.'' The 
NPRM sometimes referred to these requirements as factors, but 
criteria is a more appropriate term.
    \229\ IEC appeared to interpret the Department's proposal as 
already contemplating the type of ``immediate vesting'' that NABTU, 
the III-FFC, and the IUOE proposed, thereby prompting IEC to 
comment, incorrectly, that the Department's proposal of ``immediate 
participation and immediate vesting'' would ``eliminate[ ] fringe 
401k plans from DBA creditability.''
---------------------------------------------------------------------------

    NABTU, the III-FFC, and the IUOE, along with an individual 
commenter, further contended that an exception from annualization 
should not be available for plan types other than DCPPs, and that the 
final rule should expressly state that the narrow exception to 
annualization only applies to DCPPs. The III-FFC and the IUOE explained 
that no type of fringe benefit plan besides DCPPs satisfies each of the 
exception criteria that the Department set forth in proposed Sec.  
5.25, since, for example, health and welfare fringe benefit plans are 
continuous in nature and cover individuals when working on DBRA-covered 
and private projects. Similarly, NABTU urged the Department to 
emphasize in the final rule that the criterion that a fringe benefit 
not be continuous in nature is a stringent requirement that very few 
benefit plans would satisfy. Specifically, NABTU asserted that a year-
round SUB plan that is available to protect against loss of both 
private work and DBRA-covered work should be considered continuous in 
nature, as the plan is available throughout the year to meet a 
contingent event, such as the involuntary loss of employment due to 
seasonal or similar conditions prevalent in the construction industry. 
NABTU similarly stated that, unlike DCPPs, SUB plans are made available 
during an employee's active career, not at retirement, and therefore 
are ``continuous in nature'' for this reason as well. By limiting the 
annualization exception to certain DCPPs, NABTU contended (as did the 
III-FFC and the IUOE) that prevailing wage standards will be preserved, 
as contractors will be unable to use DBRA-covered work to pay for 
fringe benefits used by employees during periods of private work.
    Other commenters, including Fringe Benefit Group, Inc. (FBG), CC&M, 
IEC, the Law Office of Martha Hutzelman (Hutzelman), and ABC, objected 
to the treatment of particular types of fringe benefits under the 
proposed rule and, more generally, the administrative exception process 
set forth in the proposed rule. FBG expressed support for the 
principles underlying proposed Sec.  5.25(c) ``on a macro level'' but 
recommended that, with respect to DCPPs, the Department reconsider 
requiring all fringe benefit plans seeking an exception from the 
annualization requirement to submit a written request for approval to 
WHD. FBG explained that, with respect to DCPPs, such a requirement 
would place a significant burden on contractors, plan administrators, 
and WHD in connection with plans that ``on their face'' qualify for the 
exception. FBG added that this additional administrative complexity 
could discourage small businesses or new entrants from pursuing work on 
DBRA-covered projects without any offsetting benefits given that ``the 
vast number of contractors adopt DCPPs that are already consistent with 
the long-held annualization exception.'' Other commenters, including 
ABC, expressed similar concerns and opposition to the proposed 
administrative exception process.\230\ In light of these stated 
concerns, and particularly given their view that the Department has 
long successfully applied the exception from annualization to DCPPs 
that provide for immediate participation and essentially immediate 
vesting, FBG, along with CC&M, proposed amending the proposal to create 
a safe-harbor provision that would automatically apply the 
annualization exception to DCPPs that meet the proposed requirements 
without requiring them to apply for approval.
---------------------------------------------------------------------------

    \230\ IEC opposed the administrative exception process for 
similar reasons, and III-FFC similarly commented that a general 
``preclearance process'' would be unnecessary, particularly if 
exceptions to annualization are limited to certain DCPPs, and that 
the proposed process also raised practical concerns about staff and 
resources.
---------------------------------------------------------------------------

    Hutzelman similarly objected to the creation of a new 
administration exception process applicable to all types of fringe 
benefit plans and instead called for the Department to clearly define 
and describe the criteria for exception from the annualization 
requirement in the final rule. Specifically, Hutzelman recommended that 
the Department not adopt its administrative exception process or that, 
in the alternative, the proposal be revised to provide for an exception 
from the annualization process for all DCPPs and SUB plans that provide 
for immediate participation and essentially immediate vesting (as 
historically defined by the Department) where the benefit provided is 
not continuous in nature.\231\ Hutzelman then proposed that the term 
``continuous in nature'' be defined in the regulations as ``a benefit 
that requires minimum periodic deposits or payments or that has a 
stated annual cost associated with the benefit,'' such that a benefit 
that is ``continuous in nature'' ``is not a benefit that is 
continuously available, but rather is a benefit that is continuously 
funded.'' Hutzelman contended that ``essentially cash equivalent 
benefits'' such as DCPPs and SUB plans are not ``continuous in nature'' 
under this proposed definition and should be excepted from the 
annualization requirement.\232\ REBOUND and an individual

[[Page 57647]]

commenter expressed support for the annualization of fringe benefits 
and for the specific exception criteria proposed by the Department.'' 
However, they further commented that there has been an increase in the 
number of companies that offer contractors the ability to purchase 
medical and other types of insurance for their employees during the 
hours that they are employed on public works projects in order to 
comply with prevailing wage requirements, but that the contractors do 
not have to participate in the plans when they work on private 
projects. The commenters opposed annualization of such contributions, 
as long as the policies provided immediate vesting and coverage of each 
individual employee, and further stated that these policies allow 
contractors to meet the requirements of prevailing wage laws while 
still maintaining their regular operations. These comments thus appear 
similar to Hutzelman's to the extent they suggest that whether an 
exception to the annualization requirement is warranted should be 
determined based on when the contribution is made (i.e., whether 
contributions are made solely in connection with DBRA-covered work) 
rather than when benefits are available.
---------------------------------------------------------------------------

    \231\ Hutzelman's proposed formulation did not include the long-
established criterion that, in order to be excepted from 
annualization, contributions to a fringe benefit plan must not 
provide compensation for both DBRA-covered and private work.
    \232\ ABC also address the ``continuous in nature'' criterion, 
contending that the criterion does not appear in the FOH or other 
guidance materials and therefore appeared to reflect ``a 
significant, but unacknowledged, policy change.''
---------------------------------------------------------------------------

    In considering the comments received, the Department notes at the 
threshold that annualization is not a new principle; rather, as 
reflected in the directly applicable Federal court and administrative 
precedent cited in this section, DBRA contractors have been required to 
annualize fringe benefit contributions for decades. As various 
commenters stated, including annualization in the regulations will help 
ensure that contractors are aware of how to comply with fringe benefit 
requirements and are informed about how to properly credit plan 
contributions against their fringe benefit obligations.
    The Department believes that addressing annualization in the final 
rule will increase compliance with Davis-Bacon prevailing wage 
obligations by codifying subregulatory guidance and case law about the 
requirement to annualize contributions to fringe benefit plans. 
Codifying the annualization principle in regulations rather than 
continuing to address annualization at the subregulatory level does not 
increase costs or make compliance more difficult for experienced 
contractors, small contractors, or contractors that are new to DBRA-
covered projects. Rather, codifying the annualization principle will 
aid contractors in understanding and fulfilling their obligations when 
working on Davis-Bacon projects. By doing so, the regulations will help 
contractors that may otherwise have overlooked or misunderstood the 
requirements of annualization to correctly satisfy their fringe benefit 
obligations under the DBRA and to account for the annualization of 
fringe benefits when formulating bids for DBRA-covered projects.
    While annualization is not a new requirement, the addition of a 
regulatory administrative process requiring approval of all plans for 
the exception to annualization would have been new. The Department 
appreciates the comments and recommendations regarding this proposed 
administrative process to approve plans for exception from 
annualization.
    Upon review and consideration of the comments, in this final rule 
the Department adopts Sec.  5.25(c) as proposed, with two substantive 
exceptions and related revisions. First, the formal administrative 
process for requesting exceptions from the annualization requirement 
will not apply to contributions to DCPPs as long as the DCPP meets each 
of the exception criteria. This approach aligns with various 
commenters' objections to applying the proposed administrative 
exception process to DCPPs and the related requests for a safe harbor 
for DCPPs that satisfy the exception criteria. The final rule, 
therefore, consistent with existing subregulatory requirements, 
generally only requires that administrative approval of an exception to 
the annualization requirement be obtained in connection with 
contributions to fringe benefit plans other than DCPPs. In accordance 
with this change from the proposed provision, a sentence has been added 
to Sec.  5.25(c)(2) excepting contributions to DCPPs provided that each 
of the requirements of new Sec.  5.25(c)(3) is satisfied, and that the 
DCPP provides for immediate participation and essentially immediate 
vesting (i.e., the benefit vests within the first 500 hours worked). In 
the final rule, proposed Sec.  5.25(c)(3) was replaced with a portion 
of proposed Sec.  5.25(c)(2) that was revised as explained in this 
section.
    The Department made this change to the proposed rule because it 
agrees with commenters, including ABC and FBG, that contributions to 
DCPPs have a long history of being excepted from the annualization 
requirement. The Department believes that excepting contributions to 
DCPPs that meet the criteria for exception from the annualization 
requirement in the final rule addresses the concern of commenters that 
the administrative process could be burdensome on plan administrators, 
contractors, and the Department. Not applying the formal administrative 
exception process to DCPPs will likely dramatically reduce the number 
of requests for an exception from the annualization requirement. The 
Department also agrees with commenters that DCPPs will typically if not 
invariably satisfy the enumerated exception criteria. To the extent 
questions arise regarding whether the exception to annualization may 
apply to contributions to a particular DCPP, an exception request 
should be submitted in accordance with Sec.  5.25(c)(2).
    In further response to the comments about the proposal's perceived 
administrative burdens, the Department reiterates that, as revised, 
Sec.  5.25 provides that only contributions to non-DCPP fringe benefit 
plans that wish to be excepted from the annualization requirement need 
to be approved through the administrative process. Thus, as revised, 
Sec.  5.25 mirrors existing subregulatory practice, under which 
contributions to DCPPs do not need to be annualized if the applicable 
criteria are satisfied, and fringe benefit contributions to all other 
types of plans must be annualized absent requesting and receiving an 
exception from the annualization requirement from WHD. Thus, the 
administrative burden for plan administrators, contractors, and the 
Department is limited to non-DCPP plans that want to be approved for 
the exception to annualization and DCPPs for which there is uncertainty 
as to whether they meet all the requirements of the exception. Based on 
its extensive experience, the Department believes the number of fringe 
benefit plans that fall in this category will be manageable for all 
affected parties. The final rule does not impose an unduly burdensome 
administrative requirement for the remaining plans that choose to apply 
for the exception because exception requests will predominantly be 
based on readily available documents such as plan descriptions. 
Requiring approval for the exception for non-DCPP fringe benefit plans 
will help ensure workers receive their required Davis-Bacon fringe 
benefits.
    The Department declines to adopt suggestions that the exception 
from annualization perhaps should be eliminated altogether, or that it 
should apply exclusively to DCPPs. While the Department acknowledges 
these commenters' concerns that workers receive all the fringe benefits 
they are due under the DBRA, it also recognizes the long-standing 
practice of allowing DCPPs to forego annualization if they meet the 
enumerated criteria. Moreover, by allowing contributions to bona fide

[[Page 57648]]

fringe benefit plans other than DCPPs to be excepted from the 
annualization requirement, the final rule codifies existing practice 
and implements a process that allows a broader range of plans to 
potentially be excepted from the annualization requirement to the 
extent appropriate, but only if they too meet the enumerated criteria 
for the exception.
    The Department believes that the test for obtaining an exception 
from annualization is sufficient to address NABTU's and III-FFC's 
concerns about DBRA benefit contributions--particularly SUB plan 
benefits--subsidizing benefits that are available throughout the year 
on DBRA-covered and private projects. If WHD has not approved an 
exception from annualization with respect to a specific non-DCPP plan, 
such as a particular SUB plan, then contributions to the plan must be 
annualized. Moreover, with respect to such plans, exceptions to 
annualization will be approved only when each of the criteria have been 
satisfied. This framework reflects an implicit presumption in favor of 
annualization. Therefore, the Department declines to add an express 
presumption in favor of annualization.
    The second change in the final rule from the proposed rule is a 
more fulsome recitation in Sec.  5.25(c)(3) of the criteria for an 
exception to the annualization requirement. Some commenters, including 
NABTU and III-FFC, recommended the regulations include a definition of 
``continuous in nature'' and eliminate the use of the word 
``essentially'' when discussing immediate vesting, specifically 
recommending elimination of the use of the 500-hour criterion and 
opting for immediate vesting. The Department agrees that the 
regulations should include an explanation of when a fringe benefit is 
not ``continuous in nature'' to provide further guidance to the 
regulated community and other interested parties. As a result, Sec.  
5.25(c)(3)(i) of the final rule includes a new explanation of benefits 
that are ``not continuous in nature'' as benefits that are not 
available to a participant without penalty throughout the year or other 
relevant time period to which the cost of the benefit is attributable.
    The Department declines to accept Hutzelman's proposed definition 
of ``continuous in nature'' as a benefit that requires minimum periodic 
deposits or payments or that has a stated annual cost associated with 
the benefit. This proposed definition would appear to undermine the 
purpose of annualization, which is to prevent contractors from paying 
for benefits that cover hours worked on private projects with 
compensation due for hours worked on DBRA-covered projects. Moreover, 
the continuous in nature criterion focuses on the circumstances under 
which the fringe benefit is available, not the timing of the 
contractor's contributions toward the benefit. Under a contrary 
approach that focused on the timing of the contractor's contributions 
to the benefit, a contractor could annualize contributions to a fringe 
benefit plan that were made only in connection with DBRA-covered work, 
even though benefits were available to the worker during periods of 
private work. Such an approach would contravene the basic premise of 
the annualization requirement. See, e.g., Indep. Roofing Contractors, 
300 Fed. Appx. at 521 (noting the Department's ``long history of 
applying annualization'' so as to ``ensure `that a disproportionate 
amount of that fringe benefit is not paid out of wages earned on . . . 
Davis-Bacon work''') (citation omitted). For this reason, to the extent 
that REBOUND and an individual commenter suggested that whether an 
exception to the annualization requirement is warranted should be 
determined based on when the contribution is made (i.e., whether 
contributions are made solely in connection with DBRA-covered work) 
rather than when benefits are available, such a suggestion reflects a 
misunderstanding of the annualization principle, as in such a scenario, 
contributions during periods of DBRA-covered work would be used to 
subsidize benefits provided during periods of private work, thereby 
presenting a classic case in which annualization is required.
    The Department also disagrees with ABC's contention that the 
``continuous in nature'' criterion appears to reflect ``a significant, 
but unacknowledged, policy change'' because it does not appear in the 
FOH or other guidance materials. This criterion simply expressly 
reflects the bedrock principle that where benefits are available on a 
continuing basis, and are not, for example, restricted to Davis-Bacon 
work, annualization will be warranted. As such, this criterion reflects 
the Department's longstanding position, as reflected in Miree 
Construction and Independent Roofing Contractors, that it is proper to 
annualize benefits that are continuous in nature and constitute 
compensation for all of an employee's work. See Miree Constr., 930 F.2d 
at 1546 (``If an employer chooses to provide a year-long fringe 
benefit, rather than cash or some other fringe benefit, the 
annualization principle simply ensures that a disproportionate amount 
of that benefit is not paid for out of wages earned on Davis-Bacon 
work''); Indep. Roofing Contractors, 300 Fed. Appx. at 521 (concluding 
that the ARB had a reasonable basis for requiring annualization of 
apprentice training program benefits where ``apprentice training 
continued year-round but [the contractor] contributed to the 
[apprenticeship training fund] only for DBA projects'').
    The Department did not receive comments specifically on the second 
criterion that requires a benefit plan to not compensate both DBRA-
covered and private work. However, considering the comments requesting 
clarification or recommending changes to the other two criteria, the 
Department has clarified in Sec.  5.25(c)(3)(ii) of the final rule that 
the second criterion means that a benefit does not compensate both 
private and DBRA-covered work if any benefits provided during periods 
of private work are wholly paid for by compensation for private work. 
Benefits provided during periods of private work that are paid for, in 
whole or in part, by compensation earned during hours worked on DBRA-
covered work do not meet this criterion.
    While the Department appreciates some commenters' request to 
require immediate vesting, the Department declines to adopt this 
recommendation. The Department has used the 500-hour criteria for 
``essentially immediate vesting'' for decades, and it is the current 
standard for DCPPs that are excepted from the annualization 
requirement. Moreover, any request to change vesting requirements (as 
opposed to identifying a vesting threshold that satisfies the 
annualization principle) is beyond the scope of this rule. The 
Department has, however, revised the regulatory text to reflect that, 
as a matter of historical practice, the requirement of immediate 
participation and essentially immediate vesting has been a criterion 
generally applied to DCPPs. To the extent that benefit plans or 
contractors have concerns regarding the application of this criterion 
or wish to seek exception approval whether or not they satisfy the 
criterion, they may direct questions or requests for specific exception 
to the Department pursuant to Sec.  5.25(c)(3). The Department also 
notes that to the extent that IEC interpreted the Department's proposal 
as requiring ``immediate vesting'' in a manner that would ``eliminate[ 
] fringe 401k plans from DBA creditability,'' the commenter 
misunderstood the nature of the proposal, which, through its 
requirement of ``essentially immediate

[[Page 57649]]

vesting,'' reflected that annualization of contributions to DCPPs will 
be permissible (assuming other criteria are satisfied) where the 
pension benefit vests within the first 500 hours worked, which is a 
criterion that has not interfered with the availability of an exception 
from annualization for DCPPs.
    In addition to the two substantive changes discussed in this 
section, the final rule includes several clarifying changes. In Sec.  
5.25(c), the Department has added a one-sentence summary of the 
annualization principle as well as language to further clarify that 
annualization requirements apply to unfunded as well as funded plans. 
The Department also has clarified that, except as provided in Sec.  
5.25(c), contractors must annualize all contributions to fringe benefit 
plans, not all fringe benefit contributions. As proposed, this 
paragraph could have been construed to incorrectly imply that cash 
payments in lieu of fringe benefits must be annualized. Similarly, the 
beginning of Sec.  5.25(c)(3) in the final rule has been revised to 
clarify that the annualization principle, and exceptions to that 
principle, apply to contributions to fringe benefit plans, not to the 
plans themselves. This concept was clear in the NPRM and was understood 
by the regulated community and other stakeholders that submitted 
comments on this proposal. The Department has made these changes in the 
final rule to be more precise.
xiii. Section 5.26 ``* * * Contribution Irrevocably Made * * * to a 
Trustee or to a Third Person''
    The Department proposed several non-substantive technical 
corrections to Sec.  5.26 to improve clarity and readability. The 
Department received no comments on most of the proposed changes to 
Sec.  5.26 and therefore adopts those changes as proposed. The 
Department, however, received two comments contending that one of the 
proposed changes would be substantive and opposing the change. 
Specifically, FBG and ABC asserted that the proposed change from 
current language stating, ``The trustee [of fringe benefits 
contributions] must assume the usual fiduciary responsibilities imposed 
upon trustees by applicable law'' to revised language stating, ``the 
trustee or third person must adhere to any fiduciary responsibilities 
applicable under law'' appeared to impose, for the first time, 
fiduciary responsibilities on non-trustee third parties that administer 
fringe benefits, and that the scope of such fiduciary responsibilities 
was unclear.
    As an initial matter, as noted in the proposed rule, this change 
was not intended to be substantive. Neither the existing language nor 
the proposed language imposes any fiduciary responsibilities; rather, 
both simply state that the recipient of fringe benefits contributions 
must adhere to whatever fiduciary responsibilities already apply by 
virtue of any ``applicable law.'' Thus, whether a non-trustee third 
party is considered a fiduciary and subject to fiduciary 
responsibilities is determined not by the Davis-Bacon regulations but 
by other laws. The proposed rule would not have effected any change in 
this regard.
    The Department nonetheless recognizes that, as these commenters 
noted, the current regulation only includes trustees, not non-trustee 
``third persons,'' when referring to applicable fiduciary 
responsibilities, whereas the proposed rule included both. Given the 
commenters' concerns that this could be construed as a substantive 
change, the Department modifies the language in the final rule to state 
instead that ``a trustee must adhere to any fiduciary responsibilities 
applicable under law.'' The Department notes, however, that whether the 
recipient of fringe benefit contributions is a trustee or a third 
person, to the extent that the party is deemed a fiduciary under 
applicable law, if the party is found to have materially violated its 
fiduciary responsibilities with respect to the fringe benefit 
contributions, it is likely that such contributions will not be 
creditable under the DBRA. The final rule makes this change and 
otherwise adopts the language as proposed.
xiv. Section 5.28 Unfunded Plans
    Section 5.28 discusses ``unfunded plans,'' i.e., plans in which the 
contractor does not make irrevocable contributions to a trustee or 
third person pursuant to a fund, plan, or program, but instead provides 
fringe benefits pursuant to an enforceable commitment to carry out a 
financially responsible plan or program, and receives fringe benefit 
credit for the rate of costs which may be reasonably anticipated in 
providing benefits under such a commitment. In the NPRM, the Department 
proposed a technical correction to the citation to the DBA to reflect 
the codification of the relevant provision at 40 U.S.C. 3141(2)(B)(ii), 
as well as a number of other non-substantive revisions. The Department 
received no comments on these proposals. The final rule therefore 
adopts these changes as proposed.
    Additionally, the Department proposed adding a new paragraph (b)(5) 
to Sec.  5.28, explicitly stating that unfunded benefit plans or 
programs must be approved by the Secretary in order to qualify as bona 
fide fringe benefits, and to replace the text in current paragraph (c) 
with language explaining the process contractors and subcontractors 
must use to request such approval. To accommodate these changes, the 
Department proposed to add a new paragraph (d) that contains the text 
currently located in paragraph (c) with non-substantive edits for 
clarity and readability.
    As the Department noted in the proposed rule, other regulatory 
sections--including the Davis-Bacon contract clause itself in Sec.  
5.5--make clear that if a contractor provides its workers with fringe 
benefits through an unfunded plan, the contractor may only take credit 
for any costs reasonably anticipated in providing such fringe benefits 
if it has submitted a request in writing to the Department and the 
Secretary has determined that the applicable standards of the DBA have 
been met. See 29 CFR 5.5(a)(1)(iv), 5.29(e). However, Sec.  5.28 does 
not mention this approval requirement or the process for requesting 
approval, even though Sec.  5.28 is the section that most specifically 
discusses requirements for unfunded plans. Accordingly, to improve 
regulatory clarity and consistency, the Department proposed to revise 
Sec.  5.28 to clarify that, for payments under an unfunded plan or 
program to be credited as fringe benefits, contractors and 
subcontractors must submit a written request for the Secretary to 
consider in determining whether the plan or program, and the benefits 
proposed to be provided thereunder, are ``bona fide,'' meet the factors 
set forth in Sec.  5.28(b)(1)-(4), and are otherwise consistent with 
the Act. The Department also proposed to add language to explain that 
such requests must be submitted by mail to WHD's Division of Government 
Contracts Enforcement, via email to [email protected] or any successor 
address, or via any other means directed by the Administrator.
    The Department received one comment in support of the proposed 
revisions to Sec.  5.28. PAAG and PADLI commented that while ``unfunded 
plans may provide workers with meaningful benefits, prevailing wage 
violators often . . . claim fringe benefit credits for unfunded plans 
that do not meet the standards currently outlined in 29 CFR 5.28.'' As 
an example, PAAG and PADLI cited a case in which a contractor claimed 
credit for an unfunded paid time off plan under which all but 3 of the 
workers' unused vacation days were

[[Page 57650]]

forfeited every year and the workers were not compensated for the 
forfeited vacation time. PAAG and PADLI explained that contracting 
agencies--especially small, local agencies--often lack the information 
and expertise to determine whether or not an unfunded plan is 
creditable under the DBRA and therefore need to refer questionable 
cases for investigation, whereas the proposed language would ensure 
that unfunded plans would be evaluated and preapproved up front. PAAG 
and PADLI therefore supported the proposed revisions to Sec.  5.28 
explicitly requiring preapproval of unfunded plans as a means of 
ensuring that workers actually receive the money they earn and 
increasing regulatory clarity.
    The Department also received comments in opposition to these 
revisions. CC&M commented that requiring the Department's approval of 
unfunded plans, especially vacation and holiday plans, is unduly 
burdensome to contractors and would disadvantage nonunion contractors 
by discounting legitimate holiday and vacation benefits. Similarly, 
IUOE commented that over 60 percent of construction workers receive 
health care from self-funded plans. They expressed concern that 
contractors might not possess the documentation necessary to 
substantiate more ``informal'' self-funded benefits such as vacation, 
holiday, and sick leave. IUOE also expressed concern that a preapproval 
process would be unnecessarily burdensome on WHD and that WHD's 
authority to approve benefit plans could conflict with the authority of 
the Department's Employee Benefits Security Administration (EBSA) under 
the Employment Retirement Income Security Act (ERISA). The IUOE instead 
recommended that the final rule establish clear rules for determining 
the hourly fringe benefit credit in lieu of cash wages for unfunded 
plans, recommending four specific additions to the rule.\233\ III-FFC 
expressed concerns and made recommendations similar to those of IUOE. 
ABC suggested that the Department address any inconsistency in the 
regulations by eliminating the advance approval requirement from both 
Sec. Sec.  5.28 and 5.29, stating that such advance approvals should be 
voluntary on the part of contractors. Finally, IAPA expressed concern 
that under the proposed revisions, underfunded multiemployer pension 
plans may be considered unfunded, and contractors would be prohibited 
from paying cash in lieu of fringe benefits or using other fringe 
benefit plans that are regulated by the Internal Revenue Service (IRS).
---------------------------------------------------------------------------

    \233\ Specifically, IUOE suggested that (1) all ``rate of cost'' 
plans must use a yearly period for their fringe benefit credit 
calculations; (2) ``rate of cost'' health care plans must use the 
IRS COBRA rules for determining the premium costs used for any 
fringe benefit credit calculations; (3) all ``rate of contribution'' 
plans must use the existing annual or monthly time period for 
annualizing fringe credit calculation; shorter periods are not 
allowed; and (4) the regulations should state that annualization 
rule should apply to all types of plans, including Health Savings 
Accounts and Health Reimbursement Accounts; except for Defined 
Contribution Pension Plans.
---------------------------------------------------------------------------

    Many of the comments in opposition appear to be premised on a 
misconception that the revisions impose new substantive requirements 
with respect to unfunded plans. Nothing in these revisions alters the 
four substantive conditions for unfunded plans set out in Sec.  
5.28(b)(1)-(4) or the overall requirements that an unfunded plan must 
be ``bona fide'' and able to ``withstand a test . . . of actuarial 
soundness.'' For example, the existing regulations already provide the 
Secretary with discretion to require sufficient funds be set aside to 
meet the obligations of an unfunded plan, and nothing in the existing 
or revised regulations prohibits a contractor from making contributions 
to bona fide fringe benefit plans or from paying cash in lieu of fringe 
benefits, as appropriate. Nor do the revisions have any effect on 
whether a multiemployer pension plan would be considered 
``underfunded.'' Consistent with Sec. Sec.  5.5(a)(1)(iv) and 5.29(e), 
the Department has long required written approval if a contractor seeks 
credit for the reasonably anticipated costs of an unfunded benefit plan 
towards its Davis-Bacon prevailing wage obligations, including with 
respect to vacation and holiday plans. The revisions to Sec.  5.28 
merely clarify this preexisting requirement and detail the process 
through which contractors may request such approval from the 
Department. Moreover, this existing process is consistent with ERISA; 
while EBSA is charged with evaluating a plan's compliance with ERISA, 
WHD is responsible for determining whether an employer has complied 
with the fringe benefit requirements of the DBRA.
    The Department disagrees that the revised regulations will 
disadvantage non-union contractors. To the extent any contractor--union 
or non-union--wishes to take credit towards its prevailing wage 
obligations for the reasonably anticipated costs of unfunded benefit 
plans, the contractor must ensure that such plan has been approved by 
the Department. The approval process benefits contractors by helping 
them avoid potential violations by correcting any issues noted during 
the approval process. The approval process also benefits workers by 
ensuring that they will receive the full prevailing wage to which they 
are entitled when working on Davis-Bacon covered contracts. Only 
contractors who wish to claim credit for the reasonably anticipated 
costs of an unfunded plan will incur the minimal burden of submitting a 
request for approval.
    While the Department appreciates the suggestions by IUOE and III-
FFC for specific standards for unfunded plans, the Department believes 
that the current regulatory requirements provide greater flexibility to 
contractors in fulfilling their prevailing wage obligations on Davis-
Bacon covered contracts. Section 5.28 outlines the process and 
requirements for obtaining approval regarding an unfunded benefit plan; 
it does not purport to describe the methodology by which contractors 
may calculate the appropriate credit for the reasonably anticipated 
cost of such plans. Adding the language that IUOE and III-FFC proposed 
would significantly alter the purpose and scope of this section and 
would be beyond the scope of the proposed rule.
    Finally, the proposal provided that a request for approval of an 
unfunded plan must include sufficient documentation for the Department 
to evaluate whether the plan satisfies the regulatory criteria. To 
provide flexibility for contractors, the final rule, like the proposed 
rule, does not specify the documentation that must be submitted with 
the request. Rather, new paragraph (d) of this section (which, as noted 
above, contains the language of former paragraph (c) with non-
substantive edits for clarity and readability) explains that the words 
``reasonably anticipated'' contemplate a plan that can ``withstand a 
test'' of ``actuarial soundness.'' While WHD's determination whether an 
unfunded plan meets the statutory and regulatory requirements will be 
based on the totality of the circumstances, the type of information WHD 
will require from contractors or subcontractors in order to make such a 
determination will typically include identification of the benefit(s) 
to be provided; an explanation of the funding/contribution formula; an 
explanation of the financial analysis methodology used to estimate the 
costs of the plan or program benefits and how the contractor has 
budgeted for those costs; a specification of how frequently the 
contractor either sets aside funds in accordance with the cost 
calculations to meet claims as they arise, or otherwise budgets, 
allocates, or tracks such funds to ensure that they will be available 
to meet claims; an explanation of whether employer contribution amounts 
are different for Davis-Bacon and non-prevailing wage work; 
identification of

[[Page 57651]]

the administrator of the plan or program and the source of the funds 
the administrator uses to pay the benefits provided by the plan or 
program; specification of the ERISA status of the plan or program; and 
an explanation of how the plan or program is communicated to laborers 
or mechanics.
    The final rule accordingly adopts these revisions as proposed.
xv. Section 5.29 Specific Fringe Benefits
    In the NPRM, the Department proposed to revise Sec.  5.29 to add a 
new paragraph (g) that addresses the circumstances under which a 
contractor may take a fringe benefit credit for the costs of an 
apprenticeship program. While Sec.  5.29(a) provides that the 
defrayment of the costs of apprenticeship programs is a recognized 
fringe benefit that Congress considered common in the construction 
industry, the regulations do not presently address when a contractor 
may take credit for such contributions or how to properly credit such 
contributions against a contractor's fringe benefit obligations.
    In the NPRM, the Department proposed that for a contractor or 
subcontractor to take credit for the costs of an apprenticeship 
program, the program, in addition to meeting all other requirements for 
fringe benefits, must be registered with OA, or an SAA recognized by 
the OA). Additionally, the Department proposed to permit contractors to 
take credit for the actual costs of the apprenticeship program, such as 
tuition, books, and materials, but not for additional contributions 
that are beyond the costs actually incurred for the apprenticeship 
program. The proposed rule also reiterated the Department's position 
that the contractor may only claim credit towards its prevailing wage 
obligations for the workers employed in the classification of laborer 
or mechanic that is the subject of the apprenticeship program. For 
example, if a contractor has apprentices registered in a bona fide 
apprenticeship program for carpenters, the contractor could claim a 
credit for the costs of the apprenticeship program towards the 
prevailing wages due to the carpenters on a Davis-Bacon project, but 
could not apply that credit towards the prevailing wages due to other 
classifications, such as electricians or laborers, on the project. 
Furthermore, the proposed paragraph explained that, when applying the 
annualization principle pursuant to the proposed revisions to Sec.  
5.25, the workers whose total working hours are used to calculate the 
hourly contribution amount are limited to those workers in the same 
classification as the apprentice, and that this hourly amount may only 
be applied toward the wage obligations for such workers. The Department 
explained that the proposed changes were consistent with its historical 
practice and interpretation and relevant case law. See WHD Opinion 
Letters DBRA-116 (May 17, 1978), DBRA-18 (Sept. 7, 1983), DBRA-16 (July 
28, 1987), DBRA-160 (Mar. 10, 1990); FOH 15f17; Miree Constr. Corp., 
930 F.2d at 1544-45; Miree Constr. Corp. v. Dole, 730 F. Supp. 385 
(N.D. Ala. 1990); Miree Constr. Corp., WAB No. 87-13, 1989 WL 407466 
(Feb. 17, 1989). The Department also proposed a minor technical 
revision to paragraph (e) to include a citation to Sec.  5.28, which 
provides additional guidance on unfunded plans.
    The comments the Department received regarding these proposals were 
generally supportive. The Alliance agreed that limiting creditable 
contributions to registered apprenticeship programs will help ensure 
that apprentices receive quality instruction and may help prevent 
unscrupulous employers from paying a lower wage while providing sub-
standard apprenticeship programs. SMACNA stated that the guidance will 
assist contractors to properly compute fringe benefit credit against 
their fringe benefit obligation. CEA also expressed support for these 
proposals. LIUNA, while generally supportive, suggested that Sec.  
5.29(g)(2) be revised so that permissible contributions include, in 
addition to actual costs incurred by an apprenticeship program, 
contributions negotiated as part of a collectively bargained agreement. 
LIUNA expressed concern that the proposed language might not 
necessarily encompass such programs.
    After reviewing the comments received, the Department has largely 
retained the language as proposed but has modified Sec.  5.29(g)(2) to 
allow for greater flexibility in determining whether contributions to 
apprenticeship plans are creditable. Specifically, the final rule 
requires that a contractor's apprenticeship contributions must bear a 
``reasonable relationship'' to the cost of apprenticeship benefits 
provided to the contractor's employees. This standard more accurately 
reflects the Department's position noted and upheld in Miree and 
subsequent decisions. See Indep. Roofing Contractors, 300 F. App'x at 
521; Tom Mistick & Sons, Inc. v. Reich, 54 F.3d 900, 903 (D.C. Cir. 
1995); Miree Constr. Corp., 930 F.2d at 1543. The final rule further 
explains that in the absence of evidence to the contrary, the 
Department will presume that amounts the employer is required to 
contribute by a CBA or by a bona fide apprenticeship plan (whether or 
not the plan is collectively bargained) satisfy this standard, but 
reaffirms that voluntary contributions beyond that which is reasonably 
related to apprenticeship benefits are not creditable.
    While the Department declines to adopt LIUNA's suggestion to 
categorically deem collectively bargained contributions creditable, 
under this presumption, required contributions to apprenticeship plans 
under CBAs will typically be creditable. See Miree Constr. Corp., 930 
F.2d at 1543-45 (noting that the Department ``gives full credit for the 
amounts required to be contributed under a [collectively bargained] 
plan, based on the assumption that there exists a reasonable 
relationship between the amount of contributions on the one hand and 
the cost of providing training and administering the plan on the other 
hand,'' and agreeing that such an assumption is reasonable) (quoting 
Letter of Administrator of Feb. 20, 1987).
xvi. Section 5.30 Types of Wage Determinations
    The Department proposed several non-substantive revisions to Sec.  
5.30. In particular, the Department proposed to update the examples in 
Sec.  5.30(c) to more closely resemble the current format of wage 
determinations issued under the DBA. The current illustrations in Sec.  
5.30(c) list separate rates for various categories of fringe benefits, 
including ``Health and welfare,'' ``Pensions,'' ``Vacations,'' 
``Apprenticeship program,'' and ``Others.'' However, current Davis-
Bacon wage determinations typically contain a single combined fringe 
benefit rate per classification, rather than separately listing rates 
for different categories of fringe benefits. To avoid confusion, the 
Department proposed to update the illustrations to reflect the way in 
which fringe benefits are typically listed on wage determinations. The 
Department also proposed several non-substantive revisions to Sec.  
5.30(a) and (b), including revisions pertaining to the updated 
illustrations in Sec.  5.30(c).
    The Department received no comments on this proposal. The final 
rule therefore adopts this change as proposed.
xvii. Section 5.31 Meeting Wage Determination Obligations
    The Department proposed to update the examples in Sec.  5.30(c) to 
more closely resemble the current format of wage determinations under 
the DBRA. The

[[Page 57652]]

Department therefore proposed to make technical, non-substantive 
changes to Sec.  5.31 to reflect the updated illustration in Sec.  
5.30(c).
    The Department received no comments on this proposal. The final 
rule therefore adopts this change as proposed.
xviii. Section 5.33 Administrative Expenses of a Contractor or 
Subcontractor
    The Department proposed to add a new Sec.  5.33 to codify existing 
WHD policy under which a contractor or subcontractor may not take 
Davis-Bacon credit for its own administrative expenses incurred in 
connection with fringe benefit plans. 87 FR 15745 (citing WHD Opinion 
Letter DBRA-72 (June 5, 1978); FOH 15f18). This policy is consistent 
with Department case law under the DBA, under which such costs are 
viewed as ``part of [an employer's] general overhead expenses of doing 
business and should not serve to decrease the direct benefit going to 
the employee.'' Collinson Constr. Co., WAB No. 76-09, 1977 WL 24826, at 
*2 (also noting that the DBA's inclusion of ``costs'' in the provision 
currently codified at 40 U.S.C. 3141(2)(B)(ii) refers to ``the costs of 
benefits under an unfunded plan''); see also Cody-Zeigler, Inc., ARB 
Nos. 01-014, 01-015, 2003 WL 23114278, at *20 (applying Collinson and 
concluding that a contractor improperly claimed its administrative 
costs for ``bank fees, payments to clerical workers for preparing 
paperwork and dealing with insurance companies'' as a fringe benefit). 
This policy is also consistent with the Department's regulations and 
guidance under the SCA. See 29 CFR 4.172; FOH 14j00(a)(1).
    The Department also sought public comment regarding whether it 
should clarify this principle further with respect to administrative 
functions performed by third parties. 87 FR 15745. Under both the DBA 
and SCA, fringe benefits include items like health insurance, which 
necessarily involves both the payment of medical benefits and 
administration of those benefits through activities such as evaluating 
benefit claims, deciding whether they should be paid, and approving 
referrals to specialists. 40 U.S.C. 3141(2)(B); 41 U.S.C. 6703(2). 
Accordingly, reasonable costs incurred by a third-party fiduciary in 
its administration and delivery of fringe benefits to employees are 
creditable under the SCA. See WHD Opinion Letter SCA-93 (Jan. 27, 1994) 
(noting that an SCA contractor could take credit for its contribution 
to a pension plan on behalf of its employees, including the portion of 
its contribution that was used by the pension plan for ``administrative 
costs'' ``incurred'' by ``the plan itself''); FOH 14j00(a)(2). WHD 
applies a similar standard under the DBA.
    However, as explained in the NPRM, WHD has received a number of 
inquiries in recent years regarding the extent to which contractors may 
take credit for fees charged by third parties for performing such 
administrative tasks as tracking the amount of the contractor's fringe 
benefit contributions; making sure those contributions cover the fringe 
benefit credit claimed by the contractor; tracking and paying invoices 
from third-party plan administrators; and sending lists of new hires to 
the plan administrators. Since a contractor's own administrative costs 
incurred in connection with the provision of fringe benefits are non-
creditable business expenses, see Collinson, 1977 WL 24826, at *2; cf. 
29 CFR 4.172, WHD has advised that if a third party is merely 
performing these types of administrative functions on the contractor's 
behalf, the contractor's payments to the third party are not 
creditable.
    While not proposing specific regulatory text, the Department sought 
comment on whether and how to address this issue in a final rule. The 
Department sought comment on whether it should incorporate the above-
described policies, or other policies regarding third-party entities, 
into its regulations. In addition, the Department sought comment on 
examples of the administrative duties performed by third parties that 
do not themselves pay benefits or administer benefit claims. The 
Department also sought comment on the extent to which third-party 
entities both (1) perform administrative functions associated with 
providing fringe benefits to employees, such as tracking a contractor's 
fringe benefit contributions, and (2) actually administer and deliver 
benefits, such as evaluating and paying out medical claims, and on how 
the Department should treat payments to any such entities. The 
Department asked for comments on whether, for instance, it should 
consider the cost of the administrative functions in the first category 
to be non-creditable business expenses, and the cost of actual benefits 
administration and payment in the second category to be creditable as 
fringe benefit contributions. It also asked whether the creditability 
of payments to such an entity depends on the third-party entity's 
primary function or whether the third-party entity is an employee 
welfare plan within the meaning of ERISA, 29 U.S.C. 1002(1).
    The Department received several comments in response to proposed 
Sec.  5.33 and its request for comments regarding administrative 
functions performed by third parties.
    Commenters either generally agreed with or did not specifically 
address the Department's proposal to codify the longstanding principle 
that a contractor or subcontractor may not take credit for its own 
administrative expenses which it incurs directly, like the cost of an 
office employee who fills out medical insurance claim forms for 
submission to an insurance carrier.\234\ For example, Duane Morris 
noted that the statement that ``a contractor may not take DBRA credit 
for its own administrative expenses incurred in connection with the 
administration of a fringe benefit plan'' expresses a longstanding 
principle, reflected in Collinson, WAB No. 76-09, 1977 WL 24826, and 
Cody-Zeigler, ARB Nos. 01-014, 015, 2003 WL 23114278, that, in Duane 
Morris's words, ``a contractor may not take fringe credit for expenses 
it pays directly for delivering DBRA-required fringe benefits.'' FBG 
similarly stated that the language of FOH 15f18 regarding a 
contractor's own administrative expenses, which the Department proposed 
to codify in Sec.  5.33, ``directly aligns'' with its preferred 
approach to the issue of administrative costs generally.
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    \234\ East Coast Wall Systems stated they would find it 
beneficial to use fringe benefit contributions to pay for the cost 
of providing fringe benefits but did not specifically explain this 
statement or how it related to the proposed revisions.
---------------------------------------------------------------------------

    However, a number of commenters expressed concerns in response to 
the Department's request for comments regarding the potential 
creditability of administrative expenses paid by third parties. While 
they generally agreed, as noted above, that contractors should not 
receive credit against DBRA fringe benefits for their own direct costs, 
they expressed concern that the Department appeared to be considering 
classifying as non-creditable any expenses incurred by a third party 
other than those associated with claims payment or benefits 
administration. These commenters, including ABC, Duane Morris, and FBG, 
advocated that the Department instead permit any reasonable fees paid 
by a contractor to a third party that are directly related to the 
provision of fringe benefits to be creditable, and suggested that the 
standard for such an inquiry be that a third-party expense should be 
creditable as long as it would not have been incurred ``but for'' the 
provision of the fringe benefit. Duane Morris and FBG argued that such 
a standard would be

[[Page 57653]]

consistent with their own interpretation of ERISA's standard for the 
permissible use of plan assets, with Duane Morris contending that a 
separate DBRA creditability standard would make the distinction between 
creditable and noncreditable expenses ambiguous and would unnecessarily 
complicate compliance.\235\ These commenters argued that necessary 
expenses associated with plan administration go beyond mere claims 
administration, that administrative functions and the delivery of 
benefits are inherently interrelated, and therefore that the costs of 
both should be creditable toward DBRA obligations.\236\
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    \235\ Under ERISA, plan fiduciaries must act prudently and 
solely in the interest of the plan's participants and beneficiaries 
and for the exclusive purpose of providing benefits and defraying 
reasonable expenses of administering the plan. While ERISA section 
406(a) prohibits the provision of services between plans and service 
providers and plan payments to service providers, ERISA section 
408(b)(2) sets forth an exemption from section 406(a) which permits 
a plan fiduciary to contract or make reasonable arrangements for 
services necessary for the establishment or operation of the plan if 
no more than reasonable compensation is paid therefore, among other 
requirements. See 29 U.S.C. secs. 1106(a), 1108(b)(2); see also 29 
CFR 2550.408b-2. However, the exemption under section 408(b)(2) does 
not provide relief for transactions described in section 406(b) of 
ERISA, including fiduciary self-dealing, conflicts of interest, and 
kickbacks in connection with transactions involving plan assets.
    \236\ Duane Morris also submitted a set of proposals ``to 
improve the scheme for benefiting contractor employees'' subject to 
a fixed-cost contract, under which, among other elements, a 
contractor apparently would be required to request competitive bids 
for fringe benefits at least every 3 years in order to satisfy a 
requirement, for purposes of receiving fringe benefit credit, to 
evaluate whether the value of the benefit ``is market competitive 
with comparable alternatives available to the contractor.'' Under 
these proposals, contributions to a trust that ``can be expected to 
provide'' ``market competitive'' benefits would be presumptively 
creditable, ``without regard to the specific application of plan 
assets to the trust.'' Although the Department has reviewed and 
appreciates the proposals, it considers them to be outside the scope 
of this rulemaking. To the extent Duane Morris is proposing that, 
under certain conditions, a contractor should be permitted to take 
credit for payments to a third party to perform the contractor's own 
administrative tasks, the Department disagrees, for the reasons 
discussed below.
---------------------------------------------------------------------------

    Some of these commenters also argued that the Department's proposal 
would also unfairly advantage contractors that make direct payments to 
insurers as opposed to contractors who either self-insure, participate 
in multiemployer plans, or pay third parties to administer their Davis-
Bacon fringe benefit obligations. Duane Morris, for example, stated 
that the Department had ``conflate[d]'' ``employers and their plans 
when the plans are funded in trust'' and inappropriately contemplated 
``regulat[ing] the internal operations of the plan.'' \237\ Similarly, 
FBG said that the distinction between creditable expenses incurred by a 
third party for administration of a plan versus noncreditable expenses 
that substitute for a contractor's own administrative costs is 
impracticable because third parties usually bundle their services and 
fees together. It also commented that making certain third-party 
administrative costs noncreditable would make it more expensive for 
contractors to use ``third-party benefit administrators,'' thereby 
incentivizing contractors to, for instance, ``spend[ ] less on 
administrative services'' or ``bring[ ] administration `in-house' to be 
performed by individuals who lack . . . specialized knowledge[.]'' ABC 
likewise argued that contractors should be permitted to take credit for 
any reasonable fees paid to third parties, whether related to the 
administration and delivery of benefits or to the administrative costs 
relating to the provision of fringe benefits to employees, as 
contractors ``use qualified third parties to assist with the 
administration of benefits'' because they ``ensure that the highest 
quality benefits are provided in an efficient manner to covered 
employees.'' Clark Pacific commented that the rule would prohibit 
taking credit for administrative costs entirely and, as a result, 
reduce the number of contractors willing to provide fringe benefits.
---------------------------------------------------------------------------

    \237\ Duane Morris claimed that multiemployer plans maintained 
through CBAs often use plan assets to hire third-party 
administrators to perform tasks which the Department ``propose[d] to 
make non-creditable,'' such as ``reconcil[ing] covered hours [and] 
employer contributions[.]'' The Department did not receive any 
comments from unions indicating that its proposal would make 
noncreditable the cost of tasks regularly performed by plans 
maintained under CBAs between unions and contractors. In WHD's 
enforcement experience, such plans do not perform administrative 
tasks on behalf on the contractor such as keeping track of whether a 
particular contractor's contributions were sufficient to cover its 
fringe benefit credit on its various projects.
---------------------------------------------------------------------------

    III-FFC and IUOE recommended that the Department continue to 
analyze when contributions are creditable against fringe benefits on a 
case-by-case basis, particularly relating to fees charged by plan 
administrators and other plan service providers. IUOE stated that it 
would be difficult to determine whether a plan administrative expense 
is ``reasonable'' because there are too many factors to be considered, 
such as ``the size of the plan, the nature of the benefits provided by 
the plan, the nature of the administrative services provided to the 
plan, the availability of the administrative services in the 
marketplace, the precise scope of the administrative services provided, 
the qualifications, expertise and reputation of the service provider, 
differences in regional costs, and so forth.'' After reviewing the 
comments received, the Department has adopted Sec.  5.33 with several 
revisions to clarify the Department's intent and address commenter 
concerns.
    As an initial matter, the Department did not propose to make all 
third-party expenses, or even all expenses except for the direct 
expense of evaluating and paying out benefit claims, noncreditable; nor 
did the Department propose to incentivize any particular method by 
which contractors provide bona fide fringe benefits. As multiple 
commenters noted, third-party administrators may fulfill a vital role 
in the provision of fringe benefits. As WHD has expressly noted in 
guidance under the analogous fringe benefit requirements under the SCA, 
contractors may take credit for third-party expenses which are directly 
related to the administration and delivery of fringe benefits to their 
workers under a bona fide plan. See FOH 14j00(a)(2). The Department 
agrees that credit for such expenses is appropriate whether the entity 
performing such activities is an insurance carrier, a third-party trust 
fund, or a third-party administrator under a contractor's bona fide 
unfunded plan.
    To clarify this, the Department has added paragraph (a) to Sec.  
5.33, which explicitly states that a contractor may take credit for 
costs incurred by a contractor's insurance carrier, third-party trust 
fund, or other third-party administrator that are directly related to 
the administration and delivery of bona fide fringe benefits to the 
contractor's laborers and mechanics. Section 5.33(a) includes 
illustrative examples of creditable expenses directly related to the 
administration and delivery of benefits, stating that a contractor may 
take credit for payments to an insurance carrier or trust fund that are 
used to pay for both benefits and the administration and delivery of 
benefits, such as evaluating benefit claims, deciding whether they 
should be paid, approving referrals to specialists, and other 
reasonable costs of administering the plan. Additional examples of such 
creditable expenses include the reasonable costs of administering the 
plan, such as the cost of recordkeeping related to benefit processing 
and payment in the case of a healthcare plan, or expenses associated 
with managing plan investments in the case of a 401(k) plan. 
Additionally, to clarify that these expenses are also creditable

[[Page 57654]]

in the case of an unfunded plan, Sec.  5.33(a) states that a contractor 
may take credit for the fees paid to a third-party administrator to 
perform similar tasks directly related to the administration and 
delivery of benefits, including under an unfunded plan.
    As noted above, commenters did not oppose the Department's proposal 
to codify its policy that a contractor may not take credit for its own 
administrative costs where it incurs them directly, and accordingly, in 
new Sec.  5.33(b), the final rule adopts that proposal. In addition, 
section 5.33(b) of the final rule states that a contractor may not take 
credit for its own administrative expenses even when the contractor 
pays a third party to perform its administrative tasks rather than 
incurring the expenses internally. The final rule includes illustrative 
examples of such noncreditable administrative expenses, including the 
cost of filling out medical insurance claim forms for submission to an 
insurance carrier, paying and tracking invoices from insurance carriers 
or plan administrators, updating the contractor's personnel records 
when laborers or mechanics are hired or separate from employment, 
sending lists of new hires to insurance carriers or plan 
administrators, or sending out tax documents to the contractor's 
laborers or mechanics. The Department is hopeful that these examples 
will be helpful in identifying expenses that would be considered 
employer expenses not directly related to the administration and 
delivery of bona fide fringe benefits. The Department agrees with the 
commenters who contended that its regulations should not incentivize 
any particular benefit model, and as such, the final rule clarifies 
that these types of costs are non-creditable regardless of whether the 
employer performs them itself or pays a third party a fee to perform 
them. Section 5.33(b) also clarifies that recordkeeping costs 
associated with ensuring the contractor's compliance with the Davis-
Bacon fringe benefit requirements, such as the cost associated with 
tracking the amount of its fringe benefit contributions or making sure 
contributions cover the fringe benefit credit claimed, are considered a 
contractor's own administrative expenses and therefore are not 
creditable whether the contractor performs those tasks itself or 
whether it pays a third party a fee to perform those tasks.
    Section 5.33(b) is in accordance with the analogous SCA 
regulations, which preclude SCA contractors from taking credit for any 
costs that are ``primarily for the benefit or convenience of the 
contractor.'' 29 CFR 4.171(e); see also 29 CFR 4.172. Under the FLSA--
upon which the SCA prohibition against taking credit for contractor 
business expenses is based, see 48 FR 49757--an expense is primarily 
for the benefit of the employer if, among other reasons, it is 
``imposed on the employer by law.'' See Br. of the Sec'y of Labor, 2010 
WL 5622173, at *10-11, Ramos-Barrientos v. Bland Farms, No. 10-13412-C 
(11th Cir. 2011), ECF No. 47 (citing 29 CFR 531.3(d)(2), 531.32(c), 
531.38). Given that contractors may satisfy their DBRA prevailing wage 
obligations by making contributions to or incurring reasonably 
anticipated costs in providing bona fide fringe benefits under a plan 
or program, see 29 CFR 5.5(a)(1)(i), and given that contractors are 
required to keep records of the hours worked by their laborers and 
mechanics and any contributions made or costs reasonably incurred under 
a bona fide fringe benefit plan, id. at (3)(i), it would be anomalous 
to permit a contractor to take credit towards its prevailing wage 
obligation for the cost of, for instance, tracking the hours worked by 
its laborers and mechanics on DBRA-covered projects costs, tracking the 
contractor's fringe benefit contributions on behalf of these workers, 
and reconciling workers' hours worked with the contractor's 
contributions.
    This rationale applies equally to a contractor that uses its own 
employees to perform such tasks as to a contractor that pays a third 
party to perform such tasks. If a contractor were permitted to claim a 
credit for these expenses, it could effectively outsource its own 
administrative and compliance costs to third parties and have the cost 
paid for from the prevailing wages due to its workers. Similarly, if it 
is not permissible for a contractor to take credit for the cost of an 
office employee who submits claim forms to an insurance carrier--which 
none of the commenters specifically disputed--then it should not be 
permissible for a contractor to take credit for payments it makes to a 
third party to perform similar tasks on its behalf.
    The Department declines the recommendation from some commenters to 
adopt a standard under which third-party expenses are considered 
directly related to the administration and delivery of fringe benefits, 
and therefore creditable, as long as they would not have been incurred 
but for the provision of the fringe benefit. The Department 
acknowledges those comments that claimed that such a ``but for'' 
standard would be consistent with what they assert are ERISA standards 
governing the permissible use of plan assets. Regardless of the 
accuracy of those claims, the DBRA requires a different analysis for 
whether a contractor may take credit against the payment of prevailing 
wages for such expenses. Under the DBRA, the question is not whether a 
plan's assets may be used for a particular expense, but whether a 
contribution or cost may be considered a part of a worker's wage. A 
contractor's own administrative costs, even if related in some fashion 
to the fringe benefits provided to workers, are not part of its 
workers' wages since, as explained above, such costs primarily benefit 
the contractor. It is therefore not sufficient, for purposes of DBRA 
credit, that an administrative cost would not have been incurred ``but 
for'' the fringe benefit plan(s).
    The Department has observed an increase in the number of third-
party businesses that promise to reduce contractors' costs if 
contractors hire them to perform the contractors' own administrative 
tasks and then claim a fringe benefit credit for the costs of those 
outsourced tasks. Existing regulations have not been sufficient to 
curtail this practice, and for the reasons discussed above, the 
payments of fees to third parties to perform such tasks is inconsistent 
with the requirements of the DBRA. Thus, the final rule adopts an 
approach, consistent with the guidance the Department has previously 
provided, that distinguishes more precisely between creditable and 
noncreditable expenses based on whether the expenses are properly 
viewed as business expenses of the contractor. The Department believes 
that codifying this standard in the regulations will help the 
contracting community and third-party administrators understand which 
types of expenses are creditable and which types are not.
    By making creditability depend on the type and purpose of the 
expense, rather than on whether it is paid by the contractor directly 
or through a third party, the Department believes that the final rule 
addresses commenters' concerns that the proposed rule might have 
discouraged the use of bona fide third-party plan administrators or 
provided an advantage to contractors that make payments directly to 
insurers and other benefit providers. The final rule does not preclude 
contractors from taking credit for reasonable costs incurred or charged 
by these entities to administer bona fide fringe benefit plans. Rather, 
Sec.  5.33(b) merely precludes contractors from taking credit for their 
own administrative costs

[[Page 57655]]

associated with providing fringe benefit plans and which are properly 
considered business expenses of the contractor, whether the contractor 
incurs such costs directly or in the form of payments to a third party.
    While the Department appreciates some commenters' recommendation to 
continue to analyze administrative expenses on a case-by-case basis, 
given that, as discussed above, the Department has observed an increase 
in business models under which contractors may be taking credit for 
noncreditable expenses, the Department believes that it is necessarily 
to codify these basic principles to help contractors and plan 
administrators recognize and comply with the requirements and their 
obligations under the DBRA. The Department recognizes that there will, 
of course, be close cases, and will continue to conduct fact-specific 
analyses in individual cases when questions of creditability arise. To 
that end, the Department has added Sec.  5.33(c) to clarify that if 
contractors, plan administrators, or others have questions as to 
whether certain expenses are creditable, such questions should be 
submitted to the Department for review.
    Finally, the Department disagrees with FBG's comment that third 
parties' practice of bundling creditable and noncreditable expenses 
together will makes it difficult to comply with the proposed rule. In 
its investigations under the DBRA and SCA, WHD has found that when 
third parties both perform plan administration and help contractors 
fulfill their own administrative obligations, they frequently impose 
separate charges for the different types of services. Even in instances 
where such services are so intertwined that it is not possible to 
determine whether payments to a third party are for creditable plan 
administration or noncreditable administrative activities, WHD will 
consider the facts to determine whether the third party is primarily 
performing creditable services. Finally, if questions arise, Sec.  
5.33(c) will allow contractors to receive input from the Department as 
to the creditability of any questionable expenses, whether bundled or 
not.
xix. Anti-Retaliation
    The Department proposed to add anti-retaliation provisions to 
enhance enforcement of the DBRA and their implementing regulations in 
29 CFR parts 1, 3, and 5. The proposed anti-retaliation provisions were 
intended to discourage contractors, responsible officers, and any other 
persons from engaging in--or causing others to engage in--unscrupulous 
business practices that may chill worker participation in WHD 
investigations or other compliance actions and enable prevailing wage 
violations to go undetected. The proposed anti-retaliation provisions 
were also intended to provide make-whole relief for any worker who has 
been discriminated against in any manner for taking, or being perceived 
to have taken, certain actions concerning the labor standards 
provisions of the DBA, CWHSSA, and other Related Acts, and the 
regulations in parts 1, 3, and 5.
    In most WHD DBRA investigations or other compliance actions, 
effective enforcement requires worker cooperation. Information from 
workers about their actual hours worked, wages paid, and work performed 
is often essential to uncover violations such as falsification of 
certified payrolls or wage underpayments, including underpayments due 
to craft misclassification, by contractors or subcontractors that fail 
to keep pay or time records or have inaccurate or incomplete records. 
Workers are often reluctant to come forward with information about 
potential violations of the laws WHD enforces because they fear losing 
their jobs or suffering other adverse consequences. Workers are 
similarly reluctant to raise these issues with their supervisors. Such 
reluctance to inquire or complain internally may result in lost 
opportunities for early correction of violations by contractors.
    The current Davis-Bacon regulations protect the identity of 
confidential worker-informants in large part to prevent retribution by 
the contractors for whom they work. See 29 CFR 5.6(a)(5); see also 29 
CFR 6.5. This protection helps combat the ``possibility of reprisals'' 
by ``vindictive employers'' against workers who speak out about wage 
and hour violations, but does not eliminate it. Cosmic Constr. Co., WAB 
No. 79-19, 1980 WL 95656, at *5 (Sept. 2, 1980).
    When contractors retaliate against workers who cooperate or are 
suspected of cooperating with WHD or who make internal complaints or 
otherwise assert rights under the DBRA, neither worker confidentiality 
nor the DBRA remedial measures of back wages or debarment can make 
workers whole. The Department's proposed anti-retaliation provisions 
aimed to remedy such situations by providing make-whole relief to 
workers who are retaliated against, as well as by deterring or 
correcting interference with DBRA worker protections.
    The Department's authority to promulgate the anti-retaliation 
provisions stems from 40 U.S.C. 3145 and Reorganization Plan No. 14 of 
1950. In transmitting the Reorganization Plan to Congress, President 
Truman noted that ``the principal objective of the plan is more 
effective enforcement of labor standards,'' and that the plan ``will 
provide more uniform and more adequate protection for workers through 
the expenditures made for the enforcement of the existing 
legislation.'' Special Message to the Congress Transmitting 
Reorganization Plan No. 14 of 1950, reprinted in 5 U.S.C. app. 1 (Mar. 
13, 1950) (1950 Special Message to Congress).
    It is well settled that the Department has regulatory authority to 
debar Related Act contractors even though Related Acts do not expressly 
provide for debarment. See Janik Paving & Constr., Inc. v. Brock, 828 
F.2d 84, 90, 91 (2d Cir. 1987) (upholding debarment for CWHSSA 
violations even though that statute ``specifically provided civil and 
criminal sanctions for violations of overtime work requirements but 
failed to mention debarment''). In 1951, the Department added a new 
part 5 to the DBRA regulations, including the Related Act debarment 
regulation. See 16 FR 4430. The Department explained that it was doing 
so in compliance with the directive of Reorganization Plan No. 14 of 
1950 to ``assure coordination of administration and consistency of 
enforcement of the labor standards provisions'' of the DBRA. Id. Just 
as regulatory debarment is a permissible exercise of the Department's 
``implied powers of administrative enforcement,'' Janik Paving & 
Constr., 828 F.2d at 91, so, too, are the proposed anti-retaliation 
provisions and the revised Related Act debarment provisions discussed 
in section III.B.3.xxi (``Debarment''). The Department stated its 
position that it would be both efficient and consistent with the 
remedial purpose of the DBRA to investigate and adjudicate complaints 
of retaliation as part of WHD's enforcement of the DBRA. These measures 
will help achieve more effective enforcement of the Davis-Bacon labor 
standards.
    Currently, debarment is the primary mechanism under the DBRA civil 
enforcement scheme for remedying retribution against workers who assert 
their right to prevailing wages. Debarment is also the main tool for 
addressing less tangible discrimination such as interfering with 
investigations by intimidating or threatening workers. Such 
unscrupulous behavior may be both a disregard of obligations to workers 
under the DBA and ``aggravated or willful'' violations under the 
current Related Act regulations that warrant debarment. See 40 U.S.C. 
3144(b)(1); 29 CFR 5.12(a)(1), (a)(2), (b)(1).

[[Page 57656]]

    Both the ARB and ALJs have debarred contractors in part because of 
their retaliatory conduct or interference with WHD investigations. See, 
e.g., Pythagoras Gen. Contracting Corp., ARB Nos. 08-107, 09-007, 2011 
WL 1247207, at *13 (affirming debarment of contractor and its principal 
in a DBRA case in part because of the ``attempt [by principal and other 
officials of the contractor] at witness coercion or intimidation'' when 
they visited former employees to talk about their upcoming hearing 
testimony); R.J. Sanders, Inc., WAB No. 90-25, 1991 WL 494734, at *1-2 
(Jan. 31, 1991) (affirming ALJ's finding that employer's retaliatory 
firing of an employee who reported to a Navy inspector being paid less 
than the prevailing wage was ``persuasive evidence of a willful 
violation of the [DBA]''); Early & Sons, Inc., ALJ No. 85-DBA-140, 1986 
WL 193128, at *8 (Aug. 5, 1986) (willful and aggravated DBRA violations 
evidenced in part where worker who ``insisted on [receiving the 
mandated wage] . . . was told, in effect, to be quiet or risk losing 
his job''), rev'd on other grounds, WAB No. 86-25, 1987 WL 247044, at 
*2 (Jan. 29, 1987); Enviro & Demo Masters, Inc., ALJ No. 2011-DBA-
00002, Decision and Order, slip op. at 9-10, 15, 59, 62-64 (Apr. 23, 
2014) (Enviro D&O) (debarring subcontractor, its owner, and a 
supervisor because of ``aggravated and willful avoidance of paying the 
required prevailing wages,'' which included firing an employee who 
refused to sign a declaration repudiating his DBRA rights, and 
instructing workers to lie about their pay and underreport their hours 
if questioned by investigators).
    There are also criminal sanctions for certain coercive conduct by 
DBRA contractors. The Copeland Anti-Kickback Act makes it a crime to 
induce DBRA-covered construction workers to give up any part of 
compensation due ``by force, intimidation, or threat of procuring 
dismissal from employment, or by any other manner whatsoever.'' 18 
U.S.C. 874; cf. 29 CFR 5.10(b) (discussing criminal referrals for DBRA 
violations). Such prevailing wage kickback schemes are also willful or 
aggravated violations of the civil Copeland Act (a Related Act) that 
warrant debarment. See 40 U.S.C. 3145; see, e.g., Killeen Elec. Co., 
WAB No. 87-49, 1991 WL 494685, at *5 (Mar. 21, 1991).
    Interference with WHD investigations or other compliance actions 
may also warrant criminal prosecution. For example, in addition to 
owing 37 workers $656,646 in back wages in the DBRA civil 
administrative proceeding, see Enviro D&O at 66, both the owner of 
Enviro & Demo Masters and his father, the supervisor, were convicted of 
Federal crimes including witness tampering and conspiracy to commit 
witness tampering. These company officials instructed workers at the 
jobsite to hide from and ``lie to investigators about their working 
hours and wages,'' and they fired workers who spoke to investigators or 
refused to sign false documents. Naranjo v. United States, No. 17-CV-
9573, 2021 WL 1063442, at *1-2 (S.D.N.Y. Feb. 26, 2021), report and 
recommendation adopted by 2021 WL 1317232 (S.D.N.Y. Apr. 8, 2021); see 
also Naranjo, Sr. v. United States, No. 16 Civ. 7386, 2019 WL 7568186, 
at *1 (S.D.N.Y. Dec. 16, 2019), report and recommendation adopted by 
2020 WL 174072, at *1 (S.D.N.Y. Jan. 13, 2020).
    Contractors, subcontractors, and their responsible officers may be 
debarred and even criminally prosecuted for retaliatory conduct. 
Laborers and mechanics who have been discriminated against for speaking 
up, or for having been perceived as speaking up, however, currently 
have no redress under the Department's regulations implementing the DBA 
or Related Acts to the extent that back wages do not make them whole or 
that such discriminatory conduct is not prohibited under a separate 
anti-retaliation provision such as the FLSA, 29 U.S.C. 215(a)(3).\238\ 
For example, the Department currently may not order reinstatement of 
workers fired for their cooperation with investigators or as a result 
of an internal complaint to their supervisor. Nor may the Department 
award compensation for the period after a worker is fired. Similarly, 
the Department cannot require contractors to compensate workers for the 
difference in pay resulting from retaliatory demotions or reductions in 
hours. The addition of anti-retaliation provisions is a logical 
extension of the DBA and Related Acts debarment remedial measure. It 
would supplement debarment as an enforcement tool to more effectively 
prevent retaliation, interference, or any other such discriminatory 
behavior. An anti-retaliation mechanism would also build on existing 
back-wage remedies by extending compensation to a fuller range of 
harms.
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    \238\ One exception is ARRA, a Related Act, that included a 
whistleblower protection provision which provided that complaints 
were to be investigated by agency inspectors general, not WHD. See 
section 1553, Public Law 111-5, 123 Stat 115 (Feb. 17, 2009).
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    The Department therefore proposed to add two new regulatory 
provisions concerning anti-retaliation, as well as to update several 
other regulations, to reflect the new anti-retaliation provisions.
(A) Proposed New Sec.  5.5(a)(11) and (b)(5)
    The Department proposed to implement anti-retaliation in part by 
adding a new anti-retaliation provision to all contracts subject to the 
DBA or Related Acts. The proposed contract clauses provided for in 
Sec.  5.5(a)(11) and (b)(5) stated that it is unlawful for any person 
to discharge, demote, intimidate, threaten, restrain, coerce, 
blacklist, harass, or in any other manner discriminate, or to cause any 
person to do the same, against any worker for engaging in a number of 
protected activities. The proposed protected activities included 
notifying any contractor of any conduct which the worker reasonably 
believes constitutes a violation; filing any complaints, initiating or 
causing to be initiated any proceeding, or otherwise asserting or 
seeking to assert any right or protection; cooperating in an 
investigation or other compliance action, or testifying in any 
proceeding; or informing any other person about their rights under the 
DBA, Related Acts, or the regulations in 29 CFR parts 1, 3, or 5, for 
proposed Sec.  5.5(a)(11), or the CWHSSA or its implementing 
regulations in 29 CFR part 5, for proposed Sec.  5.5(b)(5).
    The scope of these anti-retaliation provisions was intended to be 
broad to better effectuate the remedial purpose of the DBRA, to protect 
workers, and to ensure that they are not paid substandard wages. 
Workers must feel free to speak openly--with contractors for whom they 
work and contractors' responsible officers and agents, with the 
Department, with co-workers, and others--about conduct that they 
reasonably believe to be a violation of the prevailing wage 
requirements or other DBRA labor standards requirements. The proposed 
anti-retaliation provisions recognized that worker cooperation is 
critical to enforcement of the DBRA. They would also incentivize 
compliance and seek to eliminate any competitive disadvantage borne by 
government contractors and subcontractors that follow the rules.
    In line with those remedial goals, the Department intended the 
proposed anti-retaliation provisions to protect workers who make 
internal complaints to supervisors or who otherwise assert or seek to 
assert Davis-Bacon or CWHSSA labor standards protections set forth in 
Sec.  5.5(a)(11) and (b)(5), as well as to remedy interference with 
Davis-Bacon worker protections or WHD investigations that may not have 
a direct adverse monetary impact on the affected workers. Similarly, 
the Department

[[Page 57657]]

intended the anti-retaliation provisions to also apply in situations 
where there is no current work or employment relationship between the 
parties. For example, it would prohibit retaliation by a prospective or 
former employer or contractor (or both). Finally, the Department's 
proposed rule sought to protect workers who make oral as well as 
written complaints, notifications, or other assertions of their rights 
protected under Sec.  5.5(a)(11) and (b)(5).
(B) Proposed New Sec.  5.18
    The Department proposed remedies to assist in enforcement of the 
DBRA labor standards provisions. Section 5.18 set forth the proposed 
remedies for violations of the new anti-retaliation provisions. This 
proposed section also included the process for notifying contractors 
and other persons found to have violated the anti-retaliation 
provisions of the Administrator's investigative findings, as well as 
for Administrator directives to remedy such violations and provide 
make-whole relief.
    Make-whole relief and remedial actions under this proposed 
provision were intended to restore the worker subjected to the 
violation to the position, both economically and in terms of work or 
employment status (e.g., seniority, leave balances, health insurance 
coverage, 401(k) contributions, etc.), that the worker would have 
occupied had the violation never taken place. Proposed available 
remedies included, but were not limited to, any back pay and benefits 
denied or lost by reason of the violation; other actual monetary losses 
or compensatory damages sustained as a result of the violation; 
interest on back pay or other monetary relief from the date of the 
loss; and appropriate equitable or other relief such as reinstatement 
or promotion; expungement of warnings, reprimands, or derogatory 
references; the provision of a neutral employment reference; and 
posting of notices that the contractor or subcontractor agrees to 
comply with the DBRA anti-retaliation requirements.
    In addition, proposed Sec.  5.18 specified that when contractors, 
subcontractors, responsible officers, or other persons dispute findings 
of violations of Sec.  5.5(a)(11) or (b)(5), the procedures in 29 CFR 
5.11 or 5.12 would apply.
    Conforming revisions were proposed to the withholding provisions at 
Sec. Sec.  5.5(a)(2) and (b)(3) and 5.9 to indicate that withholding 
includes monetary relief for violations of the anti-retaliation 
provisions at Sec.  5.5(a)(11) and (b)(5), in addition to withholding 
of back wages for DBRA prevailing wage violations and CWHSSA overtime 
violations.
    Similarly, conforming changes were proposed to Sec. Sec.  5.6(a)(4) 
and 5.10(a). Computations of monetary relief for violations of the 
anti-retaliation provisions were added to the limited investigatory 
material that may be disclosed without the permission and views of the 
Department under Sec.  5.6(a)(4). In proposed Sec.  5.10(a), monetary 
compensation for violations of anti-retaliation provisions were added 
as a type of restitution.
    As explained, contractors, subcontractors, and their responsible 
officers have long been subject to debarment for their retaliatory 
actions. The NPRM proposed to update DBRA enforcement mechanisms by 
attempting to ensure that workers can cooperate with WHD or complain 
internally about perceived prevailing wage violations without fear of 
reprisal. The proposal reflected a reasonable extension of the 
Department's broad regulatory authority to enforce and administer the 
DBRA. Further, the Department stated its belief that adding anti-
retaliation provisions would amplify existing back wage and debarment 
remedies by making workers whole who suffer the effects of retaliatory 
firings, demotions, and other actions that reduce their earnings. The 
Department explained that this important new tool would help carry out 
the DBRA's remedial purposes by bolstering WHD's enforcement.
    The Department received many comments about this proposal. All but 
a few of the comments expressed support for the anti-retaliation 
proposal. Most of the supporting comments were from individuals, 
including as part of an organized LIUNA member campaign. The remaining 
supporting comments were from many non-profit and workers' rights 
organizations, unions, labor-management groups, contractors (including 
an organized SMACNA member campaign), and various appointed and elected 
government officials. Most of the commenters expressed general support 
for this proposal in its entirety and a few commenters recommended 
measures to strengthen the proposal. The comments opposing the proposal 
were submitted by the group of U.S. Senators and several contractor 
organizations, all of whom opposed the proposal in its entirety.
    Commenters that supported the proposed anti-retaliation provisions 
in their entirety overwhelmingly agreed that the proposed provisions 
would both strengthen enforcement of the Davis-Bacon and Related Acts 
and better protect workers who speak out about potential DBRA 
violations. See, e.g., LCCHR, several members of the U.S. House of 
Representatives from Illinois, International Union of Operating 
Engineers Local 77 (IUOE Local 77), and individual commenters. UBC 
noted that the proposed anti-retaliation provisions--both the contract 
clauses and remedies--would also assist in deterring retaliatory 
conduct. NABTU emphasized that the anti-retaliation proposal is 
consistent with the Department's broad enforcement authority under 
Reorganization Plan No. 14 of 1950, which Congress has consistently 
affirmed throughout the years.
    Various commenters provided empirical support for the need to 
strengthen worker protections, including through the proposed anti-
retaliation provisions. WA BCTC and LIUNA, for example, pointed to the 
Department's recent data showing that the construction industry is 
consistently one of the top two low-wage, high violation 
industries.\239\ LCCHR highlighted various reports and articles 
documenting the widespread problem of wage theft, workers' fear of 
retaliation which leads workers to not report serious workplace 
problems, and retaliation against workers who did so report. Similarly, 
EPI referred to reports that underscored the particular importance of 
strengthening anti-retaliation protections for low-wage and immigrant 
workers who are disproportionately affected by wage theft in the 
construction industry, where many wage payment violations go unreported 
due to workers' well-founded fears of retaliation.
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    \239\ See https://www.dol.gov/agencies/whd/data/charts/low-wage-high-violation-industries.
---------------------------------------------------------------------------

    A number of commenters provided anecdotal support for the proposed 
anti-retaliation provisions as an effective mechanism to enhance 
enforcement through worker cooperation. PAAG and PADLI stated that they 
have received feedback from many workers that fear of retaliation 
stopped them from coming forward and reporting prevailing wage 
violations. FFC noted their experience with ``how reluctant workers can 
be to report misconduct,'' explaining the disincentive to come forward 
to report violations when there is no possibility that the workers will 
be made whole if they are retaliated against. Affiliated Construction 
Trades Foundation of Ohio (ACT Ohio) and NCDCL commented that they have 
witnessed workers' reluctance to report misconduct for fear of losing 
their jobs, thereby compromising their ability to support themselves 
and their families

[[Page 57658]]

financially. LCCHR explained that the risk of retaliation tends to be 
greater for workers who are already in relatively vulnerable positions 
and who are least likely to be able to withstand the consequences of 
retaliation, which can quickly escalate as lost pay leads to serious 
financial, emotional, and legal issues.
    A number of commenters, including several members of the U.S. House 
of Representatives from Illinois, lauded this proposal, as well as the 
timing of the Department's proposed rulemaking, which they asserted 
would help maximize the economic benefits of the bipartisan IIJA for 
workers, their families, and their communities. SMACNA members who 
supported the proposed anti-retaliation protections, among other 
proposals in the NPRM, also supported providing substantial resources 
to WHD. See, e.g., Mechanical & Sheet Metal Contractors of Kansas.
    A few commenters recommended additional provisions to strengthen 
the anti-retaliation proposal. PAAG and PADLI recommended adding a 
requirement to add the anti-retaliation contract provisions to existing 
DBRA mandatory postings. LCCHR described the Department's proposed 
make-whole relief as a ``good start,'' but recommended going further to 
account for financial losses that are more difficult to quantify, such 
as fees and penalties for missed payments due to loss of income, and 
non-financial harms such as harassment. An individual commenter 
asserted that the proposed uniform and less stringent debarment 
standard could also have a chilling effect on workers' willingness to 
report violations since their hours could be cut if the contractor for 
whom they work is less profitable as a result of being debarred. They 
noted that whether the threat of a reduction in wages and harm to 
career prospects comes from retaliation or from the employer's loss of 
Federal contracting opportunities, the fact that the economic 
consequence was a result of speaking up remains the same. This 
commenter, therefore, recommended adding ``predicted lost pay'' as an 
additional quasi-anti-retaliation remedy to compensate workers for 
reduced hours resulting from possible debarment. UBC suggested that the 
Department also require notice posting in the first step of the 
proposed administrative process in Sec.  5.18(a), include interest on 
lost wages, and include information in WHD case-handling manuals about 
how investigators can assist immigrant workers in obtaining deferred 
action from the Department of Homeland Security (DHS), as well as 
applications for T and U visas.
    None of the commenters that opposed the proposal rejected the 
proposed anti-retaliation provisions squarely on their merits. Rather, 
in opposing the proposal, IEC claimed that it was duplicative of 
another whistleblower protection law for Federal contractor employees, 
41 U.S.C. 4712, as well as various anti-retaliation provisions issued 
under other statutes or regulatory schemes, Executive Orders, and a 
trade agreement. APCA claimed that the anti-retaliation provisions, 
combined with other proposals, would subject many--particularly small--
firms to significant cost increases. And the group of U.S. Senators and 
ABC claimed that the proposed anti-retaliation provisions were 
overbroad remedial measures that exceeded the Department's statutory 
authority and should be withdrawn. The group of U.S. Senators argued 
that forcing private actors to reinstate workers or pay them back wages 
implicated unspecified constitutional rights and, therefore, the broad 
whistleblower enforcement scheme envisioned by the Department ``is 
reserved for Congress to impose as subject matter experts and elected 
representatives.''
    After considering the comments, the Department adopts the anti-
retaliation provisions as proposed, with one minor addition to the 
anti-retaliation contract clauses and one minor addition to the 
remedies in Sec.  5.18. The vast majority of commenters expressed 
strong support for this proposal in its entirety. The Department echoes 
the support of the many commenters that emphasized the importance of 
worker cooperation to effective enforcement of the DBRA and reiterates 
the reasons for adding these provisions that the Department enumerated 
in the NPRM preamble--primarily that the Department anticipates that 
the anti-retaliation provisions will significantly enhance enforcement, 
compliance, and deterrence, while making workers whole who suffer 
reprisals in violation of these provisions. In Sec.  5.5(a)(11)(ii) and 
(b)(5)(ii) the Department added protection for otherwise asserting ``or 
seeking to assert'' the enumerated DBRA or CWHSSA labor standards 
protections. This provision would prohibit a contractor's retaliation 
after, for example, learning that a worker has consulted with a third 
party about the possibility of asserting such rights or protections. In 
Sec.  5.18, the Department added to the illustrative list of remedies 
front pay in lieu of reinstatement. This type of relief is appropriate 
in situations where either the contractor or worker does not want 
reinstatement and front pay is provided instead.
    While the Department appreciates the recommendations of several 
commenters to strengthen the anti-retaliation provisions in particular 
respects, the Department believes that the anti-retaliation provisions 
as proposed contain appropriate and sufficient safeguards against 
retaliation. The Department agrees, however, that PAAG and PADLI's 
recommendation to require posting of the new anti-retaliation contract 
provisions would further enhance DBRA enforcement and compliance as 
well as worker protections. Therefore, the Department will add anti-
retaliation information to the Davis-Bacon poster \240\ (WH-1321) that 
is currently required by Sec.  5.5(a)(1)(i).
---------------------------------------------------------------------------

    \240\ See https://www.dol.gov/agencies/whd/posters/dbra and 
https://www.dol.gov/agencies/whd/posters/dbra/espanol.
---------------------------------------------------------------------------

    Concerning anti-retaliation remedies, the Department agrees with 
LCCHR that it is important to account for financial losses that are 
difficult to quantify, like fees and penalties for missed payments due 
to loss of income, as well as non-financial harms such as harassment. 
Nevertheless, the Department believes that the regulatory remedies in 
the final rule adequately encompass such relief. If a worker or job 
applicant provides sufficient justification of financial and non-
financial harms resulting from a violation of Sec.  5.5(a)(11) or 
(b)(5), such as those that LCCHR identified, Sec.  5.18(b) as adopted 
contemplates relief for those types of harms to remedy the violation. 
Moreover, the examples in Sec.  5.18(c) are illustrative, not 
exclusive.
    The Department also appreciates an individual commenter's concern 
that speaking up could lead to debarment with attendant adverse 
financial and/or career impacts similar to those that workers may 
experience as a result of retaliation. But the Department declines to 
adopt this commenter's accompanying recommendation for predicted lost 
pay resulting from debarment for several reasons. The final rule's 
anti-retaliation provisions are intended to encourage more workers to 
report potential DBRA violations and to provide make-whole relief for 
workers who have suffered specific incidents of reprisals or 
interference as a result of such reporting. In contrast, the individual 
commenter's proposal seeks highly speculative damages based on a 
possible future event--debarment--that may not occur and, even if it 
did, might not happen for years if the contractor disputes the 
underlying violations and/or debarment remedy through an

[[Page 57659]]

administrative hearing and any subsequent administrative or Federal 
court appeals. This commenter's proposed predicted lost pay remedy is 
far-reaching: it goes beyond financial make-whole relief for the 
particular workers who spoke up and could extend to the whole workforce 
if they were adversely impacted by the debarment. The Department's 
anti-retaliation provisions are more narrowly tailored to address 
specific harms. For example, if a worker were given a bad reference by 
a debarred DBRA contractor for whom they had worked, or if a contractor 
refused to hire a worker who had spoken up about DBRA violations and 
was then ``blacklisted,'' that worker could seek relief under the final 
rule's anti-retaliation provisions.
    While the Department also appreciates UBC's recommendation to 
require the posting of a notice to workers that the contractor or 
subcontractor agrees to comply with the DBRA anti-retaliation 
requirements in the first step of the proposed administrative process 
in Sec.  5.18(a), the Department declines to adopt this recommendation 
because at that stage of proceedings, the contractor or subcontractor 
would still be able to dispute the findings in an administrative 
hearing. The Department notes that the examples of make-whole relief 
listed in Sec.  5.18(c)--an illustrative, not exhaustive list--include 
notice posting as well as back pay and interest among other types of 
make-whole relief. Similarly, UBC's suggestion to include interest on 
lost wages is encompassed in the final rule's remedies under Sec.  
5.18. Finally, the Department appreciates UBC's recommendation to 
include information in WHD case-handling manuals about assisting 
immigrant workers in obtaining deferred action from DHS, as well as 
applications for T and U visas, and notes that WHD currently has 
publicly available guidance about these topics.\241\
---------------------------------------------------------------------------

    \241\ See, e.g., U and T Visa Certifications, Wage & Hour Div., 
Dep't of Lab., https://www.dol.gov/agencies/whd/immigration/u-t-visa; Dep't of Lab., ``FAQ: Process for Requesting Department of 
Labor Support for Requests to the Department of Homeland Security 
for Immigration-Related Prosecutorial Discretion During Labor 
Disputes'' (2022), https://www.dol.gov/sites/dolgov/files/OASP/files/Process-For-Requesting-Department-Of-Labor-Support-FAQ.pdf; 
Department of Labor U and T Visa Process & Protocols Question--
Answer, Wage & Hour Div., Dep't of Lab., https://www.dol.gov/agencies/whd/immigration/u-t-visa/faq.
---------------------------------------------------------------------------

    The Department disagrees with IEC that the proposed anti-
retaliation provisions are duplicative of other whistleblower 
protections for contractor employees and could unnecessarily expand the 
number of claims against contractors. There are Federal laws, including 
one that IEC identified, that provide protections from reprisal for 
employees of Federal contractors and grantees who disclose, among other 
things, ``information that [they] reasonably believe[ ] is a . . . 
violation of law, rule, or regulation related to a Federal contract.'' 
41 U.S.C. 4712 (covering certain civilian contracts); see 10 U.S.C. 
4701(a)(1) (covering certain defense contracts).\242\ But these 
statutory whistleblower protections are not duplicative because they 
may not apply to the same subsets of workers, and they are not as 
specifically tailored to protected activities under the DBRA. Nor are 
they mutually exclusive.
---------------------------------------------------------------------------

    \242\ Formerly cited as 10 U.S.C. 2409(a)(1).
---------------------------------------------------------------------------

    In addition, enforcement under these existing statutory 
whistleblower protections appears to have been uncommon. Specifically, 
the Department is not aware of any Federal courts deciding cases on the 
merits in which DBRA or SCA workers have availed themselves of section 
4712, and the Department is only aware of one such case under 10 U.S.C. 
2409. See Rogers v. U.S. Army, 2007 WL 1217964, at *3, *6-8 (S.D. Tex. 
Apr. 23, 2007) (dismissing, among other claims, employee's claim under 
10 U.S.C. 2409).\243\
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    \243\ Similarly, the Department is aware of only one Federal 
court decision about ARRA's whistleblower protection provisions in 
which the underlying protected activity related to alleged 
prevailing wage violations. See Business Commc'ns, Inc. v. U.S. 
Dept. of Educ., 739 F.3d 374, 376, 383 (8th Cir. 2013) (worker filed 
complaint with the Department of Education's OIG alleging that cable 
installation contractor had terminated his employment after he 
complained about not being paid prevailing wages as required by 
ARRA). In any event, most ARRA funding has been spent by now or is 
no longer available due to sunset provisions, so the protections 
that flowed from that funding no longer apply and ARRA's anti-
retaliation provisions will soon be, if they are not already, 
inapplicable to any existing or future DBRA-covered projects.
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    The new DBRA anti-retaliation provisions will coexist with these 
other whistleblower statutory protections and supplement them with 
additional worker protections to further effectuate the DBRA statutory 
and regulatory scheme. For example, the final rule's anti-retaliation 
provisions cover disclosures to a wider range of people than in the 
above-mentioned two whistleblower-protection laws. The final rule 
protects worker disclosure of information not only to law enforcement 
entities, courts, and contractors, but also to any other person (e.g., 
co-workers or advocates for workers' rights) about their Davis-Bacon 
rights and assertions of any right or protection under the DBRA.
    The Department believes that it is both efficient and consistent 
with the remedial purpose of the DBRA as well as the directive in 
Reorganization Plan No. 14 of 1950 ``to assure coordination of 
administration and consistency of enforcement'' for WHD--not only 
contracting agency inspectors general--to investigate and adjudicate 
complaints of retaliation or interference as part of the Department's 
Davis-Bacon labor standards enforcement, particularly given WHD's 
expertise in interpreting and enforcing DBRA labor standards 
requirements. Potential retaliation and interference with DBRA worker 
protections are relevant to WHD's investigations of whether debarment 
is warranted. Under the final rule, WHD's investigations will encompass 
the new anti-retaliation remedies provisions as part of the 
Department's overarching enforcement authority.
    Finally, the Department declines to withdraw its proposed anti-
retaliation provisions because, contrary to assertions of ABC and the 
group of U.S. Senators that this proposal exceeds the Department's 
statutory authority,\244\ the proposed provisions fit within the 
Department's broad enforcement authority under the DBA and 
Reorganization Plan No. 14 of 1950. See 5 U.S.C. app. 1. The comments 
submitted by the group of U.S. Senators and ABC overlook the fact that 
Reorganization Plan No. 14 of 1950 was a Congressional delegation of 
rulemaking authority to the Department. The Plan was prepared by 
President Truman and submitted to Congress in March 1950 pursuant to 
the Reorganization Act of 1949, Public Law 81-109, 63 Stat. 203 (1949). 
The Reorganization Act, as passed in 1949, provided that a plan 
submitted by the President would become effective after 60 days unless 
disapproved by Congress. See 63 Stat. at 205. Although not required, 
the Senate Committee on Expenditures in the Executive Department 
reviewed the Reorganization Plan and reported favorably before the Plan 
became

[[Page 57660]]

effective on May 24, 1950. See 95 Cong. Rep. 6792 (daily ed. May 10, 
1950).
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    \244\ The group of U.S. Senators' apparent suggestion that DBRA 
remedial purpose and remedies are limited to those Congress 
expressly provided for in the 1935 amendment to the DBA 
(withholding, debarment, and affording laborers a private right of 
action against a contractor) is inconsistent with subsequent 
legislative, regulatory, and judicial actions discussed in this 
section. Furthermore, these commenters' suggestion that DBRA is not 
remedial as that term is defined overlooks another meaning of 
``remedial statute,'' which is ``[one] that is designed to . . . 
introduce regulations conducive to the public good.'' Remedial 
statute, Black's Law Dictionary Deluxe 4th Ed. (1951) & 6th Ed. 
(1990).
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    Since that time, as NABTU noted, Congress has repeatedly recognized 
the Secretary's authority and functions under Reorganization Plan No. 
14 of 1950 with respect to the DBA's prevailing wage provisions in 
subsequent legislation. See, e.g., 42 U.S.C. 18851(b), 42 U.S.C. 
1440(g), 42 U.S.C. 3212, 20 U.S.C. 954(n), 42 U.S.C. 300j-9(e), 42 
U.S.C. 5046. Additionally, in 1984, Congress ratified and affirmed as 
law each reorganization plan that was implemented pursuant to the 
provision of a prior reorganization act. Public Law 98-532, 98 Stat. 
2705 (1984). The 1984 ratification went on to declare that ``[a]ny 
actions taken prior to the date of enactment of this Act pursuant to a 
reorganization plan ratified [herein] shall be considered to have been 
taken pursuant to a reorganization expressly approved by Act of 
Congress.'' Id. (emphasis added). Such prior actions include the 
Department's various rulemakings for 29 CFR parts 1, 3, and 5. For 
example, the 1964 final rule amending part 5 in turn had extended the 
Department's regulatory enforcement and administration authority to 
future Related Acts that the Department anticipated Congress would 
continue to enact from time to time. See 29 FR 95, 99 (Jan. 4, 1964) 
(adding the following italicized language to Sec.  5.1(a), ``The 
regulations contained in this part are promulgated in order to 
coordinate the administration and enforcement of the labor standards 
provisions of each of the following acts by the Federal agencies 
responsible for their administration and such additional statutes as 
may from time to time confer upon the Secretary of Labor additional 
duties and responsibilities similar to those conferred upon him under 
Reorganization Plan No. 14 of 1950.''). That regulation implemented by 
another Department final rule in 1983 added to the statutory sources of 
the Department's authority to promulgate such regulations to include 
the Copeland Act as well as Reorganization Plan No. 14 of 1950. See 48 
FR 19540-41 (implementing provisions of final rule that had not been 
enjoined by a Federal district court and on appeal by the Department).
    Federal courts, the ARB, and the ARB's predecessor tribunals have 
all explained that Reorganization Plan No. 14 of 1950 authorizes the 
Department ``to issue regulations designed to `assure coordination of 
administration and consistency of enforcement' of the Davis-Bacon Act 
and all Davis-Bacon related statutes.'' Vulcan Arbor Hill Corp. v. 
Reich, No. 87-3540, 1995 WL 774603, at *2 (D.D.C. Mar. 31, 1995) 
(emphasis added), aff'd, 81 F.3d 1110, 1112 (D.C. Cir. 1996) (``[The 
Reorganization Plan No. 14 of 1950] confers on the Department of Labor 
the authority and responsibility to coordinate the enforcement not only 
of the Davis-Bacon Act itself, but also Davis-Bacon related 
statutes.''); see also Coutu, 450 U.S. at 759 (``Pursuant to 
Reorganization Plan No. 14 of 1950 the Secretary of Labor . . . issued 
regulations designed to `assure coordination of administration and 
consistency of enforcement' of the Act and some 60 related statutes.'' 
(internal citations omitted)); Quincy Hous. Auth. LaClair Corp., WAB 
No. 87-32, 1989 WL 407468, at *2 (Feb. 17, 1989) (``Pursuant to [the] 
mandate [of Reorganization Plan No. 14], the Secretary has promulgated 
regulations to enforce the labor standards provisions of the Davis-
Bacon Act and the related acts.''); cf. Coleman Constr. Co., ARB No. 
15-002, 2016 WL 4238468, at *2, *9-11 (June 8, 2016) (stating that 
``the National Housing Act and CWHSSA, the two Davis-Bacon Related Acts 
under which this case is being brought, do not include a debarment 
provision,'' but that ``it is the Department of Labor regulations, duly 
promulgated pursuant to Reorganization Plan No. 14 of 1950 that provide 
for debarment for violations of a Related Act'').
    The Department reiterates that like regulatory debarment, the anti-
retaliation provisions adopted in the final rule--as well as the 
revised Related Act debarment provisions discussed in section 
III.B.3.xxi (``Debarment'')--are all permissible exercises of the 
Department's ``implied powers of administrative enforcement.'' Janik 
Paving & Constr., 828 F.2d at 91. Like the revised debarment 
provisions, the anti-retaliation provisions will also help achieve more 
effective enforcement of DBRA labor standards requirements.
    The Department does not agree with ABC or the group of U.S. 
Senators that Congress's omission of express statutory anti-retaliation 
provisions or authority in the DBA and most Related Acts prohibits the 
Secretary from regulating such behavior. The new anti-retaliation 
regulations are consistent with and a permissible extension of current 
remedies for retaliatory conduct. Courts have recognized the 
Department's broad regulatory authority to enforce and administer the 
DBRA, including the appropriateness of measures such as debarment under 
the Related Acts, which was initially implemented without explicit 
statutory authority. See Janik Paving & Constr., 828 F.2d at 92 
(holding that Congressional silence on debarment when it enacted the 
CWHSSA did not preclude the Department from enforcing its regulatory 
debarment provision under that statute and noting ``[t]hat a later 
Congress seeks to grant expressly a power which an earlier Congress has 
granted by implication does not negate the existence of the power prior 
to the express grant'' (internal quotations omitted)); Copper Plumbing 
& Heating Co. v. Campbell, 290 F.2d 368, 372-73 (D.C. Cir. 1961) 
(holding that Reorganization Plan No. 14 of 1950 authorized debarment 
under a Related Act as ``a means for securing compliance with the wage 
and hour standards and . . . obtaining responsible bidding,'' 
notwithstanding that the Related Act was silent on debarment but 
provided for other sanctions and that Congress had expressly authorized 
debarment in similar statutes, like the DBA.).
    The anti-retaliation provisions will further Reorganization Plan 
No. 14 of 1950's mandate by helping to ensure workers are paid the 
prevailing wages they are owed and to coordinate effective 
administration of Davis-Bacon labor standards on Federal and federally 
assisted construction projects. As with debarment, anti-retaliation is 
``integral to the Secretary's effective enforcement of labor standards 
provisions.'' Janik Paving & Constr., 828 F.2d at 93. Prohibiting 
retaliation against workers for asserting their rights under the DBRA 
and requiring contractors to remedy such retaliation gives DOL and 
contracting agencies a tool to help ensure effective administration and 
enforcement of the DBRA and to protect the prevailing wage statutory 
scheme ``from those who would abuse it.'' Jacquet v. Westerfield, 569 
F.2d 1339, 1345 (5th Cir. 1978). The final rule's anti-retaliation 
provisions will further the DBA's purposes of protecting workers and 
preventing substandard wages on Federal construction projects. By 
further shielding workers who speak out about violations that might not 
be discovered otherwise, this final rule will enhance the incentive to 
comply with the law, foster construction worker cooperation with the 
Department's (and contracting agencies') enforcement efforts, and 
improve the ability of WHD investigators to respond to and discover 
violations.
    The final rule's regulatory anti-retaliation provisions are not 
novel. The Department has promulgated anti-retaliation regulations with 
make-whole remedies to aid enforcement and worker protection in other 
program areas where the underlying statutes do not expressly

[[Page 57661]]

provide for anti-retaliation. For example, both the Department's H-2A 
and H-2B regulations include anti-retaliation provisions. See 29 CFR 
501.4 (H-2A); 29 CFR 503.20(a) (H-2B); Temporary Non-Agricultural 
Employment of H-2B Aliens in the United States, 80 FR 24042, 24069 
(Apr. 29, 2015) (Interim final rule; request for comments) (``Worker 
rights cannot be secured unless there is protection from all forms of 
intimidation or discrimination resulting from any person's attempt to 
report or correct perceived violations of the H-2B provisions.''). In 
addition, OSHA added an anti-retaliation regulation to provide an 
enforcement tool for the long-standing injury and illness recordkeeping 
regulations despite also having a statutory anti-retaliation provision, 
section 11(c), 29 U.S.C. 660(c)--both of which had been in place for 
over 40 years. See 29 CFR 1904.35(b)(1)(iv); Improve Tracking of 
Workplace Injuries and Illnesses, 81 FR 29624, 29627 (May 12, 2016) 
(Final rule) (``Where retaliation threatens to undermine a program that 
Congress required the Secretary to adopt, the Secretary may proscribe 
that retaliation through a regulatory provision unrelated to section 
11(c).''); cf. 57 FR 7533, 7535 (Mar. 3, 1992) (Final Rule) (stating 
that the DOE's regulatory anti-retaliation DOE Contractor Employee 
Protection Program found at 10 CFR part 708 was ``issued pursuant to 
the broad authority granted [DOE]'' by various statutes ``to prescribe 
such rules and regulations as necessary or appropriate to protect 
health, life, and property and the otherwise administer and manage the 
responsibilities and functions of the agency''). The Department's 
adoption of anti-retaliation provisions in the final rule similarly 
implements this additional enforcement tool.
xx. Post-Award Determinations and Operation-of-Law
    The Department proposed several revisions in parts 1, 3, and 5 to 
update and codify the administrative procedure for enforcing Davis-
Bacon labor standards requirements when the contract clauses and/or 
appropriate wage determination(s) have been wrongly omitted from a 
covered contract.
(A) Current Regulations
    The current regulations require the insertion of the relevant 
contract clauses and wage determination(s) in covered contracts. 29 CFR 
5.5. Section 5.5(a) requires the appropriate contract clauses to be 
inserted ``in full'' into any covered contracts, though the FAR only 
requires the DBA contract clauses to be incorporated by reference in 
FAR-covered contracts. The contract clause language at Sec.  5.5(a)(1) 
currently states that applicable wage determinations are ``attached'' 
to the contract.
    The existing regulations at Sec.  1.6(f) provide instruction for 
how the Department and contracting agencies must act when a wage 
determination has been wrongly omitted from a contract. Those 
regulations provide a procedure through which the Administrator makes a 
finding that a wage determination should have been included in the 
contract. After the finding by the Administrator, the contracting 
agency must either terminate and resolicit the contract with the valid 
wage determination or incorporate the wage determination retroactively 
by supplemental agreement or change order. The same procedure applies 
where the Administrator finds that the wrong wage determination was 
incorporated into the contract. The existing regulations at Sec.  
1.6(f) specify that the contractor must be compensated for any 
increases in wages resulting from any supplemental agreement or change 
order issued in accordance with the procedure.
    As the Department explained in the NPRM, WHD has faced multiple 
longstanding enforcement challenges under the current regulations. 
First, the language of Sec.  1.6(f) explicitly refers only to omitted 
wage determinations and does not expressly address the situation where 
a contracting agency has mistakenly omitted the contract clauses from 
the contract. Although WHD has historically relied on Sec.  1.6(f) to 
address this situation, the ambiguity in the regulations has caused 
confusion in communications between WHD and contracting agencies and 
delay in resolving conflicts. See, e.g., WHD Opinion Letters DBRA-167 
(Aug. 29, 1990); DBRA-131 (Apr. 18, 1985).
    Second, under the existing regulations, affected workers have 
suffered from significant delays while contracting agencies determine 
the appropriate course of action. At a minimum, such delays cause 
problems for workers who must endure long waits to receive their back 
wages. At worst, the delay can result in no back wages recovered at all 
where witnesses become unavailable or there are no longer any contract 
payments to withhold when a contract is finally modified or terminated. 
In all cases, the identification of the appropriate mechanism for 
contract termination or modification can be difficult and burdensome on 
Federal agencies--in particular during later stages of a contract or 
after a contract has ended.
    The process provided in the current Sec.  1.6(f) is particularly 
problematic where a contracting agency has questions about whether an 
existing contract can be modified without violating another non-DBRA 
statute or regulation. This problem has arisen in particular in the 
context of MAS contracts, BPAs, and other similar schedule contracts 
negotiated by GSA.\245\ Contracting agencies that have issued task 
orders under GSA schedule contracts have been reluctant to modify those 
task orders to include labor standards provisions where the governing 
Federal schedule contract does not contain the provisions. Under those 
circumstances, contracting agencies have argued that such a 
modification could render that task order ``out of scope'' and 
therefore arguably unlawful.
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    \245\ Sales on the GSA MAS, for example, have increased 
dramatically in recent decades--from $4 billion in 1992 to $36.6 
billion in 2020. Gov't Accountability Office, ``High Risk Series: An 
Update,'' GAO-05-207 (Jan. 2005), at 25 (Figure 1) (noting these 
types of contracting vehicles ``contribute to a much more complex 
environment in which accountability has not always been clearly 
established''), available at: https://www.gao.gov/assets/gao-05-207.pdf; Gen. Servs. Admin., ``GSA FY 2020 Annual Performance 
Report,'' at 11, available at: https://www.gsa.gov/cdnstatic/GSA%20FY%202020%20Annual%20Performance%20Report%20v2.pdf.
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    Although the Department believes it is incorrect that a contract 
modification to incorporate required labor standards clauses or wage 
determinations could render a contract or task order out of scope,\246\ 
concerns about this issue have interfered with the Department's 
enforcement of the labor standards. If a contracting agency believes it 
cannot modify a contract consistent with applicable procurement law, it 
may instead decide to terminate the contract without retroactively 
including the required clauses or wage determinations. In those 
circumstances, the regulations currently provide no express mechanism 
that explains how the Department or contracting agencies should seek to 
recover the back wages that the workers should have been paid on the 
terminated contract. While in many cases, the authority does exist, the

[[Page 57662]]

lack of an express mechanism can lead to unnecessary delay and 
confusion.
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    \246\ This argument tends to conflate the change associated with 
incorporating a missing contract clause or wage determination with 
any unexpected changes by the contracting agency to the actual work 
to be performed under the task order or contract. As a general 
matter, a Competition in Contracting Act challenge based solely on 
the incorporation of missing labor standards clauses or appropriate 
wage determinations would be without merit. See Booz Allen Hamilton 
Eng'g Servs., LLC, B-411065 (May 1, 2015), available at: https://www.gao.gov/products/b-411065.
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    The Department also engages in various compliance assistance 
efforts to decrease the risk that contract clauses will be omitted from 
covered contracts in the first place. The Department routinely conducts 
trainings for contracting agencies and other stakeholders about Davis-
Bacon coverage principles, issues and maintains guidance documents 
(such as the PWRB and FOH), and responds to requests for advice and 
rulings about coverage matters. In tandem with this rulemaking, the 
Department intends to continue these efforts to reduce the likelihood 
of erroneous omission of contract clauses and wage determinations. 
However, after decades of experience with this problem, the Department 
has determined that additional measures are necessary.
    To address these longstanding enforcement challenges, the 
Department proposed to exercise its authority under Reorganization Plan 
No. 14 of 1950 and 40 U.S.C. 3145 to adopt several changes to 
Sec. Sec.  1.6, 5.5, and 5.6.
(B) Proposed Regulatory Revisions
    In the NPRM, the Department proposed to include language in a new 
paragraph at Sec.  5.5(e) to provide that the labor standards contract 
clauses and appropriate wage determinations will be effective ``by 
operation of law'' in circumstances where they have been wrongly 
omitted from a covered contract. The Department explained that the 
purpose of the proposal was to ensure that, in all cases, a mechanism 
exists to enforce Congress's mandate that workers on covered contracts 
receive prevailing wages--notwithstanding any mistake by an executive 
branch official in an initial coverage decision or in an accidental 
omission of the labor standards contract clauses. The proposal would 
also ensure that workers receive the correct prevailing wages in 
circumstances where the correct wage determination has not been 
attached to the original contract or has not been incorporated during 
the exercise of an option.
    Under the proposal, erroneously omitted contract clauses and 
appropriate wage determinations would be effective by operation of law 
and therefore enforceable retroactive to the beginning of the contract 
or construction. The proposed language provided that all of the 
contract clauses set forth in Sec.  5.5--the contract clauses at Sec.  
5.5(a) and the CWHSSA contract clauses at Sec.  5.5(b)--are considered 
to be a part of every covered contract, whether or not they are 
physically incorporated into the contract. This includes the contract 
clauses requiring the payment of prevailing wages and overtime at Sec.  
5.5(a)(1) and (b)(1), respectively; the withholding clauses at Sec.  
5.5(a)(2) and (b)(3); and the labor-standards disputes clause at Sec.  
5.5(a)(9).
    In the NPRM, the Department explained that the operation-of-law 
provision is intended to complement the existing requirements in Sec.  
1.6(f) and would not entirely replace them. Thus, the contracting 
agency will still be required to take action as appropriate to 
terminate or modify the contract. Under the new proposed procedure, 
however, WHD would not need to await a contract modification to assess 
back wages and seek withholding, because the wage requirements and 
withholding clauses would be read into the contract as a matter of 
law.\247\ The application of the clauses and the correct wage 
determination as a matter of law would also provide WHD with an 
important tool to enforce the labor standards on a contract that a 
contracting agency decides it must terminate instead of modify.
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    \247\ The Department proposed parallel language in 29 CFR 5.9 
(Suspension of funds) to clarify that funds may be withheld under 
the contract clauses and appropriate wage determinations whether 
they have been incorporated into the contract physically, by 
reference, or by operation of law.
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    The proposal included two important provisions to protect both 
contractors and contracting agencies. First, the proposal included a 
provision requiring that contracting agencies compensate prime 
contractors for any increases in wages resulting from a post-award 
incorporation of a contract clause or wage determination by operation 
of law under Sec.  5.5(e). This proposed language was modeled after 
similar language that has been included in Sec.  1.6(f) since 
1983.\248\ Under the proposal, when the contract clause or wage 
determination is incorporated into the prime contract by operation of 
law, the prime contractor would be responsible for the payment of 
applicable prevailing wages to all workers under the contract--
including the workers of its subcontractors--retroactive to the 
contract award or beginning of construction, whichever occurs first. 
This is consistent with the current Davis-Bacon regulations and case 
law. See 29 CFR 5.5(a)(6); All Phase Elec. Co., WAB No. 85-18 (June 18, 
1986) (withholding contract payments from the prime for subcontractor 
employees even though the labor standards had not been flowed down into 
the subcontract). This responsibility, however, would be offset by the 
compensation provision in Sec.  5.5(e), which would require that the 
prime contractor be compensated for any increases in wages resulting 
from any post-award incorporation by operation of law.
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    \248\ See 46 FR 4306, 4313 (Jan. 16, 1981); 47 FR 23644, 23654 
(May 28, 1982) (implemented by 48 FR 19532 (Apr. 29, 1983)).
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    The second important provision in the proposed operation-of-law 
paragraph was language that provides protection for contracting 
agencies by continuing to allow requests that the Administrator grant a 
variance, tolerance, or exemption from application of the regulations. 
As noted in the NPRM, this includes an exemption from retroactive 
enforcement of wage determinations and contract clauses (or, where 
permissible, an exemption from prospective application) under the same 
conditions currently applicable to post-award determinations. See 29 
CFR 1.6(f); 29 CFR 5.14; City of Ellsworth, ARB No. 14-042, 2016 WL 
4238460, at *6-8 (June 6, 2016).\249\ In addition, as the Department 
noted in the NPRM, contracting agencies avoid difficulties associated 
with post-award incorporations by proactively incorporating the Davis-
Bacon labor standards clauses and applicable wage determinations into 
contracts or using the existing process for requesting a coverage 
ruling or interpretation from the Administrator prior to contract 
award. See 29 CFR 5.13.\250\
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    \249\ Factors that the Administrator considers in making a 
determination regarding retroactive application are discussed in the 
ARB's ruling in City of Ellsworth, ARB No. 14-042, 2016 WL 4238460, 
at *6-10. Among the non-exclusive list of potential factors are 
``the reasonableness or good faith of the contracting agency's 
coverage decision'' and ``the status of the procurement (i.e., to 
what extent the construction work has been completed).'' Id. at *10. 
In considering the status of the procurement, the Administrator will 
consider the status of construction at the time that the coverage or 
correction issue is first raised with the Administrator.
    \250\ Contracting agencies can also contest a determination by 
the Administrator that a contract is covered (either an initial 
determination or a post-award determination) or the Administrator's 
denial of a tolerance, variance, or exemption, by seeking review of 
the determination with the ARB. 29 CFR 7.1, 7.9. A decision of the 
ARB on a coverage question is a final agency action that in turn may 
be reviewable under the APA in Federal district court. See 5 U.S.C. 
702, 704.
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    The operation-of-law provision in proposed Sec.  5.5(e) is similar 
to the Department's existing regulations enacting Executive Order 
11246--Equal Employment Opportunity. See 41 CFR 60-1.4(e); United 
States v. Miss. Power & Light Co., 638 F.2d 899, 905-06 (5th Cir. 1981) 
(finding 41 CFR 60-1.4(e) to be valid and have force of law). The 
operation-of-law provision at 41 CFR 60-1.4(e), like the proposed 
language in

[[Page 57663]]

Sec.  5.5(e), operates in addition to and complements the other 
provisions in the Executive Order's regulations that require the equal 
opportunity contract clause to be included in the contract. See 41 CFR 
60-1.4(a).
    Unlike 41 CFR 60-1.4(e), the Department's proposed language in the 
new Sec.  5.5(e) would apply the ``operation of law'' provision only to 
prime contracts and not to subcontracts. The reason for this difference 
is that, as noted above, the Davis-Bacon regulations and case law 
provide that the prime contractor is responsible for the payment of 
applicable wages on all subcontracts. If the prime contract contains 
the labor standards as a matter of law, then the prime contractor is 
required to ensure that all employees on the contract--including 
subcontractors' employees--receive all applicable prevailing wages. 
Accordingly, as the Department explained in the NPRM, extending the 
operation-of-law provision itself to subcontracts is not necessary to 
enforce the Congressional mandate that all covered workers under the 
contract are paid the applicable prevailing wages.
    The proposed operation-of-law provision at Sec.  5.5(e) is also 
similar in many, but not all, respects to the judicially-developed 
Christian doctrine, named for the 1963 Court of Claims decision G.L. 
Christian & Assocs. v. United States, 312 F.2d 418 (Ct. Cl.), reh'g 
denied, 320 F.2d 345 (Ct. Cl. 1963). Under the doctrine, courts and 
administrative tribunals have held that required contractual provisions 
may be effective by operation of law in Federal government contracts, 
even if they were not in fact included in the contract. The doctrine 
applies even when there is no specific ``operation of law'' regulation 
as proposed here.
    The Christian doctrine flows from the basic concept in all contract 
law that ``the parties to a contract . . . are presumed or deemed to 
have contracted with reference to existing principles of law.'' 11 
Williston on Contracts Sec.  30:19 (4th ed. 2021); see Ogden v. 
Saunders, 25 U.S. 213, 231 (1827). Thus, those who contract with the 
government are charged with having ``knowledge of published 
regulations.'' PCA Health Plans of Texas, Inc. v. LaChance, 191 F.3d 
1353, 1356 (Fed. Cir. 1999) (citation omitted).
    Under the Christian doctrine, a court can find a contract clause 
effective by operation of law if that clause ``is required under 
applicable [F]ederal administrative regulations'' and ``it expresses a 
significant or deeply ingrained strand of public procurement policy.'' 
K-Con, Inc. v. Sec'y of Army, 908 F.3d 719, 724 (Fed. Cir. 2018). Where 
these prerequisites are satisfied, it does not matter if the contract 
clause at issue was wrongly omitted from a contract. A court will find 
that a Federal contractor had constructive knowledge of the regulation 
and that the required contract clause applies regardless of whether it 
was included in the contract.
    The recent decision of the Federal Circuit in K-Con is helpful to 
understanding why it is appropriate to provide that the DBA labor 
standards clauses are effective by operation of law. In K-Con, the 
Federal Circuit held that the Christian doctrine applies to the 1935 
Miller Act. 908 F.3d at 724-26. The Miller Act contains mandatory 
coverage provisions that are similar to those in the DBA, though with 
different threshold contract amounts. The Miller Act requires that 
contractors furnish payment and performance bonds before a contract is 
awarded for ``the construction, alteration, or repair of any public 
building or public work.'' 40 U.S.C. 3131(b). The DBA, as amended, 
requires that the prevailing wage stipulations be included in bid 
specifications ``for construction, alteration, or repair, including 
painting and decorating, of public buildings and public works.'' 40 
U.S.C. 3142(a).
    Like the Miller Act, the 90-year-old Davis-Bacon Act also expresses 
a significant and deeply ingrained strand of public procurement policy. 
The Miller Act and the Davis-Bacon Act are of similar vintage. The DBA 
was enacted in 1931. The DBA amendments were enacted in 1935, almost 
simultaneously with the Miller Act. Through both statutes, Congress 
aimed to protect participants on government contracts from nonpayment 
by prime contractors and subcontractors. Thus, the same factors that 
the Federal Circuit found sufficient to apply the Christian doctrine to 
the Miller Act also apply to the DBA and suggest that the proposed 
operation-of-law regulation would be appropriate.\251\
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    \251\ The Federal Circuit has also noted that the Christian 
doctrine applies to in the context of the SCA, which has a similar 
purpose as the DBA and dates only to 1965. See Call Henry, Inc. v. 
United States, 855 F.3d 1348, 1351 & n.1 (Fed. Cir. 2017). Because 
the DBA and SCA are similar statutes with the same basic purpose, 
the Department has long noted that court decisions relating to one 
of these acts may have a direct bearing on the other. See WHD 
Opinion Letter SCA-3 (Dec. 7, 1973).
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    The Department's proposal, however, offers more consideration for 
contractor equities than the Christian doctrine in two critical 
respects. First, as noted above, the proposed language at Sec.  5.5(e) 
would be paired with a contractor compensation provision similar to the 
existing provision in Sec.  1.6(f). The Christian doctrine does not 
incorporate such protection for contractors, and as a result, can have 
the effect of shifting cost burdens from the government to the 
contractor. In K-Con, for example, the doctrine supported the 
government's defense against a claim for equitable adjustment by the 
contractor. 908 F.3d at 724-28.
    Second, the Christian doctrine is effectively self-executing and 
renders contract clauses applicable by operation of law solely on the 
basis of the underlying requirement that they be inserted into covered 
contracts. The doctrine contains no specific mechanism through which 
the government can limit its application to avoid any unexpected or 
unjust results--other than simply deciding not to raise it as a defense 
or affirmative argument in litigation. The proposed provision here at 
Sec.  5.5(e), on the other hand, would pair the enactment of the 
operation-of-law language with the traditional authority of the 
Administrator to waive retroactive enforcement or grant a variance, 
tolerance, or exemption from the regulatory requirement under 29 CFR 
1.6(f) and 5.14, which the Department believes will foster a more 
orderly and predictable process and reduce the likelihood of any 
unintended consequences.
    In the NPRM, the Department also discussed whether it was necessary 
or advisable to create a different procedure in which the operation-of-
law rule would only become effective after a determination by the 
Administrator or a contracting agency that a contract was in fact 
covered. While the Department stated that it did not believe that such 
an approach was necessary, it nonetheless sought comment regarding this 
potential alternative.
(C) Discussion of Comments
(1) Sec.  5.5(e) and Operation of Law
    Many commenters expressed support for the operation-of-law proposal 
at Sec.  5.5(e) on the basis that it would be protective of workers. 
The LCCHR and other civil rights and employee advocacy organizations 
supported the proposal, stating that under the status quo, workers on 
covered projects too often do not receive DBRA-required prevailing 
wages ``on time or at all.'' Several unions strongly supported the 
proposal because it would ensure that, as UBC commented, the burden of 
``intentional or mistaken omissions'' would not be placed ``on the 
backs of construction workers.'' The FFC and the NCDCL wrote that 
technicalities or accidental omissions should not prevent

[[Page 57664]]

workers from ``receiving the protection of the DBRA and being paid the 
prevailing wage.''
    Various commenters emphasized other positive aspects of the 
proposal. The III-FFC stated that the approach will streamline 
enforcement. SMACNA noted that the compensation provision allows a 
contractor to rely on an initial determination that the DBA does not 
apply or a wage determination with lower rates applies. Similarly, 
LCCHR noted that the provision is more favorable to contractors than 
traditional operation-of-law doctrine because it provides reimbursement 
to prime contractors for any increase of wages that results from its 
invocation. Furthermore, LCCHR added that the provision's application 
only to prime contracts, and not subcontracts, reflects a targeted 
approach. This is appropriate, they stated, because prime contractors 
``are frequently repeat recipients of federal funds, engage directly 
with the contracting agency, and may reasonably be expected to be aware 
of generally applicable legal requirements, such as the DBRA.''
    Several commenters, including AFP-I4AW, ABC, CC&M, IEC, the SBA 
Office of Advocacy, and the group of U.S. Senators, opposed the 
operation-of-law proposal, arguing that it does not give contractors 
sufficient notice of the applicability of DBA requirements. IEC and the 
group of U.S. Senators asserted that a lack of notice is not consistent 
with basic contract and procedural due process principles. AFP-I4AW 
claimed that ``without direct contractual notice to contractors, the 
risk of unknowing violations will abound,'' and stressed the ``risk of 
inadvertent and completely avoidable noncompliance.'' And CC&M asserted 
that sometimes a local agency does not inform a contractor that Federal 
funds are being used on a particular project.
    Some commenters expressed concern that the operation-of-law 
provision would increase costs to contractors, and that those costs in 
turn could be passed on to the government. IEC, for example, asserted 
that the provision would lead to higher costs through two routes: 
first, uncertainty could result in contractors opting out of DBA-
covered work, resulting in less competition and thus, higher prices; 
and second, through contractors ``hedging'' about DBA coverage by 
``submitting bids that account for the DBA, when it is in fact not 
covered, but still placing these added costs onto the taxpayer.'' IEC 
also contended that ``contractors would have to track all the different 
regulatory changes (wage rates) from location,'' which would increase 
their cost of compliance. AFP-I4AW and two partners from the law firm 
Wiley Rein LLP expressed concern that the proposal could lead to 
increased litigation, with associated costs for contractors.\252\ ABC 
and the SBA Office of Advocacy expressed concern about costs and 
burdens on subcontractors.
---------------------------------------------------------------------------

    \252\ The Wiley Rein partners also expressed concern about how 
the operation-of-law provision would function in contracts that may 
be jointly covered by both the DBA and the SCA.
---------------------------------------------------------------------------

    The Wiley Rein partners and the group of U.S. Senators expressed 
concern that the provision requiring compensation for contractors would 
not work as proposed. The Wiley Rein partners stated that contracting 
officers might simply refuse to provide an equitable adjustment, 
notwithstanding the express requirement in Sec.  5.5(e). The result 
could be unreimbursed cost increases ``and related adverse effects.'' 
The Senators suggested that agencies might ``use the threat of refusing 
to award contract bids in the future'' in order to pressure contractors 
not to seek compensation. CC&M stated that it is unfair for a 
contracting agency to transfer liability to a contractor when it is the 
agency that failed to meet its obligations.
    A few commenters expressed concern that the Department lacks the 
authority to implement the proposed rule. The FTBA noted that the text 
of the DBA explicitly requires contracting agencies to insert the 
contract clauses in covered contracts. Given this statutory language, 
the comment asserted, ``it is within the sole power and domain of the 
federal courts, not the DOL as a regulatory agency, to make any 
determination that the DBA requirements are applicable by operation of 
law.'' AFP-I4AW argued that the there is no ``legal justification'' for 
the proposal because the statute requires the government to include the 
proper clauses in the contract. The comment from the group of U.S. 
Senators stated that the statute meant to place the burden on procuring 
agencies, not contractors.
    Commenters disagreed about the effect of the Supreme Court's 
decision in University Research Ass'n v. Coutu, 450 U.S. 754 (1981), 
and the state of the law on the Christian doctrine. The WileyRein 
partners noted the Court's statement in the Coutu decision that the DBA 
is ``not self-executing.'' See also id. at 784 n.38. Accordingly, the 
partners expressed doubt that the Department can ``give away'' its 
interpretive authority by allowing arbitrators, courts, or other 
administrative agencies to make determinations about whether the DBA 
should be found to be incorporated by operation of law in a given 
contract.
    The FTBA and the Wiley Rein partners argued that the Department had 
read too much into Federal Circuit decisions discussing the Christian 
doctrine. The Wiley Rein partners suggested that Coutu and Bellsouth 
Communications Systems, ASBCA No. 45955, 94-3 BCA ] 27231, a subsequent 
decision issued by the Armed Services Board of Contract Appeals, 
undermine the significance of the Federal Circuit's decision about the 
Miller Act in K-Con, 908 F.3d at 724-26. In addition, both the FTBA and 
the Wiley Rein partners stated the Department had overread the Federal 
Circuit's decision in Call Henry, 855 F.3d at 1351 n.1, because, among 
other reasons, that decision involved a situation in which the core SCA 
clauses had in fact been incorporated into the contract.
    On the other hand, the LCCHR and other civil rights and worker 
advocacy groups noted that multiple decisions after Coutu have stated 
that the DBA contract clauses may be effective by operation of law. 
See, e.g., United States ex rel. D.L.I. Inc. v. Allegheny Jefferson 
Millwork, LLC, 540 F. Supp. 2d 165, 176 (D.D.C. 2008) (``When such 
provisions are omitted from a prime contract, they do become part of 
the contract by operation of law, and the prime contractor is charged 
with constructive knowledge of Davis-Bacon's requirements.''); BUI 
Constr. Co. & Bldg. Supply, ASBCA No. 28707, 84-1 B.C.A. ] 17183 
(citing G.L. Christian, 312 F.2d at 418). LCCHR noted that these 
decisions were issued after Coutu, which suggests that Coutu imposes no 
bar to the proposed rule.
    The Wiley Rein partners made several recommendations in their 
comment. They recommended that instead of the Department's current 
proposal, the Department should adapt the SCA regulation codified at 29 
CFR 4.5(c) for use in the DBRA rule. Section 4.5(c) instructs 
contracting agencies to add omitted SCA requirements to contracts after 
award by modification but does not make them effective by operation of 
law. The partners stated that this approach would reduce the risk that 
contractors would not be made whole for increased costs, while still 
addressing the Department's enforcement concerns. They suggested that 
the SCA post-award modification provision has been time-tested because 
it was implemented many years ago. See 48 FR 49736, 49766 (Oct. 27, 
1983).
    The Wiley Rein partners also made two suggestions in the 
alternative. First, if their recommendation to adapt the SCA regulation 
is declined, the

[[Page 57665]]

Department should instead finalize the alternative option discussed in 
the NPRM to require that the operation-of-law provision at Sec.  5.5(e) 
be effective only after a determination by the contracting agency or 
the Department that the DBRA applies to the contract at issue. The 
partners stated that this option is consistent with the Christian 
doctrine, ``comports with existing caselaw,'' and offers certain 
practical benefits as well.\253\ The Wiley Rein partners also suggested 
that the Department should defer the effective date for the operation-
of-law provision until the FAR is updated to expressly require 
equitable adjustments in these circumstances.
---------------------------------------------------------------------------

    \253\ Conversely, two other commenters, UBC and the III-FFC, 
stated that the Department's proposed rule as written was superior 
to the alternative option in which the DBA provisions would only be 
added by operation of law after a determination by the 
Administrator.
---------------------------------------------------------------------------

    A few other commenters requested clarifications or made 
suggestions. AGC stated that the Department ``has always maintained 
that the DBA clauses required by the regulation are applicable by 
operation of law.'' They asserted, however, that this has never been 
``official,'' and they noted that the Department's practice is to 
require retroactive incorporation of contract clauses and appropriate 
wage determinations into a contract before enforcement. AGC 
acknowledged the language in the proposal that would require 
compensation for contractors where the operation-of-law provision is 
invoked but asked for ``further clarifications'' because ``[i]t is 
absolutely necessary that prime contractors be compensated for any 
increased costs caused by a contracting agency failure.'' The COSCDA 
similarly agreed that the Department should take actions to secure 
adequate compensation for workers in a timely manner, but it stated 
that proposals to do so should not impose additional costs on 
contractors or program administrators. CC&M suggested that when 
compensation is provided under the proposal, agencies should be 
required to pay the contractor ``150% of the delta between what the 
contractor paid and the amount that should have been paid,'' to 
penalize the agency for its error, and that withholding or cross-
withholding for violations based on operation of law should not be 
permitted unless such a rule is implemented.
    Lastly, a number of union and contractor association commenters 
expressed general support for the provision ensuring that DBA 
provisions are incorporated by ``operation of law.'' Those commenters 
included the Alaska District Council of Laborers, Bricklayers & Allied 
Craftworkers Local #1, LIUNA, LIUNA Local 341, LIUNA Local 942, the 
Massachusetts Building Trades Unions, NABTU, the Southern Nevada 
Building Trades Unions (SNBTU), the WA BCTC, SMACNA, and CEA.
    The Department considered the comments submitted regarding the 
operation-of-law provision at Sec.  5.5(e) and agrees with those 
commenters that supported the implementation of the provision as 
proposed in the NPRM. Commenters noted that failures by contracting 
agencies to properly incorporate the DBRA contract clauses and wage 
determinations have significant consequences for the workers that the 
DBA and Related Acts were enacted to protect. For example, the comment 
from LCCHR and other civil rights and worker advocacy organizations 
cited a news article that discussed similar problems occurring during 
the implementation of the 2009 Recovery Act. See Ben Penn, ``Labor's 
Infrastructure Wins Depend on Avoiding Problems of 2009,'' Bloomberg L. 
(Nov. 9, 2021).\254\ According to the article, during the 
implementation of the Recovery Act, the Department ``struggled to 
secure commitments on worker pay standards from government agencies 
that awarded contracts,'' problems ``fueled interagency breakdowns and 
debates over whether prevailing wage standards were applicable on 
particular projects,'' and ``[u]ltimately, workers paid the price when 
Davis-Bacon wasn't applied, lowering their pay.'' Id. As the Department 
noted in the NPRM, it is not appropriate for staff at an executive 
agency to effectively nullify Congress's intent that Davis-Bacon 
standards apply to certain categories of contracts.
---------------------------------------------------------------------------

    \254\ Available at: https://news.bloomberglaw.com/daily-labor-report/labors-infrastructure-wins-depend-on-avoiding-problems-of-2009.
---------------------------------------------------------------------------

    While the operation-of-law provision addressed an important subset 
of enforcement problems, as a practical matter it should not represent 
a broad expansion of application of the DBRA. As COSCDA noted in their 
comment, the proposal is an ``extension of the retroactive modification 
procedures'' that have been in effect in Sec.  1.6 of the regulations 
since the 1981-1982 rulemaking. While the Sec.  1.6(f) procedure in the 
existing regulations references only wage determinations, the 
Department has long interpreted the procedure to also require the 
retroactive modification of contracts to include missing contract 
clauses themselves. The operation-of-law provision has the effect of 
extending the current status quo only to those situations in which a 
contract has not been timely modified through the retroactive 
modification procedures in Sec.  1.6(f).
    MBI, BCCI, PCCA, and several others asserted the proposal would 
function by ``essentially eliminating the requirement to publish 
specific Davis-Bacon wage determinations in project bid and contract 
documents.'' However, this characterization is not accurate. Under the 
current procedures, contracting agencies' responsibility to insert 
contract clauses and wage determinations has long co-existed with a 
post-award modification procedure that allows the government to remedy 
any circumstances when those clauses have been omitted. Since the 1981-
1982 rulemaking, Sec.  5.5(a) has required a contracting agency head to 
``cause or require the contracting officer to insert'' the required 
contract clauses into any covered contracts. 29 CFR 5.5(a). Likewise, 
Sec.  5.6(a)(1)(i) has stated that the Federal agency is responsible 
for ``ascertain[ing] whether the clauses required by Sec.  5.5 and the 
appropriate wage determination(s) have been incorporated'' into covered 
contracts. Id. Sec.  5.6.
    The proposed operation-of-law proposal is not significantly 
different in this respect from the current incorporation and 
enforcement procedures. Contrary to the concerns of MBI and other 
commenters, Sec.  5.5(a) in the final rule continues to require 
contracting agencies to insert the contract clauses in full into 
covered contracts, although the Department has also added language to 
Sec.  5.5(a) and (b) to clarify that the FAR permits incorporation by 
reference. The contract clause at Sec.  5.5(a)(1) continues to 
contemplate that, for non-FAR contracts, the applicable wage 
determinations ``will be attached hereto and made a part thereof.'' 
These requirements are reinforced by practical consequences. The new 
provision at Sec.  5.5(e) requires that contracting agencies compensate 
contractors for any resulting increases in wages when the agency fails 
to incorporate the contract clauses and wage determinations and those 
clauses or wage determinations are subsequently incorporated into the 
contract through the operation-of-law provision. It is therefore not 
the case, as the commenters contended, that this rule eliminates 
contracting agencies' obligations to include wage determinations in 
covered contracts.
    Given current enforcement procedures already require agencies to 
incorporate omitted contract clauses and require compensation from 
contracting agencies in those

[[Page 57666]]

circumstances, it is unlikely that the operation-of-law provision will 
materially increase overall costs to contractors or the government. In 
the individual cases in which the provision ultimately must be invoked, 
the costs will be borne by the government, and not the contractor, 
because the operation-of-law provision at Sec.  5.5(e) requires 
agencies to compensate a prime contractor for any increases in wages. 
However, in such cases, the operation-of-law provision should increase 
efficiency and reduce administrative costs for both contracting 
agencies and the Department. It will reduce the need for extended 
negotiations about retroactive modification. It also may in some 
circumstances reduce litigation costs by reducing or eliminating 
disputes about the method and timing of modification. The existence of 
the compensation provision significantly reduces the potential that 
CC&M identified of contractors being required to pay the price for 
errors by contracting agencies.
    The Department also is not persuaded by comments from IEC and 
others that the operation-of-law provision will increase contractors' 
general compliance costs because contractors will have to newly track 
coverage provisions or may prophylactically apply Davis-Bacon wages 
even where they do not apply. The Department already interprets the 
DBRA to require employers to take affirmative steps to ensure that they 
are in compliance. See, e.g., Coleman Construction Co., ARB No. 15-002, 
2016 WL 4238468, at *6 (holding that ``[t]he law is clear that, if a 
contract subject to Davis-Bacon lacks the wage determination, it is the 
employer's obligation . . . to get it''). And, the Department's current 
application of Sec.  1.6(f) provides similar incentives and 
consequences as will the operation-of-law provision. As the comment 
from LCCHR and other civil rights and employee advocacy organizations 
noted, trade publications already advise contractors to be proactive in 
determining whether a project is covered.\255\ Because prime 
contractors are already monitoring DBRA coverage, the Department 
believes any increased compliance burdens due to this change will be 
minimal and are outweighed by the Department's goal of streamlining 
coverage determinations, ensuring effective enforcement, and reducing 
economic hardship to workers caused by delays in receiving backpay.
---------------------------------------------------------------------------

    \255\ See Kim Slowey, ``The Dotted Line: Beefing up Davis-Bacon 
compliance,'' Construction Dive (Mar. 30, 2021), https://www.constructiondive.com/news/the-dotted-line-beefing-up-davis-bacon-compliance/597398.
---------------------------------------------------------------------------

    The Department has also considered specific concerns raised by ABC 
and the SBA Office of Advocacy about the effects on subcontractors of 
the operation-of-law provision. ABC stated that the result of the 
operation-of-law provision would be to hold subcontractors (as well as 
prime contractors) responsible for DBRA violations without notice. The 
SBA Office of Advocacy stated that small subcontractors are less 
equipped to absorb withholding on a contract. As the Department 
explained in the NPRM, however, Sec.  5.5(e) limits the reach of the 
operation-of-law provision to prime contractors only, rather than 
including subcontractors. Accordingly, if neither a prime contract nor 
a subcontract thereunder references the DBA, the Department would not 
hold a subcontractor liable for unpaid back wages under Sec.  5.5(e). 
The Department recognizes that there may still be residual effects on a 
subcontractor where the operation-of-law provision is invoked and funds 
are withheld from a prime contractor to ensure that workers of a 
subcontractor are paid the required prevailing wages. In such a 
situation, it is possible the prime contractor might in turn delay in 
paying its subcontractor in full as a result. However, this 
circumstance is not materially different than any other enforcement 
action that involves withholding, except that there is a provision 
requiring compensation that should make the effects of any withholding 
temporary. Moreover, because the operation-of-law provision is likely 
to be invoked in only a small portion of overall enforcement actions, 
the Department believes that the additional impact of such actions on 
subcontractors will be minimal. The Department thus has concluded that 
the final rule's limited effects on subcontractors are outweighed by 
the Department's goal of streamlining and ensuring the effectiveness of 
enforcement.
    The Department also disagrees with those commenters that argued 
that the proposal does not give contractors sufficient notice of the 
applicability of DBA requirements. As noted in the NPRM, those that 
contract with the government are charged with having ``knowledge of 
published regulations.'' PCA Health Plans of Texas, 191 F.3d at 1356 
(citing Federal Crop Ins. Corp. v. Merrill, 332 U.S. 380, 384-85 
(1947)). ``[T]he appearance of rules and regulations in the Federal 
Register gives legal notice of their contents.'' Merrill, 332 U.S. at 
384-385. Under the Department's final rule, contractors will be put on 
notice, through the language of Sec.  5.5(e), that the DBRA 
requirements are effective by operation of law, regardless of whether 
they have been wrongly omitted from a contract. Section 1.6(b)(2) also 
provides notice that a contractor has an ``affirmative obligation to 
ensure that its pay practices are in compliance with the Davis-Bacon 
Act labor standards.'' Further, any contractor can seek guidance from 
the Department prior to contract award regarding whether the DBA 
provisions should apply to a contract. See 29 CFR 5.13. These 
regulations provide notice to prime contractors of the potential that 
DBRA contract clauses may be effective by operation of law. For similar 
reasons, the Department disagrees with the comments from IEC and the 
group of U.S. Senators that the proposal does not comport with 
procedural due process.\256\
---------------------------------------------------------------------------

    \256\ In addition to the notice provided by the regulation 
itself, contractors are provided due process through the 
administrative procedures that allow contractors to challenge a 
ruling by the Department that a contract is covered by the DBRA or 
that back wages are owed. See generally 29 CFR 5.11.
---------------------------------------------------------------------------

    In the NPRM, the Department provided a review of legal 
considerations regarding the application of the operation-of-law 
provision. The commenters suggesting that the statute does not permit 
the provision, or, as the AFP-I4AW argued, that the Department lacked a 
``legal justification,'' largely did not engage with that reasoning in 
the NPRM. The group of U.S. Senators, for example, stated that the 
statute meant to place the burden on procuring agencies, not 
contractors. This comment, however, did not acknowledge that the 
compensation provision in the operation-of-law proposal does in 
practice place the ultimate responsibility on the contracting agency 
rather than contractors.
    The commenters raising legal questions about the operation-of-law 
proposal based their arguments largely on the DBA's express requirement 
that contracting agencies incorporate the contract clauses into covered 
contracts. The commenters suggested that this language prevents the 
Department from enforcing the Act where the clause is not included. The 
mandatory nature of this statutory requirement, however, is itself the 
basis for the operation-of-law provision. See K-Con, 908 F.3d at 724. 
Where Congress has expressly stated that a contract clause must be 
included in certain types of contracts, that is precisely where it is 
not appropriate to allow a contracting agency to effectively nullify 
the statutory command by failing

[[Page 57667]]

to act. See S.J. Amoroso Const. Co. v. United States, 12 F.3d 1072, 
1075 (Fed. Cir. 1993) (discussing G.L. Christian & Assocs., 312 F.2d at 
426).\257\ As the Court of Federal Claims explained in denying 
rehearing on the original decision in G.L. Christian & Assocs., the 
animating principle is that ``[o]bligatory Congressional enactments are 
held to govern federal contracts because there is a need to guard the 
dominant legislative policy against ad hoc encroachment or dispensation 
by the executive.'' G.L. Christian & Assocs. v. United States, 320 F.2d 
345, 350-51 (Ct. Cl. 1963) (denying reconsideration). Therefore, the 
Department does not interpret the Davis-Bacon Act's requirement that 
agencies include a mandatory contract clause in covered contracts to 
preclude the proposed operation-of-law provision as designed.\258\
---------------------------------------------------------------------------

    \257\ Like the K-Con decision, the S.J. Amoroso Construction Co. 
matter also involved the application of statutory coverage language 
which mirrors the text of the DBA. Compare 41 U.S.C. 8303(a) 
(formerly cited as 41 U.S.C. 10b) (requiring, under the 1933 Buy 
America Act, that ``[e]very contract for the construction, 
alteration, or repair of any public building or public work in the 
United States . . . shall contain'' certain contract provisions) 
with 40 U.S.C. 3142(a) (requiring, under the DBA, that ``[e]very 
contract . . . for construction, alteration, or repair . . . of 
public building or public works . . . shall contain a provision'' 
setting prevailing wages).
    \258\ The Department disagrees with the FTBA that this statutory 
language gives Federal courts ``sole power and domain'' to determine 
whether any DBA requirements are applicable by operation of law. 
While the Christian doctrine is a judicially-made rule, the concept 
of ``operation of law'' is not limited to judge-made rules. See 
Operation of Law, Black's Law Dictionary (11th ed. 2019) (defining 
the concept as ``[t]he means by which a right or a liability is 
created for a party regardless of the party's actual intent''). 
Likewise, the potential for such a judicially imposed outcome does 
not bar administrative agencies from identifying specific 
circumstances where a rule will be effective by operation of law. 
See, e.g., 19 CFR 111.45(b) (prescribing that if a customs broker 
fails to pay user fee, permit is revoked by operation of law); 29 
CFR 38.25 (prescribing that a grant applicant's nondiscrimination 
assurance is considered incorporated by operation of law into grants 
and other instruments under the Workforce Innovation and Opportunity 
Act); 49 CFR 29.207 (prescribing that if a Tribe submits a final 
offer to the Department of Transportation to resolve a dispute and 
the Department takes no action with the 45-day review period, the 
offer is accepted by operation of law).
---------------------------------------------------------------------------

    The Department also disagrees with FTBA and the Wiley Rein partners 
that the NPRM read too much into Call Henry, Inc. v. United States, 855 
F.3d 1348, 1351 n.1 (Fed. Cir. 2017). The FTBA stated that the Call 
Henry decision only discussed operation of law with regard to section 
4(c) of the SCA, under which a predecessor contractor's CBA is 
recognized by operation of law as the contract wage determination. That 
observation is not accurate. While the opinion also discusses section 
4(c), the Department's citation was to the opinion's separate 
discussion of the SCA price adjustment clauses. See Call Henry, 855 
F.3d at 1351 n.1 (Fed. Cir. 2017). There, the Federal Circuit noted 
that the appropriate SCA price adjustment clause at 48 CFR 52.222-43 
had not been included in the contract at issue in that case, but 
explained that ``[p]ursuant to the Christian doctrine, the mandatory 
SCA clauses applicable to this contract are incorporated by reference, 
as those clauses reflect congressionally enacted, deeply ingrained 
procurement policy.'' Id. (citing G.L. Christian & Assocs., 312 F.2d at 
426). That the Federal Circuit found the SCA price adjustment clauses 
satisfy those elements of the Christian doctrine is certainly relevant 
to whether it is justifiable to require the DBRA clauses to be 
effective by operation of law as well.
    The Wiley Rein partners also questioned whether the Supreme Court's 
decision in Coutu casts doubt on the Department's reference to K-Con 
and the Christian doctrine. As noted in the NPRM, before proposing this 
new regulatory provision, the Department considered the implications of 
the Supreme Court's decision in Coutu. In that case, the Court held 
that there was no implied private right of action for workers to sue 
under the Davis-Bacon Act--at least when the contract clauses were not 
included in the contract. Coutu, 450 U.S. at 768-69 & nn.17, 19. 
Although not the focus of the decision, the Court also stated in dicta 
that the workers in that case could not rely on the Christian doctrine 
to read the missing DBA contract clause into the contract. Id. at 784 & 
n.38.\259\ For the reasons discussed in the NPRM and below, however, 
the Department has concluded that the operation-of-law provision in the 
final rule is consistent with Coutu and that the distinctions between 
the final rule and the Christian doctrine address the concerns that 
animated the Coutu Court in that case.
---------------------------------------------------------------------------

    \259\ See Steven Feldman, 1 Government Contract Awards: 
Negotiation and Sealed Bidding Sec.  1:7 n.16 (rev. Oct. 2022) 
(describing the discussion in Coutu as ``infrequently recognized 
dictum'').
---------------------------------------------------------------------------

    One of the Court's fundamental concerns in Coutu was that an 
implied private right of action could allow parties to evade the 
Department's review of whether a contract should be covered by the Act. 
The Court noted that there was at the time ``no administrative 
procedure that expressly provides review of a coverage determination 
after the contract has been let.'' 450 U.S. at 761 n.9.\260\ If an 
implied private right of action existed under those circumstances, 
private parties could effectively avoid raising any questions about 
coverage with the Department or with the contracting agency--and 
instead bring them directly to a Federal court to second-guess the 
administrative determinations. Id. at 783-84.
---------------------------------------------------------------------------

    \260\ Section 1.6(f) did not go into effect until Apr. 29, 1983, 
nearly 2 years after the Coutu decision. See 48 FR 19532. Moreover, 
although the Department has used Sec.  1.6(f) to address post-award 
coverage determinations, as noted here, the language of that 
paragraph references wage determinations and does not explicitly 
address the omission of required contract clauses. The Department 
now seeks to remedy that ambiguity in Sec.  1.6(f) by adding similar 
language to Sec.  5.6, as discussed below, in addition to the 
proposed operation-of-law language at Sec.  5.5(e).
---------------------------------------------------------------------------

    Another of the Court's concerns was that such an implied private 
right of action would undermine Federal contractors' reliance on the 
wage determinations that the Federal government had (or had not) 
incorporated into bid specifications. The Supreme Court noted that one 
of the purposes of the 1935 amendments to the DBA was to ensure that 
contractors could rely on the predetermination of wage rates that apply 
to each contract. 450 U.S. at 776. If, after a contract had already 
been awarded, a court could find that a higher prevailing wage applied 
to that contract than had been previously determined, the contractor 
could lose money because of its mistaken reliance on the prior rates--
all of which would undermine Congress's intent. Id. at 776-77.
    The operation-of-law procedure in this final rule alleviates both 
of these concerns. As noted, the procedure differs from the Christian 
doctrine because--like under the existing regulation at Sec.  1.6(f)--
contractors will be compensated for any increase in costs caused by the 
government's failure to properly incorporate the clauses or wage 
determinations. The proposed procedure therefore will not undermine 
contractors' reliance on an initial determination by the contracting 
agency that the DBRA did not apply or that a wage determination with 
lower rates applied.\261\ In light of the clear rule

[[Page 57668]]

requiring compensation, the Department is not persuaded by the concerns 
raised by commenters that contracting agencies might simply ignore the 
compensation requirement.\262\
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    \261\ For the same reason, the BellSouth case cited by the Wiley 
Rein partners does not undermine the Department's logic. In that 
case, after the government unilaterally modified a contract pursuant 
to 29 CFR 1.6(f), the government denied part of a request for 
compensation, and attempted to use the Christian doctrine to 
circumvent the requirement for compensation in Sec.  1.6(f) and the 
applicable FAR provisions. ASBCA No. 45955, Sept. 27, 1994, 94-3 BCA 
] 27231. Under the proposed operation-of-law provision in Sec.  
5.5(e), to the contrary, the Department is specifying that when the 
contract clauses are effective by operation of law, contractors will 
be compensated ``for any resulting increase in wages in accordance 
with applicable law.''
    \262\ The Department is not persuaded by the speculation from 
the group of U.S. Senators that contracting agencies might ``use the 
threat of refusing to award contracts in the future'' in order to 
pressure contractors not to seek compensation. The Department is not 
aware of any basis on which a contracting agency would be permitted 
to deny future awards because a contractor sought reimbursement 
under that regulation that expressly provides for such compensation.
---------------------------------------------------------------------------

    Nor does the operation-of-law rule risk creating an end-run around 
the administrative procedures set up by contracting agencies and the 
Department pursuant to Reorganization Plan No. 14. Instead, the 
provision will function as part of an administrative structure 
implemented by the Administrator and subject to the Administrator's 
decision to grant a variance, tolerance, or exemption. Its enactment 
should not affect one way or another whether any implied private right 
of action exists under the statute. Executive Order 11246 provides a 
helpful comparator. In 1968, the Department promulgated the regulation 
clarifying that the Executive Order's equal opportunity contract clause 
would be effective by ``operation of the Order'' regardless of whether 
it is physically incorporated into the contract. 41 CFR 60-1.4(e). That 
regulation was upheld, and the Christian doctrine was also found to 
apply to the required equal opportunity contract clause. See Miss. 
Power & Light, 638 F.2d at 905-06. Nonetheless, courts have widely held 
that E.O. 11246 does not convey an implied private right of action. 
See, e.g., Utley v. Varian Assocs., Inc., 811 F.2d 1279, 1288 (9th Cir. 
1987).
    The Department has also considered whether the operation-of-law 
provision will lead to an increase in bid protest litigation or expand 
the authority of the Court of Federal Claims or other contracting 
appeal tribunals to develop their own case law on the application of 
the DBRA without the input of the Department. In exploring this 
question, the Department considered proposing an alternative procedure 
in which the operation-of-law rule would only become effective after a 
determination by the Administrator or a contracting agency that a 
contract was in fact covered. The Department, however, does not believe 
that such an approach is necessary because both the GAO and the Federal 
Circuit maintain strict waiver rules that prohibit post-award bid 
protests based on errors or ambiguities in the solicitation. See NCS/
EML JV, LLC, B-412277, 2016 WL 335854, at *8 n.10 (Comp. Gen. Jan. 14, 
2016) (collecting GAO decisions); Blue & Gold Fleet, L.P. v. United 
States, 492 F.3d 1308, 1312-13 (Fed. Cir. 2007).\263\
---------------------------------------------------------------------------

    \263\ In Blue & Gold, the National Park Service failed to 
include the SCA contract clauses in a contract that the Department 
of Labor later concluded was covered by the Act. The Federal Circuit 
denied the bid protest from a losing bidder because ``a party who 
has the opportunity to object to the terms of a government 
solicitation containing a patent error and fails to do so prior to 
the close of the bidding process waives its ability to raise the 
same objection subsequently in a bid protest action in the Court of 
Federal Claims.'' 492 F.3d at 1313.
---------------------------------------------------------------------------

    The operation-of-law provision as enacted in this final rule also 
will not affect the well-settled case law in the Court of Federal 
Claims--developed after the Coutu decision--that only the Department of 
Labor has jurisdiction to resolve disputes arising out of the labor 
standards provisions of the contract. As part of the post-Coutu 1982 
final rule, the Department enacted a provision at 29 CFR 5.5(a)(9) that 
requires a disputes clause with that jurisdictional limitation to be 
included in all DBRA-covered contracts. See 47 FR 23660-61 (final rule 
addressing comments received on the proposal). The labor standards 
disputes clause creates an exception to the Contract Disputes Act of 
1974 and effectively bars the Court of Federal Claims from deciding 
substantive matters related to the Davis-Bacon Act and Related Acts. 
See, e.g., Emerald Maint., Inc. v. United States, 925 F.2d 1425, 1428-
29 (Fed. Cir. 1991). Under the operation-of-law provision, the disputes 
clause at Sec.  5.5(a)(9) will continue to be effective even when it 
has been omitted from a contract because the language of the operation-
of-law provision applies the principle to all of the required contract 
clauses in Sec.  5.5(a)--including Sec.  5.5(a)(9). As a result, under 
the operation-of-law provision, disputes regarding DBRA coverage or 
other related matters arising under Sec.  5.5(a)(9) should continue to 
be heard only through the Department's administrative process instead 
of or prior to any judicial review in the Court of Federal Claims, and 
there is no reason to believe that the implementation of the operation-
of-law provision would lead to a parallel body of case law in that 
venue.
    The Department has also considered the Wiley Rein partners' concern 
that the operation-of-law provision could result in litigation pursuant 
to the False Claims Act (FCA). See 31 U.S.C. 3729 et seq. The FCA, 
which applies to claims submitted by contractors for payment under the 
DBRA, provides an important avenue for private whistleblowers to assist 
the government in recovering funds that have been paid out as a result 
of false or fraudulent claims. See, e.g., United States ex rel. Int'l 
Bhd. of Elec. Workers Loc. 98 v. Farfield Co., 5 F.4th 315, 343 (3d 
Cir. 2021). To be actionable, the FCA requires false claims to be 
``material'' to the Government's decision to make payments in response 
to the claims. Id. at 342 (citing 31 U.S.C. 3729(a)(1)(B)). Where a DBA 
contractor fails to comply with the DBRA contract clauses, the 
regulations require contracting agencies to suspend payments to the 
contractor. See 29 CFR 5.9 (stating in the event of a contractor's 
compliance failure, the government ``shall'' take action if necessary 
to suspend payments). And where a contractor knowingly misrepresents 
information on the certified payroll it must submit, it subjects itself 
to potential criminal penalties for false statements (which are 
referenced on the certified payroll forms themselves) and 
debarment.\264\
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    \264\ The Department pursues recovery (and suspension or 
withholding as necessary) regardless of the amount of unpaid wages. 
Davis-Bacon enforcement efforts at the Department in the last decade 
have resulted in the recovery of more than $229 million in back 
wages for over 76,000 workers. see 2020 GAO Report, at 39, supra 
note 14. This recovery occurred across 14,639 compliance 
determinations, meaning that the average recovery in a compliance 
investigation was under $16,000.
---------------------------------------------------------------------------

    The circumstances may be different, however, where no certified 
payroll has been submitted because the contract clause has been omitted 
entirely from the contract by the contracting agency. As noted in the 
NPRM, debarment requires some degree of intent, so it would generally 
not be appropriate to debar a contractor for violations where the 
contracting agency omitted the contract clause and the clause was 
subsequently incorporated retroactively or found to be effective by 
operation of law. The FCA also has a scienter requirement that, like 
the DBRA debarment standard, requires a level of culpability beyond 
negligence. See United States v. Comstor Corp., 308 F. Supp. 3d 56, 88 
(D.D.C. 2018). Whether the FCA scienter requirement can be satisfied 
will depend on the facts and circumstances of any individual case. For 
example, where a contracting agency omits the contract clauses based on 
case law or guidance from the Department that is public or shared with 
the contractor, a relator would be unlikely to be able to satisfy the 
FCA's scienter requirement for the same reasons that debarment would 
generally not be appropriate. For these reasons, there is no certainty 
that the operation-of-law provision will lead to a

[[Page 57669]]

significant expansion of FCA disputes.\265\
---------------------------------------------------------------------------

    \265\ AFP-I4AW also expressed a generalized concern about 
increased litigation from the operation-of-law provision. As there 
is no certainty that the provision will increase bid protests, 
claims in the Court of Federal Claims, or FCA litigation, the 
Department does not agree that such generalized concern is a 
persuasive reason to decline to adopt the proposal.
---------------------------------------------------------------------------

    Finally, the Wiley Rein partners' concern about arbitrators 
potentially deciding Davis-Bacon coverage issues does not warrant a 
different approach. The Department believes it is unlikely that 
arbitrators will be asked to consider Davis-Bacon questions with any 
frequency. When a dispute turns on Davis-Bacon determinations that 
implicate the Department's technical expertise, arbitration is not 
appropriate. See IBEW Local 113 v. T&H Services, 8 F.4th 950, 962-63 
(10th Cir. 2021). Moreover, mandatory pre-dispute arbitration 
agreements neither prevent workers from alerting agencies to potential 
violations of the law nor limit agencies' authority to pursue 
appropriate enforcement measures in response to worker complaints. See 
EEOC v. Waffle House, Inc., 534 U.S. 279, 287 (2002). To the extent 
that any arbitrator considers a Davis-Bacon coverage question, however, 
it would not run the risk of creating a separate body of law because 
arbitration decisions are generally sealed and non-precedential.
    Given all of these continued safeguards and considerations, the 
Department believes it is not necessary to expressly limit the proposed 
operation-of-law provision to be effective only after the Department or 
a contracting agency determines that contract clauses or wage 
determinations were erroneously omitted, as the Wiley Rein partners 
advocated.
    The Department also considered the Wiley Rein partners' suggestion 
to replace the operation-of-law provision with post-award procedures 
similar to the SCA regulation at 29 CFR 4.5(c). The SCA regulation at 
Sec.  4.5(c) is similar to the existing DBRA regulation at Sec.  
1.6(f). It covers situations where the Department discovers that a 
contracting agency made an erroneous determination that the SCA did not 
apply to a particular contract and/or failed to include an appropriate 
wage determination in the contract. Id. Sec.  4.5(c). In those 
situations, the SCA regulation states that the contracting agency has 
30 days from the notification by the Department to incorporate the 
missing clauses or wage determinations through the exercise of any all 
authority that may be needed, including through its authority to pay 
any additional costs. Id. It also states that the Department can 
require retroactive application. Id. The Wiley Rein partners wrote that 
a primary benefit of this proposal would be to avert FCA litigation or 
other disputes. For the reasons discussed above, the Department is not 
persuaded that the final rule will lead to a significant increase in 
FCA or other litigation.
    This language from Sec.  4.5(c), moreover, does not fully address 
the underlying problems that the Department is seeking to address with 
the operation-of-law provision. Section 4.5(c) still leaves the 
Department's enforcement efforts dependent on the willingness or 
ability of contracting agencies to pursue modification of a contract at 
the Department's direction, and the speed with which they accomplish 
the necessary modification. While many agencies timely act in response 
to the Department's requests under Sec.  4.5(c), the Department has 
also experienced many of the same challenges enforcing the SCA under 
Sec.  4.5(c) as it has experienced enforcing the DBRA under Sec.  
1.6(f). Thus, modeling the updated DBRA post-award modification 
regulations based on Sec.  4.5(c) would be an improvement over the 
current status quo, but such a rule would not resolve the contract-
modification issues that have motivated the operation-of-law proposal.
    While the Department declines to replace the operation-of-law 
provision with a Sec.  4.5(c)-type provision, some of the Wiley Rein 
partners' animating concerns are nonetheless addressed in the related 
aspects of the final rule. For example, for contracts covered by both 
the DBA and SCA, the partners stated that their proposal would simplify 
contract administration by allowing contracting agencies to be able to 
make both DBA and SCA contract modifications in the same contract 
modification. Using similar contract-modification procedures for each 
Act would allow this. However, the existence of an operation-of-law 
provision in the DBRA regulations is not an obstacle to this sort of 
coordination. As described in the NPRM, the operation-of-law provision 
is intended to work in tandem with the existing wage-determination 
modification procedure at Sec.  1.6(f), as well as the new contract-
modification procedure in Sec.  5.6(a)(1)(ii). Thus, notwithstanding an 
operation-of-law provision, the Department could still issue a 
direction to a contracting agency to incorporate new terms for 
application of both the SCA and DBRA in the same contract.
    Similarly, the final rule addresses the Wiley Rein partners' 
concern about the need for a clear date marking the dividing line 
between prospective and retroactive applicability. The language in 
Sec.  5.5(e) specifically subjects such a determination to the 
Administrator's authority to grant a variance, tolerance, or exemption. 
As noted in the NPRM, this includes the authority to limit retroactive 
enforcement traditionally exercised under 29 CFR 1.6(f). Thus, when the 
Administrator issues a coverage determination pursuant to the 
operation-of-law provision, the Administrator will be authorized to 
make a decision about the date back to which the retroactive 
application will be enforced and the date from which prospective 
application is required. Cf. FlightSafety Def. Corp., ARB No. 2022-
0001, slip op. at 16-19 (Feb. 28, 2022) (affirming the Administrator's 
determination, in an SCA matter, that under the circumstances of that 
case the prospective application of a missing contract clause should 
begin at the start of the subsequent Contract Line Item Number period). 
This authority should sufficiently allay the Wiley Rein partners' 
concerns.
    The Department has considered AGC's request for further 
clarification regarding the manner in which the compensation 
requirement would work. The language of Sec.  5.5(e) requires that 
compensation should be made ``in accordance with applicable law.'' As a 
general matter, the FAR will provide the applicable law for direct 
Federal procurement contracts. The FAR currently includes price 
adjustment clauses applicable to different types of Davis-Bacon 
contracts. See, e.g., 48 CFR 52.222-30, 52.222-31 and 52.222-32. 
Because the FAR and its price-adjustment contract clauses provide 
applicable law, the Department does not believe it is appropriate to 
adopt CC&M's suggestion to mandate that contractors be reimbursed 150 
percent of the difference between current and required wage rates. The 
Department also does not believe that it is necessary to penalize 
contracting agencies when the compensation provision alone already 
provides sufficient incentive to agencies to ensure that contract 
clauses and applicable wage determinations are correctly incorporated 
into covered contracts.
    Finally, the Wiley Rein partners suggested that the Department 
should defer the effective date for the operation-of-law provision 
until the FAR is updated to expressly require equitable adjustments in 
these circumstances. In the DATES section of this final rule, the 
Department discusses

[[Page 57670]]

the applicability date of the rule. See also infra section III.C 
(``Applicability Date''). The provisions of parts 3 and 5 of the final 
rule (including the operation-of-law provisions at Sec. Sec.  3.11(e) 
and 5.5(e)) are generally applicable only to contracts entered into 
after the effective date of the final rule.
    Once the operation-of-law provision at Sec.  5.5(e) is effective 
and applicable to a contract, it will require the incorporation as a 
matter of law of any omitted contract clauses and wage determinations 
that would have been appropriate and necessary to include in the 
contract at the time the contract was entered into. Because Sec.  
5.5(e) will generally only apply to contracts newly entered into after 
the applicability date, the Department would not interpret Sec.  5.5(e) 
to require the contract clause provisions as amended in this final rule 
to be incorporated by operation of law to replace the contract clauses 
that have already been physically incorporated into contracts entered 
into before the applicability date. Similarly, Sec.  5.5(e) would not 
incorporate the contract clauses into any contract from which the 
clauses have been wrongly omitted, unless that contract has been 
entered into after the effective date of the final rule. For any 
contracts entered into prior to the effective date of the final rule 
that are missing required contract clauses or wage determinations, the 
Department will seek to address any omissions solely through the 
modification provisions in the existing regulation at Sec.  1.6(f).
    The Department declines to defer the effective date of the 
operation-of-law provision at Sec.  5.5(e) for contracts governed by 
the FAR, but has amended Sec.  5.5(e) to clarify how the provision 
interacts with the FAR. The final rule clarifies that for contracts 
governed by the FAR, the contract clauses that are made effective by 
operation of law are the Davis-Bacon contract clauses in the FAR 
itself. Accordingly, for any contracts that are entered into after the 
effective date of the final rule but before the effective date of any 
amendment to the FAR (including an amendment to the required FAR DBRA 
contract clauses), Sec.  5.5(e) would incorporate by operation-of-law 
the FAR contract clauses that are mandatory under the FAR regulation in 
effect at the time the FAR contract was entered into. As a result, it 
is not necessary to defer the effective date of Sec.  5.5(e).
    The final rule thus adopts the regulatory text of Sec.  5.5(e) as 
proposed, with the limited modification discussed above.
(2) Sec.  3.11 Application of Copeland Act Regulations
    The Department also proposed a revision to Sec.  3.11 to conform to 
the ``operation of law'' provision in Sec.  5.5(e). Section 3.11 
currently requires all covered contracts to ``expressly bind the 
contractor or subcontractor to comply'' with the applicable regulations 
from part 3. 29 CFR 3.11. The existing regulations then reference Sec.  
5.5(a)'s longstanding requirement that agency heads require contracting 
officers to insert appropriate contract clauses into all covered 
contracts. See id. The contract clause at Sec.  5.5(a)(3)(ii) contains 
the certified payroll requirements that are derived from and mirror the 
requirements in part 3. See section III.B.3.iii.(B).
    The proposed new operation-of-law paragraph in Sec.  5.5(e) makes 
all of the contract clauses required by Sec.  5.5(a) effective by 
operation of law even when they have been wrongly omitted from a 
covered contract. Thus, in accordance with Sec.  5.5(e), the 
recordkeeping requirements in the contract clause at Sec.  
5.5(a)(3)(ii) are made effective by operation of law where necessary. 
The Department proposed the amendment to Sec.  3.11 as a conforming 
change to provide notice to contractors that the applicable part 3 
regulations, required to be included in every contract by that 
provision, are effective by operation of law where necessary.
    UBC expressed support for the proposed change to Sec.  3.11, 
writing that it would improve application and enforcement of the DBRA 
standards. AFPF-I4AW opposed the operation-of-law addition to Sec.  
3.11, arguing that the change will lead to greater litigation and 
wasted resources. The Department has considered these comments, which 
parallel the comments received on Sec.  5.5(e). The Department believes 
that the proposed language in Sec.  3.11 provides appropriate 
additional notice that the regulations in part 3 govern DBRA-covered 
contracts whether or not their requirements have been physically 
included through a contract clause or otherwise. For the same reasons 
articulated above with regard to Sec.  5.5(e), the Department does not 
believe that the operation-of-law provision will significantly increase 
litigation or otherwise waste resources. By making required contract 
clauses effective by operation of law, the Department will avoid the 
enforcement challenges that have arisen in the application of the 
current contract-modification provision at Sec.  1.6(f). The final rule 
therefore adopts the language of Sec.  3.11 as proposed.
(3) Sec.  5.5(d) Incorporation of Contract Clauses and Wage 
Determinations by Reference
    The Department proposed a new provision at Sec.  5.5(d) to clarify 
that the clauses and wage determinations are equally effective if they 
are incorporated by reference, notwithstanding the requirement in Sec.  
5.5(a) that contracting agencies insert contract clauses ``in full'' 
into non-FAR contracts and the language of the contract clause at Sec.  
5.5(a)(1)(i) that specifies that the applicable wage determination ``is 
attached'' to such contracts. As the Department noted in the NPRM, this 
follows from the FAR and the common law of contract. Under the FAR, a 
contract that contains a provision expressly incorporating the clauses 
and the applicable wage determination by reference may be tantamount to 
insertion in full. See 48 CFR 52.107, 52.252-2. And, as a general 
matter, the terms of a document appropriately incorporated by reference 
into a contract effectively bind the parties to that contract. See 11 
Williston on Contracts section 30:25 (4th ed.) (``Interpretation of 
several connected writings'').
    Only one commenter, CC&M, referenced this proposed language. In the 
comment, CC&M stated general opposition to the idea that incorporation 
by reference can be just as effective as inserting the full Davis-Bacon 
contract section. The comment did not address the common use of 
incorporation by reference in the FAR or in the common law. The 
Department agrees with CC&M that it is preferable for contracting 
agencies to insert contract clauses and wage determinations in full 
into covered contracts. That is why the Department maintained 
instructions to contracting agencies in Sec.  5.5(a) that they continue 
to be required to insert the contract clauses ``in full'' into non-FAR-
covered contracts.\266\ The Department does not agree, however, that 
the failure by a contracting agency to do so should result in a 
disregard of the statutory command that a contract should be covered 
and the workers on the contract paid a prevailing wage. This is 
particularly true where the contract includes express language making 
compliance with the DBRA a term of the agreement. In such a situation, 
it generally would be sufficient under the common law to find the 
missing contract clauses and wage determinations to be effective 
through incorporation by reference. The same

[[Page 57671]]

should be true under a statute that has the recognized purpose of 
protecting workers and ensuring that they are paid prevailing wages. 
See Binghamton Constr. Co., 347 U.S. at 178.
---------------------------------------------------------------------------

    \266\ The Department, however, has revised its instructions in 
Sec.  5.5(a) to reflect that it is FAR convention to incorporate 
clauses by reference, as opposed to in full text.
---------------------------------------------------------------------------

    As the Department explained in the NPRM, these various proposed 
parallel regulatory provisions are consistent and work together. They 
require the best practice of physical insertion or modification of 
contract documents (or, where warranted, incorporation by reference), 
so as to provide effective notice to all interested parties, such as 
contract assignees, subcontractors, sureties, and employees and their 
representatives. At the same time, they create a safety net to ensure 
that where any mistakes are made in initial determinations, the 
prevailing wage required by statute will still be paid to the laborers 
and mechanics on covered projects.
    Accordingly, the final rule adopts the language of Sec.  5.5(d) as 
proposed.
(4) Sec.  1.6(f) Post-Award Correction of Wage Determinations
    In addition to the operation-of-law language at Sec.  5.5(e), the 
Department proposed to make several changes to the regulation at Sec.  
1.6(f) that contains the current post-award procedure requiring 
contracting agencies to incorporate an omitted wage determination. 
First, as discussed above in section III.B.1.vi. (Sec.  1.6 Use and 
effectiveness of wage determinations), the Department proposed adding 
titles to Sec.  1.6(a)-(g) in order to improve readability of the 
section as a whole. The proposed title for Sec.  1.6(f) was ``Post-
award determinations and procedures.'' The Department also proposed 
dividing Sec.  1.6(f) into multiple paragraphs to improve the 
organization and readability of the important rules it articulates.
    At the beginning of the section, the Department proposed a new 
Sec.  1.6(f)(1), which explains generally that if a contract subject to 
the labor standards provisions of the Acts referenced by Sec.  5.1 is 
entered into without the correct wage determination(s), the relevant 
agency must incorporate the correct wage determination into the 
contract or require its incorporation. The Department proposed to add 
language to Sec.  1.6(f)(1) expressly providing for an agency to 
incorporate the correct wage determination post-award ``upon its own 
initiative'' as well as upon the request of the Administrator. The 
current version of Sec.  1.6(f) explicitly provides only for a 
determination by the Administrator that a correction must be made. Some 
contracting agencies had interpreted the existing language as 
precluding an action by a contracting agency alone--without action by 
the Administrator--to modify an existing contract to incorporate a 
correct wage determination. The Department proposed the new language to 
clarify that the contracting agency can take such action alone. Where a 
contracting agency does intend to take such an action, proposed 
language at Sec.  1.6(f)(3)(iii) would require it to notify the 
Administrator of the proposed action.
    In the proposed reorganization of Sec.  1.6(f), the Department 
located the discussion of the Administrator's determination that a 
correction is necessary in a new Sec.  1.6(f)(2). The only proposed 
change to the language of that paragraph was not substantive. The 
current text of Sec.  1.6(f) refers to the action that the 
Administrator may take as an action to ``issue a wage determination.'' 
However, in the majority of cases, where a wage determination is not 
included in the contract, the proper action by the Administrator will 
not be to issue a new or updated wage determination, as that term is 
used in Sec.  1.6(c), but to identify the appropriate existing wage 
determination that applies to the contract. Thus, to eliminate any 
confusion, the Department proposed to amend the language in this 
paragraph to describe the Administrator's action as ``requir[ing] the 
agency to incorporate'' the appropriate wage determination. To the 
extent that, in an exceptional case, the Department would need to 
``issue'' a new project wage determination to be incorporated into the 
contract, the proposed new language would require the contracting 
agency to incorporate or require the incorporation of that newly issued 
wage determination.
    The Department also proposed to amend the language in Sec.  1.6(f) 
that describes the potential corrective actions that an agency may 
take. In a non-substantive change, the Department proposed to refer to 
the wage determinations that must be newly incorporated as ``correct'' 
wage determinations instead of ``valid'' wage determinations. This is 
because the major problem addressed in Sec.  1.6(f)--in addition to the 
failure to include any wage determination at all--is the use of the 
wrong wage determinations. Even while wrong for one contract, a wage 
determination may be valid if used on a different contract to which it 
properly applies. It is therefore more precise to describe a misused 
wage determination as incorrect rather than invalid. The proposed 
amendment would also add to the reference in the current regulation at 
Sec.  1.6(f) to ``supplemental agreements'' or ``change orders'' as the 
methods for modifying contracts post-award to incorporate valid wage 
determinations. The Department proposed, in a new Sec.  1.6(f)(3), to 
instruct that agencies make such modifications additionally through the 
exercise of ``any other authority that may be needed.'' This language 
parallels the Department's regulation at 29 CFR 4.5 for similar 
circumstances under the SCA.
    The Department also proposed to make several changes to Sec.  
1.6(f) to clarify that the requirements apply equally to projects 
carried out with Federal financial assistance as they do to DBA 
projects. The proposed initial paragraph at Sec.  1.6(f)(1) contains 
new language that states expressly that where an agency is providing 
Federal financial assistance, ``the agency must ensure that the 
recipient or sub-recipient of the Federal assistance similarly 
incorporates the correct wage determination(s) into its contracts.'' 
Similarly, the reference to agencies' responsibilities in proposed new 
Sec.  1.6(f)(3) requires an agency to terminate and resolicit the 
contract or to ``ensure'' the incorporation (in the alternative to 
``incorporating'' the correct wage determination itself)--in 
recognition that this language applies equally to direct procurement 
where the agency is a party to a DBA-covered contract and Related Acts 
where the agency must ensure that the relevant State or local agency 
incorporates the corrected wage determination into the covered 
contract. Finally, the Department also proposed to amend the 
requirement that the incorporation should be ``in accordance with 
applicable procurement law'' to instead reference ``applicable law.'' 
This change is intended to recognize that the requirements in Sec.  1.6 
apply also to projects executed with Federal financial assistance under 
the Related Acts, for which the Federal or State agency's authority may 
not be subject to Federal procurement law. None of these proposed 
changes represent substantive changes, as the Department has 
historically applied Sec.  1.6(f) equally to both DBA and Related Act 
projects. See, e.g., City of Ellsworth, ARB No. 14-042, 2016 WL 
4238460, at *6-8.
    In the new Sec.  1.6(f)(3)(iv), the Department proposed to include 
the requirements from the existing regulations that contractors must be 
compensated for any change and that the incorporation must be 
retroactive to the beginning of the construction. That retroactivity 
requirement, however, is amended to include the qualification that the 
Administrator may direct otherwise. As noted above, the

[[Page 57672]]

Administrator may make determinations of non-retroactivity on a case-
by-case basis. In addition, consistent with the SCA regulation on post-
award incorporation of wage determinations at 29 CFR 4.5(c), the 
Department proposed including language in a new Sec.  1.6(f)(3)(ii) to 
require that incorporation of the correct wage determination be 
accomplished within 30 days of the Administrator's request, unless the 
agency has obtained an extension.
    The Department also proposed to include new language at Sec.  
1.6(f)(3)(v), applying to Related Acts, instructing that the agency 
must suspend further payments or guarantees if the recipient refuses to 
incorporate the specified wage determination and that the agency must 
promptly refer the dispute to the Administrator for further proceedings 
under Sec.  5.13. This language is a clarification and restatement of 
the existing enforcement regulation at Sec.  5.6(a)(1), which provides 
that no such payment or guarantee shall be made ``unless [the agency] 
ensures that the clauses required by Sec.  5.5 and the appropriate wage 
determination(s) are incorporated into such contracts.''
    In proposed new language at Sec.  1.6(f)(3)(vi), the Department 
included additional safeguards for the circumstances in which an agency 
does not retroactively incorporate the missing clauses or wage 
determinations and instead seeks to terminate the contract. The 
proposed language provided that before termination, the agency must 
withhold or cross-withhold sufficient funds to remedy any back wage 
liability or otherwise identify and obligate sufficient funds through a 
termination settlement agreement, bond, or other satisfactory 
mechanism. This language is consistent with the existing FAR provision 
at 48 CFR 49.112-2(c) that requires contracting officers to ascertain 
whether there are any outstanding labor violations and withhold 
sufficient funds if possible before forwarding the final payment 
voucher. It is also consistent with the language of the template 
termination settlement agreements at 48 CFR 49.602-1 and 49.603-3 that 
seek to ensure that any termination settlement agreement does not 
undermine the government's ability to fully satisfy any outstanding 
contractor liabilities under the DBRA or other labor clauses.
    Finally, the Department included a proposed provision at Sec.  
1.6(f)(4) to clarify that the specific requirements of Sec.  1.6(f) to 
physically incorporate the correct wage determination operate in 
addition to the proposed requirement in Sec.  5.5(e) that makes the 
correct wage determination applicable by operation of law. As discussed 
above, such amendment and physical incorporation (including 
incorporation by reference) is helpful in order to provide notice to 
all interested parties, such as contract assignees, subcontractors, 
sureties, and employees and their representatives.
    Two contractor associations, CEA and SMACNA, generally expressed 
support for the Department's proposed amendments to Sec.  1.6(f). They 
noted in particular that the proposed amendments would allow 
contracting agencies to incorporate correct wage determinations upon 
their own initiative as well as at the request of the Administrator. 
These two commenters, along with the UBC, supported the proposed 
language at Sec.  1.6(f)(4) that states the operation-of-law provision 
at Sec.  5.5(e) would operate in tandem with the requirement that 
contracting agencies insert wage determinations into contracts where 
they have been omitted.
    In contrast, ABC opposed the proposed changes to Sec.  1.6(f), 
stating that the proposal would allow contracting agencies to make a 
change ``without a determination from WHD of special circumstances 
justifying such incorporation'' as required by current rules. ABC 
argued that this ``threatens contractors with improper changes to their 
government contracts post-award.'' ABC also stated that the proposed 
new language at Sec.  1.6(f)(3)(vi) that requires withholding before 
contract termination ``imposes new withholding and cross-withholding 
requirements that violate longstanding understandings of the contract-
based scope of the DBA and FAR contract requirements.''
    AGC stated that the proposed language needs additional 
clarification. As AGC noted, the proposed rule stated at Sec.  
1.6(f)(3)(i) that ``[u]nless the Administrator directs otherwise, the 
incorporation of the clauses required by Sec.  5.5 must be 
retroactive.'' AGC requested clarification about whether the 
Administrator's authority to ``direct[ ] otherwise'' applies only to 
the retroactive incorporation or also to the requirement that 
contractors must be compensated for any increased costs as a result. 
AGC also asked two other questions regarding compensation: first, 
whether the proposal would allow the Administrator to deny compensation 
to contractors when a wage determination is retroactively included; and 
second, what would happen if a missing wage determination were not 
retroactively included in a contract. AGC stated that it is absolutely 
necessary that prime contractors be compensated for increased costs 
that result from a contracting agency failure.
    The Department considered the comments received regarding the 
proposed revisions to Sec.  1.6(f) and agrees with the commenters 
supporting the amendments to this section. Allowing contracting 
agencies to take action to correct missing or incorrect wage 
determinations will streamline compliance and enforcement. Earlier 
action to remedy such problems will be more protective of workers, who 
otherwise may need to wait a longer time to receive the prevailing 
wages they are due. In response to ABC's comment about ``improper 
changes,'' the Department notes that proposed Sec.  1.6(f)(3)(iii) 
requires agencies to provide notice to the Administrator of their 
proposed action before they require incorporation on their own 
initiative. This requirement provides the Department with the 
opportunity to help ensure that the contracting agency's proposed 
action is appropriate. The Department also considered ABC's comments 
about withholding, but those comments appear to be directed toward the 
Department's cross-withholding proposals. The Department has addressed 
comments regarding these proposals in section III.B.3.xxiii 
(``Withholding'').
    The proposed language at Sec.  1.6(f)(3)(i) addressed the 
Administrator's authority to direct that a newly incorporated wage 
determination should not be enforced retroactively to the beginning of 
the contract. The Administrator does not have separate authority to 
``direct[] otherwise'' with regard to contractor compensation. Rather, 
the proposed language of Sec.  1.6(f)(3)(iv) states that the contractor 
must be compensated for any increases in wages resulting from 
incorporation of a missing wage determination, and the language at 
proposed Sec.  1.6(f)(3) states that the method of adjustment in 
contract prices ``should be in accordance with applicable law.'' For 
direct Federal procurement contracts, the extent to which compensation 
is due, if any, is governed by the FAR and any price adjustment clauses 
applicable to different types of Davis-Bacon contracts. See, e.g., 48 
CFR 52.222-30, 52.222-31 and 52.222-32.
    The provisions regarding compensation in Sec.  1.6(f) apply where 
the contracting agency incorporates the correct wage determination into 
a contract post-award. They do not apply in the hypothetical AGC 
provides, in which the contractor believes that a wage determination is 
missing and the missing wage determination is not retroactively 
included in the contract. While it is important for enforcement 
purposes that the Department and

[[Page 57673]]

contracting agencies have the ability to modify an award to correct 
errors (with appropriate compensation), the Department has generally 
found it to be inappropriate for a contractor to seek to modify wage 
determinations post-award to attempt to receive compensation for wage 
rates it has been paying already. See Joe E. Woods, Inc., ARB No. 96-
127, 1996 WL 678774 (Nov. 19, 1996).
    The Department proposed several of the changes to Sec.  1.6(f) in 
order to borrow language from the similar SCA provision at 29 CFR 
4.5(c). That provision, as noted in the comment by the Wiley Rein 
partners, has been time-tested in the many years it has been in effect 
to address post-award modifications under the SCA. The changes proposed 
to Sec.  1.6(f) are common-sense changes that provide clarity and 
consistency to the process of addressing circumstances where no wage 
determination, or the wrong wage determination, was attached to a 
covered contract. The changes will benefit construction workers by 
ensuring that they receive back wages owed to them in a timely manner.
    The final rule therefore adopts the revisions to Sec.  1.6(f) as 
proposed.
(6) Sec.  5.6(a)(1) Post-Award Incorporation of Contract Clauses
    The Department proposed to revise Sec.  5.6(a)(1) to include 
language expressly providing a procedure for determining that the 
required contract clauses were wrongly omitted from a contract. As 
noted above, the Department has historically sought the retroactive 
incorporation of missing contract clauses by reference to the language 
regarding wage determinations in Sec.  1.6(f). In the NPRM, the 
Department proposed to eliminate any confusion by creating a separate 
procedure at Sec.  5.6(a)(1)(ii) that will apply specifically to 
missing contract clauses in a similar manner as Sec.  1.6(f) continues 
to apply to missing or incorrect wage determinations.
    The Department proposed to revise Sec.  5.6(a)(1) by renumbering 
the existing regulatory text as Sec.  5.6(a)(1)(i), and adding an 
additional paragraph, (a)(1)(ii), to include the provision clarifying 
that where a contract is awarded without the incorporation of the 
Davis-Bacon labor standards clauses required by Sec.  5.5, the agency 
must incorporate the clauses or require their incorporation. This 
includes circumstances where the agency does not award a contract 
directly but instead provides funding assistance for such a contract. 
In such instances, the Federal agency, or other agency where 
appropriate, must ensure that the recipient or subrecipient of the 
Federal assistance incorporates the required labor standards clauses 
retroactive to the date of contract award, or the start of construction 
if there is no award.
    The proposed paragraph at Sec.  5.6(a)(1)(ii) contained a similar 
set of provisions as Sec.  1.6(f), as modified by the amendments to 
that paragraph proposed in the NPRM. These included that the 
incorporation must be retroactive unless the Administrator directs 
otherwise; that retroactive incorporation may be required by the 
request of the Administrator or upon the agency's own initiative; that 
incorporation must take place within 30 days of a request by the 
Administrator, unless an extension is granted; that the agency must 
withhold or otherwise obligate sufficient funds to satisfy back wages 
before any contract termination; and that the contractor should be 
compensated for any increase in costs resulting from any change 
required by the paragraph.
    The Department also proposed to clarify the application of the 
current regulation at Sec.  5.6(a)(1), which states that no payment, 
advance, grant, loan, or guarantee of funds will be approved unless the 
Federal agency ensures that the funding recipient or sub-recipient has 
incorporated the required clauses into any contract receiving the 
funding. Similar to the proposed provision in Sec.  1.6(f)(3)(v), a new 
proposed provision at Sec.  5.6(a)(1)(ii)(C) explains that such a 
required suspension also applies if the funding recipient refuses to 
retroactively incorporate the required clauses. In such circumstances, 
the issue must be referred promptly to the Administrator for 
resolution.
    Similar to the proposed provision at Sec.  1.6(f)(4), the 
Department also proposed a provision at Sec.  5.6(a)(1)(ii)(E) that 
explains that the physical-incorporation requirements of Sec.  
5.6(a)(1)(ii) would operate in tandem with the proposed language at 
Sec.  5.5(e), making the contract clauses and wage determinations 
effective by operation of law.
    The proposed changes clarify that the requirement to incorporate 
the Davis-Bacon labor standards clauses is an ongoing responsibility 
that does not end upon contract award, and the changes expressly state 
the Department's longstanding practice of requiring the relevant agency 
to retroactively incorporate, or ensure retroactive incorporation of, 
the required clauses in such circumstances. As discussed above, such 
clarification is warranted because agencies occasionally have expressed 
confusion about--and even questioned whether they possess--the 
authority to incorporate, or ensure the incorporation of, the required 
contract clauses after a contract has been awarded or construction has 
started.
    The proposed changes similarly make clear that while agencies must 
retroactively incorporate the required clauses upon the request of the 
Administrator, agencies also have the authority to make such changes on 
their own initiative when they discover that an error has been made. 
The proposed changes also eliminate any confusion of the recipients of 
Federal funding as to the extent of the Federal funding agency's 
authority to require such retroactive incorporation in federally funded 
contracts subject to the Davis-Bacon labor standards. Finally, the 
proposed changes do not alter the provisions of 29 CFR 1.6(g), 
including its provisos.
    The Department received only one comment, from ABC, regarding the 
proposed revisions to Sec.  5.6(a). ABC referenced its concerns about 
the Sec.  5.5(e) operation-of-law provision and stated that the 
proposal at Sec.  5.6(a) ``again holds contractors responsible without 
notice of DBA requirements.'' The comment added that ``[u]ntil now, 
contractors have not been held responsible for DBA compliance'' in 
these circumstances and continued that ``[c]hanging contract 
requirement after award is forbidden unless specific requirements of 
the FAR are satisfied.'' ABC also stated that the NPRM is ``unclear or 
else fails to justify the apparent expansion in the scope of the DBA's 
coverage.''
    The Department disagrees with ABC. As explained above, these 
revisions merely codify the Department's practice of requiring 
contracting agencies to take the necessary steps to correct contracts 
which omit required clauses and does not represent an expansion in 
``the scope of the DBA's coverage.'' Although Sec.  1.6(f) expressly 
references only the authority of the Department to direct the 
incorporation of missing wage determinations, the Department has 
consistently interpreted that language as including by necessity the 
authority to request the incorporation of erroneously omitted contract 
clauses. See, e.g., DBRA-131 (Apr. 18, 1985) (requesting the 
contracting agency take action ``in accordance with section 1.6(f) of 
Regulations, 29 CFR part 1, to include the Davis-Bacon provisions and 
an applicable wage decision'' in a contract from which the contract 
clauses were erroneously omitted). Accordingly, the rule neither 
imposes new DBA responsibilities on contractors nor provides agencies 
with new authority to amend contracts which they could not have amended 
previously.

[[Page 57674]]

    Finally, this proposed revision to Sec.  5.6(a)(ii) does not 
``hold[ ] contractors responsible without notice of DBA requirements,'' 
as ABC states, for the same reason that the new operation-of-law 
provision at Sec.  5.5(e) does not. Like the operation-of-law 
provision, and like the existing regulation at Sec.  1.6(f), the 
revision to Sec.  5.6(a)(ii) contains a compensation provision that 
states that the contractor must be compensated for any increases in 
wages resulting the incorporation of a missing contract clause. 
Contractors will also receive sufficient notice through publication of 
the final rule. See Merrill, 332 U.S. at 384-85.
    Retroactive incorporation of the required contract clauses ensures 
that agencies take every available step to ensure that workers on 
covered contracts are paid the prevailing wages that Congress intended. 
The final rule therefore adopts the language in Sec.  5.6(a)(ii) as 
proposed.
xxi. Debarment
    In accordance with the Department's goal of updating and 
modernizing the DBA and Related Act regulations, as well as enhancing 
the implementation of Reorganization Plan No. 14 of 1950, the 
Department proposed a number of revisions to the debarment regulations 
that were intended both to promote consistent enforcement of the Davis-
Bacon labor standards provisions and to clarify the debarment standards 
and procedures for the regulated community, adjudicators, 
investigators, and other stakeholders.
    The regulations implementing the DBA and the Related Acts currently 
reflect different standards for debarment. Since 1935, the DBA has 
mandated 3-year debarment ``of persons . . . found to have disregarded 
their obligations to employees and subcontractors.'' 40 U.S.C. 3144(b) 
(emphasis added); see also 29 CFR 5.12(a)(2) (setting forth the DBA's 
``disregard of obligations'' standard). Although the Related Acts 
themselves do not contain debarment provisions, since 1951, their 
implementing regulations have imposed a heightened standard for 
debarment for violations under the Related Acts, providing that ``any 
contractor or subcontractor . . . found . . . to be in aggravated or 
willful violation of the labor standards provisions'' of any Related 
Act will be debarred ``for a period not to exceed 3 years.'' 29 CFR 
5.12(a)(1) (emphasis added). The Department proposed to harmonize the 
DBA and the Related Act debarment-related regulations by applying the 
longstanding DBA debarment standard and related provisions to the 
Related Acts as well. Specifically, in order to create a uniform set of 
substantive and procedural requirements for debarment under the DBA and 
the Related Acts, the Department proposed five changes to the Related 
Act debarment regulations so that they mirror the provisions governing 
DBA debarment.
    First, the Department proposed to adopt the DBA statutory debarment 
standard--disregard of obligations to employees or subcontractors--for 
all debarment cases and to eliminate the Related Acts' regulatory 
``aggravated or willful'' debarment standard. Second, the Department 
proposed to adopt the DBA's mandatory 3-year debarment period for 
Related Act cases and to eliminate the process under the Related Acts 
regulations for early removal from the ineligible list (also known as 
the debarment list).\267\ Third, the Department proposed to expressly 
permit debarment of ``responsible officers'' under the Related Acts. 
Fourth, the Department proposed to clarify that under the Related Acts 
as under the DBA, entities in which debarred entities or individuals 
have an ``interest'' may be debarred. Related Acts regulations 
currently require a ``substantial interest.'' Finally, the Department 
proposed to make the regulatory scope of debarment language under the 
Related Acts consistent with the scope of debarment under the DBA by 
providing, in accordance with the current scope of debarment under the 
DBA, that Related Acts debarred persons and firms may not receive ``any 
contract or subcontract of the United States or the District of 
Columbia,'' as well as ``any contract or subcontract subject to the 
labor standards provisions'' of the DBRA. See 29 CFR 5.12(a)(2).
---------------------------------------------------------------------------

    \267\ There are several terms referring to the same list (e.g., 
ineligible list, debarment list, debarred bidders list) and the 
terms for this list may continue to change over time.
---------------------------------------------------------------------------

(A) Relevant Legal Authority
    The 1935 amendments to the DBA gave the Secretary authority to 
enforce--not just set--prevailing wages, including through the remedy 
of debarment. See Coutu, 450 U.S. at 758 n.3, 759 n.5, 776-77; see also 
S. Rep. No. 74-332, pt. 3, at 11, 14-15 (1935). Since then, the DBA has 
required 3-year debarment of persons or firms that have been found to 
``have disregarded their obligations to employees and subcontractors.'' 
40 U.S.C. 3144(b) (formerly 40 U.S.C. 276a-2 and known as section 3(a) 
of the DBA). The DBA also mandates debarment of entities in which 
debarred persons or firms have an ``interest.'' 40 U.S.C. 3144(b)(2).
    Approximately 15 years later, the Truman Administration developed, 
and Congress accepted, Reorganization Plan No. 14 of 1950, a 
comprehensive plan to improve Davis-Bacon enforcement and 
administration. The Reorganization Plan provided that ``[i]n order to 
assure coordination of administration and consistency of enforcement'' 
of the DBRA by the agencies who are responsible for administering them, 
the Secretary of Labor was empowered to ``prescribe appropriate 
standards, regulations, and procedures, which shall be observed by 
these agencies.'' Reorganization Plan No. 14 of 1950, 15 FR 3176. In 
transmitting the Reorganization Plan to Congress, President Truman 
observed that ``the principal objective of the plan is more effective 
enforcement of labor standards'' with ``more uniform and more adequate 
protection for workers through the expenditures made for the 
enforcement of the existing legislation.'' 1950 Special Message to 
Congress.
    Shortly after Reorganization Plan No. 14 of 1950 was adopted, the 
Department promulgated regulations adding ``a new Part 5,'' effective 
July 1, 1951. 16 FR 4430. These regulations added the ``aggravated or 
willful'' debarment standard for the Related Acts. Id. at 4431. The 
preamble to that final rule explained that adding the new part 5 was to 
comply with Reorganization Plan No. 14 of 1950's directive to prescribe 
standards, regulations, and procedures ``to assure coordination of 
administration and consistency of enforcement.'' Id. at 4430. Since 
then, the two debarment standards--disregard of obligations in DBA 
cases and willful or aggravated violations in Related Acts cases--have 
co-existed, but with challenges along the way that the Department seeks 
to resolve through this rulemaking.
(B) Proposed Regulatory Revisions
(1) Debarment Standard
a. Proposed Change to Debarment Standard
    As noted previously, the DBA generally requires the payment of 
prevailing wages to laborers and mechanics working on contracts with 
the Federal Government or the District of Columbia for the construction 
of public buildings and public works. 40 U.S.C. 3142(a). In addition, 
Congress has included DBA prevailing wage provisions in numerous 
Related Acts under which Federal agencies assist construction projects 
through grants, loans, guarantees, insurance, and other

[[Page 57675]]

methods. The same contract clauses are incorporated into DBA- and 
Related Act- covered contracts, and the laws apply the same labor 
standards protections (including the obligation to pay prevailing 
wages) to laborers and mechanics without regard to whether they are 
performing work on a project subject to the DBA or one of the Related 
Acts. Not only are some projects subject to the requirements of both 
the DBA and one of the Related Acts due to the nature and source of 
Federal funding, but also the great majority of DBA-covered projects 
are also subject to CWHSSA, one of the Related Acts.
    Against this backdrop, there is no apparent need for a different 
level of culpability for Related Acts debarment than for DBA debarment. 
The sanction for failing to compensate covered workers in accordance 
with applicable prevailing wage requirements should not turn on the 
source or form of Federal funding. Nor is there any principled reason 
that it should be easier for prime contractors, subcontractors, and 
their responsible officials to avoid debarment in Related Acts cases. 
Accordingly, the Department proposed to revise the governing 
regulations so that conduct that warrants debarment on DBA construction 
projects would also warrant debarment on Related Act projects. This 
proposal fits within the Department's well-established authority to 
adopt regulations governing debarment of Related Act contractors. See, 
e.g., Janik Paving & Constr., 828 F.2d at 91; Copper Plumbing & Heating 
Co. v. Campbell, 290 F.2d 368, 372-73 (D.C. Cir. 1961).
    The Department noted in the NPRM that the potential benefits of 
adopting a single, uniform debarment standard outweigh any benefits of 
retaining the existing dual-standard framework. Other than debarment, 
contractors who violate the DBA and Related Acts run the risk only of 
having to pay back wages, often long after violations occurred. Even if 
these violations are discovered or disclosed through an investigation 
or other compliance action, contractors that violate the DBA or Related 
Acts can benefit in the short-term from the use of workers' wages, an 
advantage that can enable such contractors to underbid their more law-
abiding competitors. If the violations never come to light, such non-
compliant contractors pocket wages that belong to workers. 
Strengthening the debarment remedy encourages unprincipled contractors 
to comply with Davis-Bacon prevailing wage requirements by expanding 
the reach of this remedy when they do not. Facchiano Constr. Co. v. 
U.S. Dep't of Lab., 987 F.2d 206, 214 (3d Cir. 1993) (observing that 
debarment ``may in fact `be the only realistic means of deterring 
contractors from engaging in willful [labor] violations based on a cold 
weighing of the costs and benefits of non-compliance' '' (quoting Janik 
Paving & Constr., 828 F.2d at 91)).
    In proposing a unitary debarment standard, the Department intended 
that well-established case law applying the DBA ``disregard of 
obligations'' debarment standard would now also apply to Related Act 
debarment determinations. Under this standard, as a 2016 ARB decision 
explained, ``DBA violations do not, by themselves, constitute a 
disregard of an employer's obligations,'' and, to support debarment, 
``evidence must establish a level of culpability beyond negligence'' 
and involve some degree of intent. Interstate Rock Prods., Inc., ARB 
No. 15-024, 2016 WL 5868562, at *4 (Sept. 27, 2016) (footnotes 
omitted). For example, the underpayment of prevailing wages, coupled 
with the falsification of certified payrolls, constitute a disregard of 
a contractor's obligations that establish the requisite level of 
``intent'' under the DBA debarment provisions. See id. Bad faith and 
gross negligence regarding compliance have also been found to 
constitute a disregard of DBA obligations. See id. The Department's 
proposal to apply the DBA ``disregard of obligations'' standard as the 
sole debarment standard would maintain safeguards for law-abiding 
contractors and responsible officers by retaining the bedrock principle 
that DBA violations, by themselves, generally do not constitute a 
sufficient predicate for debarment. Moreover, the determination of 
whether debarment is warranted would continue to be based on a 
consideration of the particular facts found in each investigation and 
to include the same procedures and review process that are currently in 
place to determine whether debarment is to be pursued.
    For these reasons and those discussed in more detail in this 
section below, the Department's proposal to harmonize debarment 
standards included a reorganization of Sec.  5.12. Proposed paragraph 
(a)(1) set forth the ``disregard of obligations'' debarment standard, 
which would apply to both DBA and Related Acts violations. The proposed 
changes accordingly removed the ``willful or aggravated'' language from 
Sec.  5.12, with proposed conforming changes in 29 CFR 5.6(b) (included 
in renumbered 5.6(b)(4)) and 5.7(a). Proposed paragraph (a)(2) combined 
the parts of current Sec.  5.12(a)(1) and (a)(2) concerning the 
different procedures for effectuating debarment under the DBA and 
Related Acts.
b. Impacts of Proposed Debarment Standard Change
    Because behavior that is willful or aggravated is also a disregard 
of obligations, in many instances the proposed harmonization of the 
debarment standards would apply to conduct that under the current 
regulations is already debarrable under both the DBA and Related Acts. 
For example, falsification of certified payrolls to simulate compliance 
with Davis-Bacon labor standards has long warranted debarment under 
both the DBA and Related Acts. See, e.g., R.J. Sanders, Inc., WAB No. 
90-25, 1991 WL 494734, at *1-2 (Jan. 31, 1991) (DBA); Coleman Constr. 
Co., ARB No. 15-002, 2016 WL 4238468, at *11 (Related Acts). Kickbacks 
also warrant debarment under the DBA and Related Acts. See, e.g., 
Killeen Elec. Co., Inc., WAB No. 87-49, 1991 WL 494685, at *5-6 (DBA 
and Related Act). In fact, any violation that meets the ``willful or 
aggravated'' standard would necessarily also be a disregard of 
obligations.
    Under the proposed revisions, a subset of violations that would 
have been debarrable only under the DBA ``disregard of obligations'' 
standard now would be potentially subject to debarment under both the 
DBA and Related Acts. The ARB recently discussed one example of this 
type of violation, stating that intentional disregard of obligations 
``may . . . include acts that are not willful attempts to avoid the 
requirements of the DBA'' since contractors may not avoid debarment 
``by asserting that they did not intentionally violate the DBA because 
they were unaware of the Act's requirements.'' Interstate Rock Prods., 
ARB No. 15-024, 2016 WL 5868562, at *4. Similarly, ``failures to set up 
adequate procedures to ensure that their employees' labor was properly 
classified,'' which might not have been found to be willful or 
aggravated Related Act violations, were debarrable under the DBA 
``disregard of obligations'' standard. Id. at *8. Under the 
Department's proposed revisions to Sec.  5.12, these types of 
violations could now result in debarment in Related Acts as well as DBA 
cases. Additionally, under the ``disregard of obligations'' standard, 
prime contractors and upper-tier subcontractors may be debarred if they 
fail to flow down the required contract clauses into their lower-tier 
subcontracts as required by Sec.  5.5(a)(6), or if they otherwise fail 
to ensure that their subcontractors are in compliance with the Davis-
Bacon labor standards

[[Page 57676]]

provisions. See 29 CFR 5.5(a)(6), (7); Ray Wilson Co., ARB No. 02-086, 
2004 WL 384729, at *10 (affirming debarment under DBA of upper-tier 
subcontractor and its principals because of subcontractor's 
``abdication from--and, thus, its disregard of--its obligations to 
employees of . . . its own lower-tier subcontractor''). Such failures 
alone, which might not have been found to be a willful or aggravated 
violation depending on the totality of the circumstances, would under 
the proposed harmonized standard be more likely to satisfy the 
requirements for debarment whether the failure had occurred on a DBA or 
Related Act project.
c. Benefits of Proposed Debarment Standard Change
i. Improved Compliance and Enforcement
    In the NPRM, the Department stated its position that applying the 
DBA's ``disregard of obligations'' debarment standard in a uniform, 
consistent manner would advance the purpose of the DBA, ```a minimum 
wage law designed for the benefit of construction workers.''' Abhe & 
Svoboda, Inc. v. Chao, 508 F.3d 1052, 1055 (D.C. Cir. 2007) (quoting 
Binghamton Constr. Co., 347 U.S. at 178). Both the DBA statutory and 
the Related Acts regulatory debarment provisions are ``intended to 
foster compliance with labor standards.'' Howell Constr., Inc., WAB No. 
93-12, 1994 WL 269361, at *7 (May 31, 1994); see also Interstate Rock 
Prods., ARB No. 15-024, 2016 WL 5868562, at *8 (``Debarment has 
consistently been found to be a remedial rather than punitive measure 
so as to encourage compliance and discourage employers from adopting 
business practices designed to maximize profits by underpaying 
employees in violation of the Act.'').
    The Department explained that using the ``disregard of 
obligations'' debarment standard for all DBA and Related Act work would 
enhance enforcement of and compliance with Davis-Bacon labor standards 
in multiple ways. First, it would better enlist the regulated community 
in Davis-Bacon enforcement by increasing contractors' incentive to 
comply with the Davis-Bacon labor standards. See, e.g., Facchiano 
Constr., 987 F.2d at 214 (``Both Sec.  5.12(a)(1) and Sec.  5.12(a)(2) 
are designed to ensure the cooperation of the employer, largely through 
self-enforcement.''); Brite Maint. Corp., WAB No. 87-07, 1989 WL 
407462, at *2 (May 12, 1989) (debarment is a ``preventive tool to 
discourage violation[s]'').
    Second, applying the ``disregard of obligations'' standard to 
Related Act cases would serve the important public policy of holding 
contractors' responsible officials accountable for noncompliance in a 
more consistent manner, regardless of whether they are performing on a 
Federal or federally funded project. Responsible officials currently 
may be debarred under both the DBA and the Related Acts. See, e.g., 
P.B.M.C., Inc., WAB No. 87-57, 1991 WL 494688, at *7 (Feb. 8, 1991) 
(stating that ``Board precedent does not permit a responsible official 
to avoid debarment by claiming that the labor standards violations were 
committed by agents or employees of the firm'' in Related Act case); 
P.J. Stella Constr. Corp., WAB No. 80-13, 1984 WL 161738, at *3 (Mar. 
1, 1984) (affirming DBA debarment recommendation because ``an employer 
cannot take cover behind actions of his inexperienced agents or 
representatives or the employer's own inexperience in fulfilling the 
requirements of government construction contracts''); see also Howell 
Constr., Inc., WAB No. 93-12, 1994 WL 269361, at *7 (DBA case) 
(debarment could not foster compliance if ``corporate officials . . . 
are permitted to delegate . . . responsibilities . . . [and] to 
delegate away any and all accountability for any wrong doing''). 
Applying a unitary debarment standard would further incentivize 
compliance by all contractors and responsible officers.
ii. Greater Consistency and Clarity
    The Department also stated its view that applying the DBA debarment 
and debarment-related standards to all Related Act prevailing wage 
cases would eliminate the confusion and attendant litigation that have 
resulted from erroneous and inconsistent application of the two 
different standards. The incorrect debarment standard has been applied 
in various cases over the years, continuing to the present, 
notwithstanding the ARB's repeated clarification. See, e.g., J.D. 
Eckman, Inc., ARB No. 2017-0023, 2019 WL 3780904, at *3 (July 9, 2019) 
(remanding for consideration of debarment under the correct standard as 
a result of ALJ's legal error of using inapplicable ``disregard of 
obligations'' standard rather than applicable ``aggravated or willful'' 
standard); Coleman Constr. Co., ARB No. 15-002, 2016 WL 4238468, at *9-
11 (noting that the ALJ had applied the wrong debarment standard but 
concluding that the ALJ's ``conflat[ion of the] two different legal 
standards'' was harmless error under the circumstances). Most recently, 
the ARB vacated and remanded an ALJ's decision to debar a subcontractor 
and its principal under the DBA, noting that, even though the 
Administrator had not argued that the DBA applied, the ALJ had applied 
the incorrect standard because ``the contract was for a construction 
project of a non-[F]ederal building that was funded by the U.S. 
Government but did not include the United States as a party.'' Jamek 
Eng'g Servs., Inc., ARB No. 2020-0043, 2021 WL 2935807, at *8 (June 23, 
2021); see also Jamek Eng'g Servs., Inc. (Jamek II), ARB No. 2022-0039, 
2022 WL 6732171, at *8-9 (Sept. 22, 2022) (affirming ALJ's decision on 
remand, including 3-year debarment for aggravated or willful Related 
Acts violations), appeal docketed, Jamek Eng'g Servs., Inc. v. U.S. 
Dep't of Lab., No. 22-cv-2656 (D. Minn. Oct. 21, 2022).
    Additionally, the ``aggravated or willful'' Related Acts standard 
has been interpreted inconsistently over the past decades. In some 
cases, the ARB has required actual knowledge or awareness of 
violations, while in others it has applied (or at least recited with 
approval) a less stringent standard that encompasses intentional 
disregard or plain indifference to the statutory requirements but does 
not require actual knowledge of violations. Compare J.D. Eckman, Inc., 
ARB No. 2017-0023, 2019 WL 3780904, at *3 (requiring actual knowledge 
or awareness of the violation) and A. Vento Constr., WAB No. 87-51, 
1990 WL 484312, at *3 (Oct. 17, 1990) (aggravated or willful violations 
are ``intentional, deliberate, knowing violations of the [Related 
Acts'] labor standards provisions'') with Fontaine Bros., Inc., ARB No. 
96-162, 1997 WL 578333, at *3 (Sept. 16, 1997) (stating in Related Act 
case that ``mere inadvertent or negligent conduct would not warrant 
debarment, [but] conduct which evidences an intent to evade or a 
purposeful lack of attention to, a statutory responsibility does'' and 
that ``[b]lissful ignorance is no defense to debarment'' (quotation 
omitted)); see also Pythagoras Gen. Contracting Corp., ARB Nos. 08-107, 
09-007, 2011 WL 1247207, at *12 (``[A] `willful' violation encompasses 
intentional disregard or plain indifference to the statutory 
requirements.'').
    The Department stated its belief that a single debarment standard 
would provide consistency for the regulated community. Under the 
proposed single ``disregard of obligations'' debarment standard, 
purposeful inattention, and gross negligence with regard to Davis-Bacon 
labor standards obligations--as well as actual knowledge of or

[[Page 57677]]

participation in violations--could warrant debarment. The Department 
explained that it would continue to carefully consider all of the facts 
involved in determining whether a particular contractor's actions meet 
the proposed single standard.
(2) Length of Debarment Period
    The Department also proposed to revise Sec.  5.12(a)(1) and (2) to 
make 3-year debarment mandatory under both the DBA and Related Acts and 
to eliminate the regulatory provision permitting early removal from the 
debarment list under the Related Acts.
    As noted above, since 1935, the DBA has mandated a 3-year debarment 
of contractors whose conduct has met the relevant standard. In 1964, 
the Department added two regulatory provisions that permit Related Acts 
debarment for less than 3 years as well as early removal from the 
debarment list. According to the 1964 final rule preamble, the 
Department added these provisions ``to improve the debarment provisions 
under Reorganization Plan No. 14 of 1950 by providing for a flexible 
period of debarment up to three years and by providing for removal from 
the debarred bidders list upon a demonstration of current 
responsibility.'' 29 FR 95.
    The Department explained in the proposal that its experience over 
the nearly 60 years since then has shown that those Related Act 
regulatory provisions that differ from the DBA standard have not 
improved the debarment process (i.e., have not assured consistency of 
enforcement) for any of its participants. Rather, they have added 
another element of confusion and inconsistency to the administration 
and enforcement of the DBA and Related Acts. For example, contractors 
and subcontractors have been confused about which provision applies. 
See, e.g., Bob's Constr. Co., Inc., WAB No. 87-25, 1989 WL 407467, at 
*1 (May 11, 1989) (stating that ``[t]he [DBA] does not provide for less 
than a 3-year debarment'' in response to contractor's argument that 
``if the Board cannot reverse the [ALJ's DBA] debarment order, it 
should consider reducing the 3-year debarment'').
    Requiring a uniform 3-year debarment period would reduce confusion 
and increase consistency. Although the regulations currently provide 
for an exception to 3-year debarment, debarment in Related Acts cases 
is usually, but not always, for 3 years. In some cases, the WAB treated 
a 3-year debarment period as effectively presumptive and therefore has 
reversed ALJ decisions imposing debarment for fewer than 3 years. See, 
e.g., Brite Maint. Corp., WAB No. 87-07, 1989 WL 407462, at *1, *3 
(imposing a 3-year debarment instead of the 2-year debarment ordered by 
the ALJ); Early & Sons, Inc., WAB No. 86-25, 1987 WL 247044, at *1-2 
(Jan. 29, 1987) (same); Warren E. Manter Co., Inc., WAB No. 84-20, 1985 
WL 167228, at *2-3 (June 21, 1985) (same). Under current case law, 
``aggravated or willful'' violations of the Related Acts labor 
standards provisions warrant a 3-year debarment period ``absent 
extraordinary circumstances.'' A. Vento Constr., WAB No. 87-51, 1990 WL 
484312, at *6. ALJs have grappled with determining the appropriate 
length of debarment in Related Acts cases. Id. In the NPRM, Department 
noted its belief that setting a uniform 3-year debarment period would 
provide clarity and promote consistency.
    Further, the Department remarked that it had concluded that in 
instances--usually decades ago--when debarment for a period of less 
than 3 years had been found to be warranted, it had not improved the 
debarment process or compliance. See, e.g., Rust Constr. Co., Inc., WAB 
No. 87-15, 1987 WL 247054, at *2 (Oct. 2, 1987) (1-year debarment), 
aff'd sub nom. Rust Constr. Co., Inc. v. Martin, 779 F. Supp. 1030, 
1032 (E.D. Mo. 1992) (affirming WAB's imposition of 1-year debarment 
instead of no debarment, noting ``plaintiffs could have easily been 
debarred for three years''); Progressive Design & Build Inc., WAB No. 
87-31, 1990 WL 484308, at *3 (Feb. 21, 1990) (18-month debarment); 
Morris Excavating Co., Inc., WAB No. 86-27, 1987 WL 247046, at *1 (Feb. 
4, 1987) (6-month, instead of no, debarment).
    For the above reasons, the Department proposed to modify the period 
of Related Acts debarment to mirror the DBA's mandatory 3-year 
debarment when contractors are found to have disregarded their 
obligations to workers or subcontractors.
    The Department also proposed to eliminate the provision at 29 CFR 
5.12(c) that allows for the possibility of early removal from the 
debarment list for Related Acts contractors and subcontractors. The 
Department stated that in its experience, the possibility of early 
removal from the debarment list has not improved the debarment process. 
Just as Related Acts debarment for fewer than 3 years has rarely been 
permitted, early removal from the debarment list has seldom been 
requested, and it has been granted even less often.
    Similarly, the ARB and WAB do not appear to have addressed early 
removal for decades. When they have, the ARB and WAB affirmed denials 
of early removal requests. See Atl. Elec. Servs., Inc., ARB No. 96-191, 
1997 WL 303981, at *1-2 (May 28, 1997); Fred A. Nemann, WAB No. 94-08, 
1994 WL 574114, at *1, *3 (June 27, 1994). Around the same time, early 
removal was affirmed on the merits in only one case. See IBEW Loc. No. 
103, ARB No. 96-123, 1996 WL 663205, at *4-6 (Nov. 12, 1996). 
Additionally, the early-removal provision has caused confusion among 
judges and the regulated community concerning the proper debarment 
standard. For example, an ALJ erroneously relied on the regulation for 
early relief from Related Acts debarment in recommending that a 
contractor not be debarred under the DBA. See Jen-Beck Assocs., Inc., 
WAB No. 87-02, 1987 WL 247051, at *1-2 (July 20, 1987) (remanding case 
to ALJ for a decision ``in accordance with the proper standard for 
debarment for violations of the [DBA]''). Accordingly, the Department 
proposed to amend Sec.  5.12 by deleting paragraph (c) and renumbering 
the remaining paragraph to accommodate that revision.
(3) Debarment of Responsible Officers
    The Department also proposed to revise 29 CFR 5.12 to expressly 
state that responsible officers of both DBA and Related Acts 
contractors and subcontractors may be debarred if they disregard 
obligations to workers or subcontractors. The purpose of debarring 
individuals along with the entities in which they are, for example, 
owners, officers, or managers is to close a loophole where such 
individuals could otherwise continue to receive Davis-Bacon contracts 
by forming or controlling another entity that was not debarred. The 
current regulations mention debarment of responsible officers only in 
the paragraph addressing the DBA debarment standard. See 29 CFR 
5.12(a)(2). But it is well-settled that they can be debarred under both 
the DBA and Related Acts. See Facchiano Constr., 987 F.2d at 213-14 
(noting that debarment of responsible officers is ``reasonable in 
furthering the remedial goals of the Davis-Bacon Act and Related Acts'' 
and observing that there is ``no rational reason for including 
debarment of responsible officers in one regulation, but not the 
other''); Hugo Reforestation, Inc., ARB No. 99-003, 2001 WL 487727, at 
*12 (Apr. 30, 2001) (CWHSSA; citing Related Acts cases); see also 
Coleman Constr. Co., ARB No. 15-002, 2016 WL 4238468, at *12 
(``Although the regulations do not explicitly grant authority to debar 
individual corporate

[[Page 57678]]

officers in Related Act cases, the regulations have been interpreted to 
grant such authority for decades.''). Thus, by expressly stating that 
responsible officers may be debarred under both the DBA and Related 
Acts, this proposed revision merely codifies current law. The 
Department explained that it intended that Related Acts debarment of 
individuals would continue to be interpreted in the same way as 
debarment of DBA responsible officers has been interpreted.
(4) Debarment of Other Entities
    The Department proposed another revision so that the Related Acts 
regulations mirror the DBA regulations not only in practice, but also 
in letter. Specifically, the Department proposed to revise 29 CFR 
5.12(a)(1) (with conforming changes in Sec.  5.12 and elsewhere in part 
5) to state that ``any firm, corporation, partnership, or association 
in which such contractor, subcontractor, or responsible officer has an 
interest'' must be debarred under the Related Acts, as well as the DBA. 
The DBA states that ``No contract shall be awarded to persons appearing 
on the list or to any firm, corporation, partnership, or association in 
which the persons have an interest.'' 40 U.S.C. 3144(b)(2) (emphasis 
added); see 29 CFR 5.12(a)(2). In contrast, the current regulations for 
Related Acts require debarment of ``any firm, corporation, partnership, 
or association in which such contractor or subcontractor has a 
substantial interest.'' 29 CFR 5.12(a)(1) (emphasis added); see 29 CFR 
5.12(b)(1), (d).
    The 1982 final rule preamble for these provisions indicated that 
the determination of ``interest'' (DBA) and ``substantial interest'' 
(Related Acts) was intended to be the same: ``In both cases, the intent 
is to prohibit debarred persons or firms from evading the ineligibility 
sanctions by using another legal entity to obtain Government 
contracts.'' 47 FR 23658, 23661 (May 28, 1982), implemented by 48 FR 
19540 (Apr. 29, 1983). It is ``not intended to prohibit bidding by a 
potential contractor where a debarred person or firm holds only a 
nominal interest in the potential contractor's firm,'' and 
``[d]ecisions as to whether `an interest' exists will be made on a 
case-by-case basis considering all relevant factors.'' Id. In the NPRM, 
the Department proposed to eliminate any confusion by requiring the DBA 
``interest'' standard to be the standard for both DBA and Related Acts 
debarment.
(5) Debarment Scope
    The Department proposed to revise the regulatory language 
specifying the scope of Related Acts debarment so that it mirrors the 
language specifying the scope of DBA debarment set forth in current 29 
CFR 5.12(a)(2). Currently, under the corresponding Related Acts 
regulation, Sec.  5.12(a)(1), contractors are not generally debarred 
from being awarded all contracts or subcontracts of the United States 
or the District of Columbia, but rather are only barred from being 
awarded contracts or subcontracts subject to Davis-Bacon and/or CWHSSA 
labor standards provisions, i.e., ``subject to any of the statutes 
listed in Sec.  5.1.'' As proposed in revised Sec.  5.12(a)(1), in 
Related Acts as well as DBA cases, any debarred contractor, 
subcontractor, or responsible officer would be barred for 3 years from 
``[being] awarded any contract or subcontract of the United States or 
the District of Columbia and any contract or subcontract subject to the 
labor standards provisions of any of the statutes referenced by Sec.  
5.1.''
    The Department's belief is that there is no reasoned basis to 
prohibit debarred contractors or subcontractors whose violations have 
warranted debarment for Related Acts violations from receiving DBRA 
contracts or subcontracts, but to permit them to continue to be awarded 
other, non-DBRA-covered contracts or subcontracts with the United 
States or the District of Columbia that parties debarred under the DBA 
are statutorily prohibited from receiving during their debarment 
period. The proposed changes to Sec.  5.12(a)(1) would eliminate this 
anomalous situation, and apply debarment consistently to contractors, 
subcontractors, and their responsible officers who have disregarded 
their obligations to workers or subcontractors, regardless of the 
nature of the of Federal contract or subcontract for the work.
(C) Discussion
    The Department received many comments about its proposed debarment 
provisions. Most of the comments, including organized IUOE and SMACNA 
member campaign comments, expressed general support for the debarment 
proposals in their entirety. A few organizations, including a group of 
civil rights and workers' rights organizations, unions, and labor-
management organizations, specified the detailed reasons for their 
support. Several commenters opposed the proposals entirely, giving 
reasons for their opposition.
    As an overarching matter, commenters that supported the debarment 
proposals did so because the proposal would promote consistent 
enforcement of the DBRA labor standards provisions. Supporting 
commenters generally agreed that the proposed uniform debarment 
standards and procedures (e.g., mandatory 3-year debarment, no option 
for early removal, responsible officer, and/or interest proposals) 
would provide clarity for, among others, the regulated community and, 
thus, enhance compliance with the DBRA labor standards provisions. See, 
e.g., Balance America, Inc., CEA, LCCHR, Fair Contracting Foundation of 
Minnesota, UBC, LIUNA.
    Commenters like FFC noted that having one debarment standard would 
be easier to understand for both workers and contractors. UBC supported 
the single debarment standard because it would eliminate confusion for 
adjudicators and the regulated community and improve efficiency for the 
Department. LCCHR also supported the uniform 3-year debarment period 
without early removal to promote clarity as to regulatory obligations 
and compliance.
    Among supporters, many comments praised the proposal's impact on 
worker protection. For example, III-FFC and LCCHR supported the uniform 
``disregard of obligation'' debarment standard because it would reach 
contractor behavior that is essential for compliance with Davis-Bacon 
and CWHSSA labor standards, but that may not have been deemed to rise 
to the level of aggravated or willful behavior under the existing 
Related Act debarment standard. LCCHR gave as examples of such behavior 
a contractor's failure to establish appropriate procedures to classify 
laborers or mechanics correctly and to ensure that lower-tier 
subcontractors are in compliance with DBRA labor standards 
requirements. These and other commenters applauded the proposed 
harmonized debarment standards because they would strengthen worker 
protections, in part by reducing disincentives to underpay workers--in 
some cases repeatedly--as well as by enhancing enforcement. See, e.g., 
FFC, IUOE Local 77, LIUNA.
    Several commenters emphasized the importance of uniform, clear 
debarment standards to further protect workers and DBRA-compliant 
contractors by deterring contractors that treat violations as part of 
their business model due in part to the unlikelihood of being debarred. 
The Fair Contracting Foundation of Minnesota explained that in their 
experience, contractors that show a disregard for labor standards 
obligations on one project without significant consequences often go on 
to demonstrate a similar disregard on future projects. They, therefore, 
supported the single debarment

[[Page 57679]]

standard as well as the mandatory 3-year debarment and interest 
provisions to further protect workers and DBRA-compliant contractors, 
incentivize compliance, and promote consistent enforcement of labor 
standards requirements. ACT Ohio asserted that violators of the DBRA 
rarely face debarment from Federal contracts, no matter how egregious 
the violation. And LCCHR highlighted watchdog group findings that the 
Federal government has awarded contracts to contractors that have 
repeatedly violated Federal laws like the DBA, such as a report 
asserting that in fiscal year 2017 Federal agencies spent over $425 
million on contractors that had been found to have violated the DBA in 
2016. UBC noted that applying the lower debarment threshold to Related 
Act violations would increase deterrence.
    A number of commenters similarly supported the harmonized debarment 
standard as a way to hold repeat contractors accountable. See, e.g., 
ACT Ohio, Foundation for Fair Contracting of Connecticut, Inc. (FFC-
CT). They noted that the different debarment standards could allow 
violators to remain out of compliance without facing real consequences 
beyond just paying back wages. FFC-CT explained that debarment is a 
real consequence that sends a message to government contractors that 
``we expect them to be responsible stewards of public monies.''
    Those commenters that supported the proposed changes also affirmed 
the importance of the Department's proposal to codify existing law 
regarding debarment of responsible officers. The UA emphasized the need 
to debar individuals so that they cannot ``avoid accountability by 
setting up shop as another entity.'' LCCHR noted their support for the 
responsible officers proposal, which is consistent with existing law.
    Some supporting commenters went further and claimed that the 
current two debarment standards are inconsistent, see, e.g., FFC, or 
even arbitrary and capricious, see, e.g., NABTU. NCDCL claimed that the 
heightened Related Act standard ``arbitrarily makes it more difficult 
to debar contractors for violations of the DBRA.'' LCCHR asserted that 
there is no principled reason for employing two different debarment 
standards for contractors that are otherwise subject to the same 
contractual requirements. NABTU cited Transactive Corp. v. United 
States, 91 F.3d 232, 237 (D.C. Cir. 1996) and Encino Motorcars, LLC v. 
Navarro, 136 S. Ct. 2117, 2127 (2016) in support of its claim that the 
different DBA and Related Act debarment standards ``are arbitrary and 
capricious because they treat identical situations differently without 
a reasonable basis.'' LCCHR also objected to the inconsistent 
consequences for similar behavior under the current DBRA debarment 
framework.
    Among commenters who opposed the Department's debarment proposals 
in their entirety, several challenged the Department's authority to 
change the debarment standard for Related Acts. ABC and IEC questioned 
the Department's authority to implement a uniform standard for DBA and 
Related Act debarments. ABC argued that since Congress had not adopted 
the DBA standard for Related Act debarments, the Department could not 
``unilaterally impose a unitary debarment test.'' ABC claimed that if 
in the 70 years since the Department established by regulation in 1951 
Congress had wanted to impose the DBA's ``inflexible and easier to 
prove'' ``disregard of obligations'' debarment standard, it could 
easily have done so, and that the Department had provided no specific 
justification for this ``radical change.'' IEC objected to applying the 
DBA debarment standard to Related Acts, stating without further 
explanation that this broadening would likely exceed ``the statutory 
authority of several if not all of the `Related Acts.' ''
    Next, unlike commenters that noted that a uniform debarment 
standard would lead to more consistent enforcement, a few commenters 
contended that the Department's proposed changes would not achieve 
these results or were too burdensome. The group of U.S. Senators 
claimed that the fact-specific nature of the DBA ``disregard of 
obligations'' standard is ``ambiguous'' and would lead to ``the same 
supposed `inconsistencies' '' the Department sought to address in the 
proposed rule. They also claimed that in the NPRM, the Department 
failed to explain the ``disregard of obligations'' standard, which 
would pose a greater obstacle to small firms bidding on ``federal 
contracts covered by the DBRA [that are] in essence nearly the entirety 
of federal procurement.'' In addition, the group of U.S. Senators 
questioned the Department's claim that the willful or aggravated 
standard has been interpreted inconsistently over the decades, alleging 
that this claim is ``dubious'' because of ``the volatile manner in 
which DOL calculates prevailing wage rates.''
    Unlike commenters who lauded the proposal's enhanced enforcement 
and worker protection and clarity for the regulated community and other 
stakeholders, FTBA and the group of U.S. Senators asserted that the 
proposed harmonized debarment provisions would have a negative impact 
on contractors, especially small and mid-size contractors. FTBA 
asserted that compliance with certain aspects of DBA requirements like 
the classification of work and coverage issues such as the site-of-the-
work limitation can be ``extraordinarily difficult even for contractors 
with robust compliance processes.'' FTBA and ABC faulted the Department 
for not proposing changes such as greater transparency about proper 
classification of workers on wage determinations, instead of relying on 
``unpublished union scope of work claims'' or ``unpublished union work 
rules'' that make it challenging for non-union contractors to properly 
determine job classifications.\268\ The group of U.S. Senators asserted 
that small and mid-size contractors are at greater vulnerability of 
``unintentionally violating incomprehensible prevailing wage 
requirements.''
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    \268\ The Department did not include the publication of ``union 
work rules'' in the proposed rule, and therefore, such an initiative 
is outside the scope of this rulemaking. However, the Department 
recognizes that it is important that contractors be able to 
understand wage determinations and comply with their obligations to 
pay laborers and mechanics prevailing wages based on the appropriate 
labor classifications in the applicable wage determination. 
Therefore, the Department will continue to address the clarity of 
wage determinations at the subregulatory level. The Department 
believes that the modifications to the enforcement procedures in 
part 5 of this rulemaking should be implemented along with continued 
efforts to improve compliance.
---------------------------------------------------------------------------

    To support its claim that the Department's debarment and other 
proposals would be an ``impermissible burden on the private sector,'' 
the group of U.S. Senators alleged that the Department's proposal to 
eliminate the aggravated or willful debarment standard would ``lower[ ] 
the burden of persuasion to a `disregard of obligations' [and] ensnare 
many small contractors into debarment proceedings.'' According to the 
group of U.S. Senators, given the ``non-transparent and wasteful manner 
in which prevailing wages are calculated'' and ``less than consistent'' 
survey methods, small and mid-size contractors who ``lack 
administrative resources to keep abreast of DOL's nightmarishly 
bureaucratic administration of DBRA'' would be vulnerable to ``an ocean 
of legal liability as a result of the new debarment standard.'' FTBA 
asserted that there was no compelling reason for the Department to 
choose the ``more rigid threshold and longer debarment period'' given 
that debarment is a remedial, not punitive measure.
    ABC also objected to the Department's proposals to revise Sec.  
5.12(a)(2) to

[[Page 57680]]

expressly include responsible officers and entities in which they have 
a ``substantial [sic] interest'' for debarment purposes, claiming that 
the NPRM offered little guidance as to how responsible officers would 
be determined or what constitutes a substantial interest in a debarred 
company. ABC requested additional guidance about these provisions.
    The Department considered all the comments it received about its 
proposals to harmonize the DBA and Related Act debarment standards by 
adopting the DBA's debarment provisions for all DBRA debarments. As 
explained below, the Department adopts the debarment provisions as 
proposed.
    As many of the supporting commenters underscored, a primary benefit 
of the harmonized debarment provisions, most notably the change to a 
single ``disregard of obligations'' debarment standard, will be to 
improve consistency of--and, thus, effectiveness of--enforcement and 
coordination of administration of the DBRA, as Reorganization Plan No. 
14 of 1950 directs the Department to do. The unitary debarment standard 
will also advance Reorganization Plan No. 14 of 1950's related 
objective of ``more uniform and adequate protection for workers.'' 1950 
Special Message to Congress.
    Although the Related Act debarment standard adopted in 1951 was 
also implemented to try to accomplish Reorganization Plan No. 14 of 
1950's directive, it has become evident that more change is needed to 
achieve this objective. As explained in the NPRM, the dual debarment 
standard and related provisions have not achieved the goals the 
Department intended that they would, and, in some instances, have led 
to counterproductive results from inconsistent or erroneous application 
of the applicable standard(s), as well as from confusion about which 
standard applies. For example, in one case, a subcontractor and its 
principal claimed that they should not be debarred under the DBA 
because their violations were not ``willful or fraudulent,'' an 
apparent misunderstanding of the ``disregard of obligation'' standard. 
NCC Elec. Servs., Inc., ARB No. 13-097, 2015 WL 5781073, at *6 n.25 
(Sept. 30, 2015).\269\
---------------------------------------------------------------------------

    \269\ While misunderstanding the applicable debarment standard 
has led to counterproductive results, contrary to the assertion of 
the group of U.S. Senators, for debarment purposes, it is irrelevant 
if contractors do not understand how WHD calculated or periodically 
adjusted applicable prevailing wages and fringe benefits. Although 
contractors are free to challenge the wage rates on a wage 
determination prior to contract award, if they do not challenge the 
rates prior to that date and instead agree to incorporation of the 
wage determination into their contract without modification, they 
have thereby accepted the wage rates as a part of their contract and 
have agreed to comply with those wage rates. In this context, given 
their commitment to pay no less than the wage rates listed in the 
wage determination that they have accepted as contractually binding, 
contractors do not need to understand how prevailing wage rates are 
determined to comply, but merely need to be able to look at the 
applicable wage determination and pay required rates listed on that 
wage determination, a task well within the capacity of even small 
firms.
---------------------------------------------------------------------------

    As some commenters that supported this change asserted, the current 
dual debarment standard could be viewed as arbitrary or inconsistent to 
the extent that it treats contractors, subcontractors, and their 
responsible officers--who are subject to the same DBRA labor standards 
requirements and doing the same types of work--differently based solely 
on the source of Federal funding or assistance. The Department, 
however, does not agree with NABTU that the current dual debarment 
standards are impermissibly arbitrary or capricious. The Department 
also disagrees with FTBA that it did not explain why there were 
different debarment standards. As explained in the NPRM, the Department 
adopted a new part 5 in 1951 to comply with Reorganization Plan No. 14 
of 1950's directive and made changes to Related Act debarment in 1964 
in an effort to improve debarment provisions under that Reorganization 
Plan. The Department posits that the willful or aggravated Related Act 
standard may have been chosen in 1951 to lessen the effect on the 
regulated community of the expansion of debarment to Related Act 
violations by limiting debarment to more egregious violations, in an 
acknowledgement of the relative novelty of Related Act work at that 
time. This heightened standard may have been intended to accommodate 
the regulated community's relative inexperience with Related Act work, 
as well as the new part 5 provisions, most of which were new (other 
than Copeland Act requirements, which had existed since the mid-1930s).
    The Department's 1964 changes to the Related Act 3-year debarment 
period may have corresponded with growing criticism in the early 1960s 
of Federal agency use of debarment and suspension without sufficient 
due process safeguards. See, e.g., Robert F. Meunier & Trevor B. A. 
Nelson, ``Is It Time for a Single Federal Suspension and Debarment 
Rule?,'' 46 Pub. Cont. L.J. 553, 558-59, 559 n.29 (2017) (discussing 
judicial ``due process and fundamental fairness requirements'' 
developments in debarment and suspension beginning in the 1960s and 
extending through the 1990s); see also Copper Plumbing & Heating Co., 
290 F.2d at 371-73 (affirming the Department's regulatory authority to 
debar contractors for willful or aggravated violations of Related Acts 
such as the Eight Hour Laws, and in dicta mentioning that ``upon a 
proper showing [of responsibility] it appears'' the contractor's 
petition for removal from the Comptroller General's ineligible list 
``would have been granted'').
    There are now more than 70 Related Acts, and federally assisted 
construction work is prevalent. Since the same Davis-Bacon contractual 
obligations apply on Related Act projects as on DBA projects, with a 
few exceptions mandated by statute,\270\ the regulated community's 
familiarity with their labor standards obligations on Related Acts has 
also increased over this time. Due process safeguards include that the 
DBRA regulations require notification of violation findings and an 
opportunity to request a hearing when WHD finds reasonable cause to 
believe that debarment is warranted.
---------------------------------------------------------------------------

    \270\ Such exceptions include the ``site of the work'' 
provision, which applies to DBA and most Related Act work, with the 
exception of CWHSSA and certain HUD projects under ``development 
statutes.'' Another difference is that under the DBA, the Department 
recommends debarment to the GAO for implementation, while under the 
Related Acts, the Department effectuates debarment.
---------------------------------------------------------------------------

    Moreover, in the decades since the Related Act debarment provisions 
went into effect, as explained in the NPRM, it has become clear that 
having two debarment standards has not always improved consistency of 
enforcement and administration and, at times, has had the opposite 
effect. It has become evident that the flexibility of a possible 
shorter debarment period of under 3 years and the possibility of early 
removal from the debarment list, aside from rarely being used over the 
past 2 or 3 decades, have not improved the effectiveness of debarment, 
and at times, have impaired it. The Department agrees with commenters 
that the unitary debarment standard and concomitant related provisions 
(mandatory 3-year debarment period with no early removal, interest, 
responsible officers, and scope of debarment) will be easier to 
understand for the regulated community and adjudicators, and more 
consistent in application and result.
    The final rule thus adopts a uniform debarment framework comprised 
of the longstanding DBA provisions. The DBA debarment provisions will 
enhance worker protection by eliminating the heightened Related Act 
standards, and the DBA standards are well-known to the regulated 
community. The

[[Page 57681]]

Department emphasizes that the ``disregard of obligations'' standard is 
not ``new,'' as the group of U.S. Senators asserted. The Department 
also disagrees with ABC that this rule is a ``radical change.'' Rather, 
it takes the original, longstanding ``disregard of obligations'' 
debarment standard and applies it to all debarments, not only DBA 
debarments. Since 1935, the DBA has required debarment of ``persons or 
firms'' who have ``disregarded their obligations to employees and 
subcontractors'' as well as debarment of firms and other entities in 
which such debarred persons or firms have an ``interest.'' 40 U.S.C. 
3144(b). Since willful or aggravated violations are, by definition, 
also a disregard of a contractor's obligations to workers or 
subcontractors, debarment for such violations will continue.
    The Department disagrees with the allegation from the group of U.S. 
Senators that the fact-specific nature of the ``disregard of 
obligations'' standard is ``ambiguous'' and will lead to 
inconsistencies the Department is trying to address. First, aggravated 
or willful Related Act violations are also determined on a case-
specific basis. Second, such totality of the circumstances analyses are 
common legal approaches, even in criminal law where a person's liberty 
is at stake. See, e.g., Florida v. Harris, 568 U.S. 237, 244 (2013) 
(describing the ``fluid concept'' of probable cause under the Fourth 
Amendment as a ``common-sensical standard'' that should evaluated by 
looking at the ``totality of the circumstances . . . a more flexible, 
all-things-considered approach'' and ``reject[ing] rigid rules, bright-
line tests, and mechanistic inquiries'' for determining probable cause 
in case involving police search of a vehicle during a traffic stop); 
see also Monasky v. Taglieri, 140 S. Ct. 719, 723 (2020) (holding that 
a child's ``habitual residence'' for purposes of the Hague Convention 
``depends on the totality of the circumstances specific to the case''); 
Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545, 553-
54 (2014) (holding that courts may consider the totality of the 
circumstances when determining whether a case is ``exceptional'' under 
Federal Patent Act provision concerning the award of attorney's fees to 
prevailing parties). The Department is confident that its case-by-case 
approach in the DBRA debarment context will continue to be fairly 
administered and readily understood by the regulated community.
    Contractors on DBRA projects are charged with knowing the law, 
including the Davis-Bacon and CWHSSA labor standards requirements and 
the consequences, such as debarment, for violating them. See, e.g., NCC 
Elec. Servs., Inc., ARB No. 13-097, 2015 WL 5781073, at *7 (``[T]here 
has to be a presumption that the employer who has the savvy to 
understand government bid documents and to bid on a Davis-Bacon Act job 
knows what wages the company is paying its employees and what the 
company and its competitors must pay when it contracts with the federal 
government'' (quotation marks omitted)); cf. Abhe & Svoboda, Inc., 508 
F.3d at 1059-60 (``Existing administrative and judicial decisions and 
the [DBA] itself put the Company on fair notice of what was required'' 
regarding classification of employees despite contractor's claim that 
``general wage determinations did not indicate the proper method of 
classifying employees.'').
    Being a government contractor carries with it attendant 
responsibilities, not least of which is complying with DBRA labor 
standards requirements. These obligations apply to all DBRA 
contractors, subcontractors, and responsible officers. Government 
contractors may be subject to debarment regardless of size and even if 
their disregard of obligations occurs on their first DBRA contract, or 
if WHD has not previously found violations. See, e.g., Stop Fire, Inc., 
WAB No. 86-17, 1987 WL 247040, at *2 (June 18, 1987) (``The contention 
that this was a company's first Davis-Bacon Act job is not sufficient 
to relieve it from being placed on the ineligible list, absent other 
additional justification.''); Morris Excavating Co., Inc., WAB No. 86-
27, 1987 WL 247046, at *1 (rejecting ``principle that each contractor'' 
violating the DBRA ``gets one free shot at underpaying laborers and 
mechanics on a Davis-Bacon project until the time of enforcement'' and 
finding that 6-month debarment of a small contractor on relatively 
small contract doing ``localized specialty work'' was warranted despite 
workers' ``agree[ment] that [the firm] would pay them their regular 
wages now and the additional Davis-Bacon amount later'').
    The Department believes that existing mechanisms are sufficient to 
address FTBA's concern about debarment in light of what they allege to 
be a lack of ``transparency'' about applicable classifications. If 
there is any uncertainty about which classifications apply to 
particular work, contractors may request clarification and information 
on local area practice, including from the contracting agency or WHD. 
If that further guidance indicates that the work in question is not 
performed by a classification listed on the wage determination, the 
issue may be resolved through the conformance process. Further, 
``[c]ontractors who seek to perform work on a federal construction 
project subject to the Davis-Bacon Act have an obligation `to 
familiarize themselves with the applicable wage standards contained in 
the wage determination incorporated into the contract solicitation 
documents.' '' Am. Bldg. Automation, Inc., ARB No. 00-067, 2001 WL 
328123, at *3-4 (Mar. 30, 2001) (citation omitted) (denying 
subcontractor's appeal of denial of conformance request in which 
subcontractor claimed it had no reason to believe that building 
automation and controls work fell within plumber classification). Firms 
of any size may also consult the extensive subregulatory materials that 
are available on WHD's website (including FOH chapters and the PWRB), 
request informal compliance assistance from WHD, or seek guidance in 
accordance with 29 CFR 5.13. More formally, contractors may request 
ruling letters from the Administrator.
    The Department disagrees with the group of U.S. Senators that the 
NPRM did not adequately explain the ``disregard of obligations'' 
standard such that small firms could understand it. Not only did the 
NPRM contain an explanation of the standard, but also the Department 
has resources available on its website for those who desire more 
information about debarment criteria. Nevertheless, the Department 
takes this opportunity to expand upon the explanation in the NPRM about 
the types of actions and inactions that could constitute a debarrable 
disregard of obligations to workers or subcontractors under the rule. 
The additional examples of debarrable actions or omissions in this 
section are illustrative, not exhaustive.
    As the Department highlighted in the NPRM, it is well settled that 
contractors, subcontractors, and responsible officers will be debarred 
for certain egregious or deliberate and knowing violations under both 
the disregard of obligations and aggravated or willful standards. For 
example, falsification of certified payroll combined with underpayment 
or misclassification--thus simulating compliance with Davis-Bacon or 
CWHSSA obligations--constitute aggravated and willful violations and, 
necessarily, a disregard of obligations to workers too. Falsification 
of certified payrolls can take various forms including, but not limited 
to, overreporting prevailing wages and/or fringe benefits paid; 
underreporting

[[Page 57682]]

hours worked; misclassifying workers who performed skilled trade work 
as laborers; omitting workers (often because they are paid less that 
required wages) from the payroll; and listing managers or principals 
who did not perform manual labor as laborers and mechanics.
    Making workers ``kick back'' or return any portion of the 
prevailing wages is another DBRA violation that has warranted debarment 
under both the willful or aggravated and the ``disregard of 
obligations'' standards for decades. See, e.g., Killeen Elec. Co., WAB 
No. 87-49, 1991 WL 494685, at *5. Such kickbacks have been illegal 
since 1934, when the Copeland ``Anti-Kickback'' Act was passed and can 
even result in criminal prosecution. See 48 Stat. 948 (June 13, 1934); 
see also section III.B.3.xix (``Anti-Retaliation''). When the DBA was 
amended in 1935, Congress not only added the debarment sanction, but 
also ``the provision that each contract shall contain a stipulation 
requiring unconditional weekly payments without subsequent deductions 
or rebates'' to try to eliminate the ``illegal practices of exacting 
rebates or kick-backs.'' H. Rep. No. 74-1756, at 3 (1935); S. Rep. No. 
74-1155, at 3 (1935); 40 U.S.C. 3142(c)(1). Regulations implementing 
the Copeland Act's requirement that contractors and subcontractors 
submit weekly statements about wages paid each worker--with some 
variation and changes over the years--have been in place since 1935, 
except for a ``three-year hiatus from 1948 to 1951.'' Donovan, 712 F.2d 
at 630; see also 6 FR 1210, 1210-1211 (Mar. 1, 1941) (requiring 
contractors and subcontractors to provide weekly sworn affidavits 
regarding wages paid during preceding pay roll period); 7 FR 686, 687-
88 (Feb. 4, 1942).
    Other categories of willful or aggravated actions that necessarily 
warrant debarment under the lower ``disregard of obligations'' standard 
include, but are not limited to, contractor efforts to require or 
coerce workers to lie to the Department or contracting agencies about 
their wages paid and hours worked, or to refuse to cooperate with such 
enforcement efforts at all by instructing workers to leave the job site 
when investigators are conducting worker interviews. These actions are 
akin to falsification of payroll or destruction of records to the 
extent that such actions are intended to simulate compliance or, at 
least, hide noncompliance.
    While disregard of obligations ``need not be the equivalent of 
intentional falsification,'' DBA violations alone do not constitute a 
disregard of obligations warranting debarment. See NCC Elec. Servs., 
Inc., ARB No. 13-097, 2015 WL 5781073, at *6, *10; Structural Concepts, 
Inc., WAB No. 95-02, 1995 WL 732671, at *3 (Nov. 30, 1995) (the strict 
liability standard for holding prime contractors liable for back wages 
owed to workers has not been extended to debarment under the DBA). For 
example, in Structural Concepts, the Board reversed an ALJ's debarment 
order because the Board could not conclude from the evidence presented 
that the prime contractor's principal knew or should have known of the 
subcontractor's falsified certified payrolls, and when the principal 
did find out about the subcontractor's DBA violations, they took 
reasonable action by cancelling the subcontract. Id.
    The Department reiterates, as it explained in the NPRM, that 
contractors' bad faith or grossly negligent actions or inactions can be 
a disregard of their DBRA obligations warranting 3-year debarment. 
While merely inadvertent or negligent conduct or innocuous mistakes 
would not warrant debarment, conduct evidencing an intent to evade, or 
a purposeful lack of attention to, statutory or regulatory obligations 
warrant debarment. ``Blissful ignorance is no[t]'' and will continue 
not to be a ``defense to debarment.'' Fontaine Bros., Inc., ARB No. 96-
162, 1997 WL 578333, at *3.
    Debarment under the ``disregard of obligations'' standard requires 
some element of intent or culpability beyond mere negligence. P&N, 
Inc./Thermodyn Mech. Contractors, Inc., ARB No. 96-116, 1996 WL 697838, 
at *4, *7 (Oct. 25, 1996); NCC Elec. Servs., Inc., ARB No. 13-097, 2015 
WL 5781073, at *6. The Department, thus, disagrees with the claim from 
the group of U.S. Senators that small and mid-size contractors are at 
greater vulnerability of debarment for ``unintentionally violating'' 
prevailing wage requirements. Truly unintentional violations that are 
merely negligent would not merit debarment as a disregard of 
obligations.
    The Board has explained the difference between violations that 
constitute a disregard of obligations to workers or subcontractors and 
those that are willful or aggravated violations. For example, an 
``intentional failure to look at what the law requires'' may not rise 
to a deliberate, knowing, and intentional action that constitutes a 
willful or aggravated violation of the Related Acts. Interstate Rock 
Prods., Inc., ARB No. 15-024, 2016 WL 5868562, at *4 (``Intentional 
disregard of obligations may therefore include acts that are not 
willful attempts to avoid the requirements of the DBA.''). The Board 
went on to explain that ``contractors and subcontractors [may not] 
ignore the rules and regulations applicable to DBA contracts, pay their 
employees less than prevailing wages, and avoid debarment by asserting 
that they did not intentionally violate the DBA because they were 
unaware of the Act's requirements.'' Id. Similarly, gross negligence 
and bad faith can constitute a disregard of obligations. NCC Elec. 
Servs., Inc., ARB No. 13-097, 2015 WL 5781073, at *6 & n.22.
    For example, a contractor or subcontractor's failure to ``look to 
[their] obligations under DBA,'' a failure to read DBA provisions on a 
contract, a failure ``to keep proper records tracking the actual work 
performed,'' and failing to flow down Davis-Bacon labor standards 
provisions to lower-tier subcontractors would be a disregard of 
obligations because government contractors are expected to know the 
law. Id. at *7. A subcontractor's failure to read DBRA provisions the 
prime contractor included in its subcontract and its failure to include 
the DBA provision in its own subcontract with a lower-tier contractor 
also has been held to constitute a disregard of the debarred 
subcontractor's obligations to be aware of the DBA requirements and to 
ensure its lower-tier subcontractor complied with wage payment and 
record keeping requirements. See Ray Wilson Co., ARB No. 02-086, 2004 
WL 384729, at *10.
    Recordkeeping violations short of falsification have led to 
debarment in various Related Act cases. See, e.g., Fontaine Bros., 
Inc., ARB No. 96-162, 1997 WL 578333, at *3 (affirming debarment of a 
contractor that failed to keep records of any payroll deductions or to 
keep any records for workers paid in cash); P.B.M.C., Inc., WAB No. 87-
57, 1991 WL 494688, at *7 (debarment appropriate where contractor 
failed to record workers' piecework production and hours worked). The 
regulations notify contractors that ``failure to submit the required 
records upon request or to make such records available may be grounds 
for debarment.'' 29 CFR 5.5(a)(3)(iii) (current). Under the final rule, 
such required records now also include contracts and related documents. 
See 29 CFR 5.5(a)(3)(iii). In one case, a contractor's failure to 
submit certified payrolls on a timely basis--it waited 9 weeks before 
submitting the first nine certified payrolls--also constituted a 
disregard of its obligations warranting debarment. Sealtite Corp., WAB 
No. 87-06, 1988 WL 384962, at *4 (Oct. 4 1988).
    A disregard of contractors' compliance and oversight

[[Page 57683]]

responsibilities could also result in debarment under the DBA standard. 
``[F]ailure to properly instruct [subordinates] in the preparation of 
the payrolls'' could result in debarment under the DBA. C.M. Bone, WAB 
No. 78-04, 1978 WL 22712, at *1 (Sept. 13, 1978); see also Ray Wilson 
Co., ARB No. 02-086, 2004 WL 384729, at *10. Another example of actions 
or omissions that could result in debarment under the unitary standard 
includes a failure to flow down the applicable wage determination and 
Davis-Bacon and/or CWHSSA labor standards provisions to lower-tier 
subcontractors.
    While there will be a subset of violations that would only have 
been debarrable under the DBA ``disregard of obligations'' standard but 
now will be potentially subject to debarment under both the DBA and 
Related Acts, the Department does not anticipate that this subset of 
violations will be particularly large or the violations novel. First, 
as explained in the NPRM and reiterated in this section above, many of 
the same types of violations have long been debarrable under both the 
DBA and Related Acts (e.g., falsification of certified payrolls coupled 
with underpayment or misclassification, kickbacks). Second, in some 
cases involving projects subject to both DBA and Related Acts, the 
Board previously has decided debarment based on the laxer DBA 
``disregard of obligations'' standard. See, e.g., Interstate Rock 
Prods., ARB No. 15-024, 2016 WL 5868562, at *8 n.36 (affirming 
debarment for misclassification under the DBA ``laxer standard'' which 
``render[ed] debarment under the [Related Acts] redundant and moot); 
P&N, Inc./Thermodyn Mech. Contractors, Inc., ARB No. 96-116, 1996 WL 
697838, at *2 & n.7 (distinguishing between the DBA and Related Act 
standards and applying the less strict DBA standard because case 
involved violations of both DBA and CWHSSA).
    The Department expects the change to a single debarment standard--
the current ``disregard of obligations'' standard instead of the 
heightened aggravated or willful standard--will further the remedial 
goals of the DBRA by more effectively enlisting the regulated community 
in compliance with the Davis-Bacon and CWHSSA labor standards 
requirements. The Department's decision to change to a single debarment 
standard rests in part on its belief that extending the current 
``disregard of obligations'' standard to all DBA and Related Act 
debarments will promote ``the cooperation of the employer, largely 
through self-enforcement,'' in complying with the DBRA requirements. 
Facchiano Constr., 987 F.2d at 214. As echoed by various commenters, 
this change makes particular sense since DBA and Related Act 
construction work is otherwise generally subject to the same Davis-
Bacon labor standards.
    The Department agrees with the many commenters who emphasized the 
importance of preventing repeat violations by contractors who may not 
be debarred the first time they are found to have violated the DBA or 
Related Acts. The Department echoes the importance of incentivizing 
compliance by contractors and their responsible officers on every 
project, particularly in light of limited enforcement resources vis-a-
vis the number of potentially affected workers on DBRA-covered 
projects. To the extent some unscrupulous contractors' business models 
even rely on the likelihood of their violations going undetected, as 
some commenters asserted, strengthening the debarment remedy takes on 
an even greater importance for repeat, or potential repeat, violators.
    Similar concerns animated the 1935 amendments to the DBA, which 
until then had no enforcement provisions. The legislative history 
indicates that Congress added debarment, one such enforcement power, in 
part to address the problem of repeat violators getting new Davis-Bacon 
contracts. See, e.g., S. Rep. No. 74-332, pt. 3, at 11 (1935) (noting 
the need to ``speedily remed[y]'' the situation in which the 
requirement to award contracts to the lowest responsible bidder 
resulted in ``the anomaly . . . where violators of prevailing wage 
scales and even contractors who have actually been guilty of dishonest 
practices, such as defrauding their workmen . . . were granted 
additional contracts by the Government''). Congress in 1935, thus, 
implemented a ``[s]ystem of coordination between various Government 
Departments to assure that the Government will not be in the position 
of continuing to contract with a contractor who disregards his 
obligations to his employees and subcontractors.'' H. Rep. No. 74-1756, 
at 2 (1935); S. Rep. No. 74-1155, at 2 (1935). The debarment provision 
``further penalizes offending contractors and subcontractors by 
disqualifying them for 3 years from their privilege of bidding for 
Government contracts''--a measure to arm the Department and contracting 
agencies with another tool for departments not to have to ``continue to 
deal'' with ``bidders [who] had been notorious violators of the Davis-
Bacon Act in the past.'' H. Rep. No. 74-1756, at 3; S. Rep. No. 74-
1155, at 3.
    As commenters asserted, it is not uncommon for contractors and 
their responsible officers found to have engaged in debarrable conduct 
under the DBRA to have committed similar violations on other projects. 
The Department expects that adopting the ``disregard of obligations'' 
debarment standard for Related Act violations may reduce repeat 
violations by contractors, subcontractors, and their responsible 
officers, since they will face the possibility of debarment on Related 
Act-only projects for a broader range of actions and inactions than 
under the current dual debarment framework.
    The Department is authorized to harmonize the DBRA debarment 
standards by substituting the DBA standard for that of the Related 
Acts. Contrary to commenters who asserted the Department does not have 
the authority to do so, and as discussed in more detail in section 
III.B.3.xix (``Anti-Retaliation''), since 1950, Congress has repeatedly 
recognized the Secretary's authority and functions under Reorganization 
Plan No. 14 of 1950--as recently as November 2021. See IIJA 41101, 42 
U.S.C. 18851(b). And in 1984 Congress ratified and affirmed 
Reorganization Plan No. 14 of 1950 as law. Reorganization Plan No. 14 
of 1950 expressly authorizes the Department to adopt regulations that 
promote consistent enforcement and more efficient administration of the 
DBRA. The Department anticipates that having one debarment standard 
instead of two will do just that. Just as the Department was authorized 
to implement regulatory debarment under the willful or aggravated 
standard under the Related Acts in 1951, so too may it now adjust that 
standard to the ``disregard of obligations'' standard in order to more 
effectively promote the remedial goals of the DBRA.
    The Department, therefore, disagrees with commenters that claimed 
that it lacks authority to adopt the ``disregard of obligations'' 
standard for debarment under the Related Acts. IEC, for example, did 
not cite any specific statutory provision or other law to support their 
contention that this rule exceeds the Department's authority under 
``several if not all'' of the Related Acts. Reorganization Plan No. 14 
of 1950 has consistently been applied to Related Acts even where it is 
not specifically referenced in the Related Act.
    Regulatory debarment outside the DBRA context as a ``means for 
accomplishing [a] congressional purpose,'' Gonzalez v. Freeman, 334

[[Page 57684]]

F.2d 570, 577 (D.C. Cir. 1964), or to support ``the integrity and 
effectiveness of federally funded activities,'' Meunier & Nelson, 
supra, at 556-57, is not uncommon. In the 1980s, debarment and 
suspension from Federal procurement and nonprocurement transactions was 
promulgated in the FAR and the Non-procurement Common Rule, 
respectively. See FAR Subpart 9.4, 48 CFR 9.400-409 (procurement 
debarment, suspension, and ineligibility); 2 CFR part 180 (OMB 
guidelines to agencies on governmentwide debarment and suspension 
(nonprocurement, e.g., Federal grants, loans, and other forms of 
assistance)); see also 48 FR 42102, 42148 (Sept. 19, 1983) 
(establishing the FAR); 53 FR 19161 (May 26, 1988) (memorandum about 
publication of final government-wide nonprocurement common rule); 
Meunier & Nelson, supra, at 554-57. As such, the regulated community is 
or should be familiar with the general concept of debarment or 
suspension being a consequence for misuse of Federal funding or 
assistance.\271\
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    \271\ As with debarment under the DBA and Related Acts, the 
policy for debarment, suspension, and ineligibility under the FAR 
underscores that ``[t]he serious nature of debarment and suspension 
requires that these sanctions be imposed only in the public interest 
for the Government's protection and not for purposes of 
punishment.'' 48 CFR 9.402(b); see also Gonzalez, 334 F.2d at 576-77 
(``Notwithstanding its severe impact upon a contractor, debarment is 
not intended to punish but is a necessary `means for accomplishing 
the congressional purpose''' at issue in that case).
---------------------------------------------------------------------------

    In addition to the decisions upholding regulatory debarment for 
Related Act willful or aggravated violations discussed in the NPRM, 
courts have upheld regulatory debarment and suspension measures absent 
express Congressional authority for such provisions, provided there are 
certain minimum fairness safeguards. See, e.g., Gonzalez, 334 F.2d at 
576-77 (finding statute that made no explicit provision for debarring 
contractors doing business with the agency authorized debarment of 
``irresponsible, defaulting or dishonest'' bidders and contractors, a 
power ``inherent and necessarily incidental to the effective 
administration of the statutory scheme''); cf. Jacquet, 569 F.2d at 
1345 (upholding regulation temporarily disqualifying households that 
fraudulently acquired food stamps, which was ``appropriate for the 
effective and efficient administration of the program'' and ``[gave] 
the administrative authorities a tool with which to protect the program 
from those who would abuse it'' and was authorized despite the Food 
Stamp Act's silence about such disqualification). Such administrative 
debarment power comes with ``an obligation to deal with uniform minimum 
fairness as to all.'' Gonzalez, 334 F.2d at 577. Specifically, 
``[c]onsiderations of basic fairness require administrative regulations 
establishing standards for debarment and procedures which will include 
notice of specific charges, opportunity to present evidence and to 
cross-examine adverse witnesses, all culminating in administrative 
findings and conclusions based upon the record so made.'' Id. at 578. 
Although the Department's rule eliminates the provisions providing for 
the possibility of debarment for fewer than 3 years and early removal 
from the debarment list, as mentioned above, the Department's debarment 
procedures accord contractors and responsible officers extensive due 
process protections to challenge their debarment in the first 
instance.\272\
---------------------------------------------------------------------------

    \272\ The Department notes that contrary to the comment from the 
group of U.S. Senators, the regulations do not change any of the 
existing evidentiary burdens (e.g., ``burden of persuasion''). WHD 
will continue to have to prove violations in administrative 
proceedings by a preponderance of the evidence.
---------------------------------------------------------------------------

    The Department also disagrees with FTBA that it should (or could) 
make the unitary debarment standard the heightened Related Act standard 
with the possibility of a shorter period and early removal. The 
Department cannot change the DBA disregard of obligation standard, the 
mandatory 3-year period, or the extension of debarment to entities in 
which a debarred person or firm has an interest because those 
provisions are statutory, not regulatory. The Department may, however, 
under its statutory and implied powers of enforcement, bring Related 
Act debarments within the DBA debarment framework of a lower standard, 
mandatory 3-year period, and no possibility of early removal. The 
Department has long had procedures in place that provide contractors, 
``responsible officers,'' and other affected parties ample notice of 
the findings against them, an opportunity to request a hearing in which 
they could contest those findings, and the ability to appeal adverse 
decisions. See 29 CFR 5.11, 5.12, pts. 6, 7, 18. These robust 
procedures include safeguards for the regulated community if they 
choose to challenge--as they have been able to do for decades--3-year 
debarment for disregarding their obligations, albeit in all DBRA cases 
under the final rule, not just DBA cases. The rule's harmonized 
debarment provisions will further the DBRA's remedial goals of 
protecting workers, with all the attendant procedural safeguards for 
the regulated community.
    As part of the revisions to harmonize debarment provisions, the 
Department is codifying both existing case law about debarment of 
``responsible officers'' in Related Act cases and the Department's 
position about debarment of entities in which debarred parties have an 
``interest.'' The Department agrees with the UA that absent debarment 
of such individuals and entities, debarred parties could avoid 
debarment sanctions by setting up shop as a new entity to obtain 
government contracts. In response to ABC's request for more guidance 
about how responsible officers would be determined or what constitutes 
a substantial interest in a debarred company, the Department reiterates 
that these changes do not effect a substantive change in the law or how 
it is applied, as noted in the NPRM (and restated above). These 
determinations--both in the current regulations and final rule--are 
made on a case-by-case basis considering all relevant facts, and in the 
relatively rare circumstances in which there are issues regarding who 
qualifies as a responsible officer or what constitutes an interest in a 
debarred company, information regarding those issues is available 
through various public Departmental resources. See e.g., 47 FR 23661 
(1982 final rule).
    In determining whether an individual responsible officer's 
debarment is warranted, the Department evaluates factors such as 
involvement in and responsibility for running the company; status as an 
officer and/or principal of the entity (although status alone is not 
determinative); actual or constructive knowledge of or gross negligence 
with respect to DBRA obligations (e.g., failure to ensure present or 
future compliance with applicable labor standards, failure to correct 
ongoing violations, etc.); and/or violations (e.g., underpayments, 
misclassification, incomplete, inaccurate, or falsified payroll and 
timekeeping, etc.). See, e.g., Facchiano Constr., 987 F.2d at 213-15; 
Pythagoras Gen. Contracting Corp., ARB Nos. 08-107, 09-007, 2011 WL 
1247207, at *13-14, *13 n.94. Responsible company officials cannot 
``avoid debarment by claiming that the labor standards violations were 
committed by employees of the firm.'' Superior Masonry, Inc., WAB No. 
94-19, 1995 WL 256782, at *5 (Apr. 28, 1995). The Department notes much 
of the same analysis to determine whether a firm has disregarded its 
obligations and should be debarred will apply to determine whether an 
individual is a

[[Page 57685]]

responsible officer of the firm whose debarment is warranted.
    To determine whether a debarred firm or person has an ``interest'' 
in another entity that should also be debarred, the Department will 
consider such factors as the debarred party's ownership interest, 
extent of control of the related entity's operations, whether the 
related entity was formed by a person previously affiliated with or a 
relative of the debarred party, and whether there is common management. 
See, e.g., R.C. Foss & Son, Inc., WAB No. 87-46, 1990 WL 484311, at *2, 
*4 (Dec. 31, 1990) (affirming Related Act debarment of entity owned by 
wife of debarred subcontractor's principal owner and for which debarred 
owner was performing same functions as he had performed for debarred 
subcontractor); see generally Charles Randall, LBSCA No. 87-SCA-32, 
1991 WL 733572 (Dec. 9, 1991) (SCA and CWHSSA). Entities in which a 
debarred person or firm holds only a ``nominal interest'' will not be 
debarred. 47 FR 23661.
    Finally, because the Department received no comments specifically 
about the scope of the debarment proposal, the final rule therefore 
adopts the change as proposed.
    For the foregoing reasons, the final rule adopts the harmonized 
debarment standards so that--regardless of the source or type of 
Federal funding--all DBRA contractors, subcontractors, and responsible 
officers (as well as firms in which they have an interest) that 
disregard their obligations to workers or subcontractors are subject to 
a 3-year debarment during which they may not receive any contract or 
subcontract of the United States or the District of Columbia, as well 
as any contract or subcontract subject to the labor standards 
provisions of the laws referenced in Sec.  5.1. Specifically, the 
Department adopts with no modification the proposed changes to Sec.  
5.12 as well as the proposed conforming changes to Sec.  5.6(b) 
(included in renumbered Sec. Sec.  5.6(b)(4) and 5.7(a)). In addition, 
the Department adopts the changes to Sec.  5.5(a)(10) as proposed, 
except that an inadvertent error in the proposed regulatory text has 
been corrected. That section referred to ineligibility ``by virtue of 
40 U.S.C. 3144(b) or Sec.  5.12(a) or (b),'' but it should only have 
referred to--and this correction has been made in the final rule--
ineligibility ``by virtue of 40 U.S.C. 3144(b) or Sec.  5.12(a)'' to 
conform to the harmonized debarment provisions in revised Sec.  5.12. 
Paragraph 5.12(a)(2) has been revised to specify that debarment actions 
are reflected on the SAM website.
xxii. Employment Relationship Not Required
    The Department proposed a few changes throughout parts 1, 3, and 5 
to reinforce the well-established principle that Davis-Bacon labor 
standards requirements apply even when there is no employment 
relationship between a contractor and worker.
    In relevant part, the DBA states that ``the contractor or 
subcontractor shall pay all mechanics and laborers employed directly on 
the site of the work, unconditionally and at least once a week, and 
without subsequent deduction or rebate on any account, the full amounts 
accrued at time of payment, computed at wage rates not less than those 
stated in the advertised specifications, regardless of any contractual 
relationship which may be alleged to exist between the contractor or 
subcontractor and the laborers and mechanics.'' 40 U.S.C. 3142(c)(1). 
The Department has interpreted this language to cover ``[a]ll laborers 
and mechanics employed or working upon the site of the work,'' Sec.  
5.5(a)(1)(i), and the definitions of ``employed'' in parts 3 and 5 of 
the existing regulations similarly reflect that the term includes all 
workers on the project and extends beyond the traditional common-law 
employment relationship. See Sec.  3.2(e) (``Every person paid by a 
contractor or subcontractor in any manner for his labor . . . is 
employed and receiving wages, regardless of any contractual 
relationship alleged to exist between him and the real employer.''); 
Sec.  5.2(o) (``Every person performing the duties of a laborer or 
mechanic [on DBRA work] is employed regardless of any contractual 
relationship alleged to exist between the contractor and such 
person.''); cf. 41 U.S.C. 6701(3)(B) (defining ``service employee'' 
under the SCA to ``include[ ] an individual without regard to any 
contractual relationship alleged to exist between the individual and a 
contractor or subcontractor''); 29 CFR 4.155 (providing that whether a 
person is a ``service employee'' does not depend on any alleged 
contractual relationship).
    The ARB and its predecessors have similarly recognized that the 
DBRA apply to workers even in the absence of an employment 
relationship. See Star Brite Constr. Co., Inc., ARB No. 98-113, 2000 WL 
960260, at *5 (June 30, 2000) (``[T]he fact that the workers [of a 
subcontractor] were engaged in construction of the . . . project 
triggered their coverage under the prevailing wage provisions of the 
[DBA]; lack of a traditional employee/employer relationship between 
[the prime contractor] and these workers did not absolve [the prime 
contractor] from the responsibility to insure that they were 
compensated in accordance with the requirements of the [DBA].''); Labor 
Servs., Inc., WAB No. 90-14, 1991 WL 494728, at *2 (May 24, 1991) 
(stating that the predecessor to section 3142(c) ``applies a functional 
rather than a formalistic test to determine coverage: if someone works 
on a project covered by the Act and performs tasks contemplated by the 
Act, that person is covered by the Act, regardless of any label or lack 
thereof,'' and requiring a contractor to pay DBA prevailing wages to 
workers labeled as ``subcontractors''). This broad scope of covered 
workers also extends to CWHSSA, the Copeland Act, and other Related 
Acts. See 40 U.S.C. 3703(e) (providing that Reorganization Plan No. 14 
of 1950 and 40 U.S.C. 3145 apply to CWHSSA); 29 CFR 3.2(e); see also, 
e.g., Ray Wilson Co., ARB No. 02-086, 2004 WL 384729, at *6 (finding 
that workers met the DBA's ``functional [rather than formalistic] test 
of employment'' and affirming an ALJ's order of prevailing wages and 
overtime pay due to workers of a second-tier subcontractor); Joseph 
Morton Co., WAB No. 80-15, 1984 WL 161739, at *2-3 (July 23, 1984) 
(rejecting a contractor's argument that workers were subcontractors not 
subject to DBA requirements and affirming an ALJ finding that the 
contractor owed the workers prevailing wage and overtime back wages for 
work performed on a contract subject to DBA and CWHSSA); cf. Charles 
Igwe, ARB No. 07-120, 2009 WL 4324725, at *3-5 (Nov. 25, 2009) 
(rejecting contractors' claim that workers were independent contractors 
not subject to SCA wage requirements, and affirming an ALJ finding that 
contractors ``violated both the SCA and the CWHSSA by failing to pay 
required wages, overtime, fringe benefits, and holiday pay, and failing 
to keep proper records'').
    The Department proposed a few specific changes to the regulations 
in recognition of this principle. First, the Department proposed to 
amend Sec.  1.2 to add a definition of ``employed'' that is 
substantively identical to the definition in Sec.  5.2 and to amend 
Sec.  3.2 to clarify the definition of ``employed'' in part 3. These 
changes clarify that the DBA's expansive coverage of workers even in 
the absence of an employment relationship is also relevant to wage 
surveys and wage determinations under part 1 and certified payrolls 
under part 3. Second, the Department proposed to change references to 
employment (e.g., ``employee,'' ``employed,'' ``employing,''

[[Page 57686]]

etc.) in Sec.  5.5(a)(3) and (c), as well as elsewhere in the 
regulations, to refer instead to ``workers,'' ``laborers and 
mechanics,'' or ``work.'' Notwithstanding the broad scope of worker 
coverage reflected in the existing definitions and in case law, the 
Department explained that the additional language proposed, 
particularly in the DBRA contract clauses, would further clarify the 
scope of worker coverage and eliminate any ambiguity that laborers and 
mechanics are covered by the DBRA even in the absence of an employment 
relationship. Consistent with the above, however, the words 
``employee,'' ``employed,'' or ``employment'' when used in this 
preamble or in the regulations (including the existing regulations), 
should be interpreted expansively and do not limit coverage to workers 
in an employment relationship. Finally, the Department proposed to 
clarify in the definition of ``employed'' in parts 1, 3, and 5 that the 
broad understanding of that term applies equally in the context of 
``public building[s] or public work[s]'' and in the context of 
``building[s] or work[s] financed in whole or in part by assistance 
from the United States through loan, grant, loan guarantee or 
insurance, or otherwise.''
    The Department received several dozen comments on this proposal, 
most of which supported the proposed changes. Many of these comments 
contended that this proposal would help address the widespread 
misclassification of employees as independent contractors in the 
construction industry by reducing or eliminating the perceived 
incentives to misclassify employees as independent contractors. Several 
comments cited to numerous misclassification studies substantiating 
widespread misclassification of employees as independent contractors. 
For example, the National Employment Law Project (NELP) cited to a 2007 
study of New York's unemployment insurance audits which concluded that 
the misclassification rate in the construction industry is almost 50 
percent higher than the overall misclassification rate in the private 
sector. LCCHR cited to a study finding 23 percent of Minnesota's, 20 
percent of Illinois', and 10 percent of Wisconsin's construction 
workers were misclassified or paid off-the-books. LCCHR further noted 
that, according to the study, such misclassification or off-the-books 
payments cost the three states a combined $360 million in lost tax 
revenues per year. LCCHR also cited to an estimate that U.S. 
construction workers were denied over $811 million in overtime premium 
in 2017 due to misclassification and off-the-books payments.
    NELP also stated that the NPRM's proposals to clarify coverage of 
laborers and mechanics regardless of their employment status would 
increase accountability and improve work standards in multitiered 
contracting relationships. TAUC expressed their support for the NPRM's 
proposed changes because the misclassification of employees as 
independent contractors gives an unfair competitive advantage to 
contractors and subcontractors who misclassify and underpay their 
workers.
    The Department appreciates the commenters' concerns about 
misclassification in the construction industry and expects the NPRM's 
proposed changes, which are adopted in this final rule, to further 
emphasize that the DBRA's labor standards requirements apply to workers 
even in the absence of an employment relationship. The changes may also 
help to reduce misclassification in the construction industry by 
eliminating any misperception that DBRA requirements can be avoided by 
classifying workers as independent contractors or by otherwise denying 
the existence of an employment relationship.
    Smith, Summerset & Associates also supported the proposed changes, 
but commented that the ``irrelevancy'' of employee status should be 
further amplified by the specific mention of irrelevancy in the 
regulations or at least in the preamble. Smith, Summerset & Associates 
stated that DBRA contractors are overburdened with contracting agency 
requests for additional documentation that workers are self-employed 
when workers are listed on certified payrolls without payroll taxes 
withheld. However, the Department believes that the proposed changes 
adequately explain that employee status is not relevant to worker 
coverage under the DBRA, but agencies may still have other relevant 
purposes for requesting such documentation. As stated in section 
III.B.3.iii.(B) of this preamble, contracting agencies are free to 
provide certified payrolls to other enforcement agencies without the 
Department's authorization or permission where the contracting agency 
has determined that such a submission is appropriate and is in 
accordance with relevant legal obligations. In other words, even though 
employee status is not relevant to worker coverage under the DBRA, 
there may be other legitimate reasons to request documentation 
regarding whether a worker has been properly identified as ``self-
employed'' or as an independent contractor, and the revisions discussed 
in this section are not intended to discourage such requests.
    CC&M expressed concern over the cost shifting of payroll taxes to 
workers when they are misclassified as independent contractors. CC&M 
also noted that even when contractors pay the correct prevailing wages 
to workers who are misclassified as independent contractors, such 
workers are excluded from unemployment insurance and other State or 
Federal employment benefits. Though the Department acknowledges the 
issues raised by CC&M, these concerns are outside the scope of this 
rulemaking. The DBA does not address issues related to payroll taxes, 
unemployment insurance or Federal, State, or local benefit programs 
that are outside the scope of the wage determinations. Contractors on 
DBRA-covered projects are required to comply with other applicable 
laws. Payroll tax laws and other employment benefit programs often have 
statutory definitions of employment that are properly interpreted and 
applied by the government agencies with appropriate enforcement and/or 
regulatory authority over such laws. The Department may, however, refer 
its findings of misclassification of employees as independent 
contractors to other tax agencies for further action under their 
respective authority and discretion.
    On the other hand, NAHB opposed the NPRM's proposed changes to 
employment terms in parts 1, 3, and 5, asserting that such changes 
would ``seemingly remove[ ] the defining line between general 
contractor and subcontractor liability by implying [an employment] 
relationship `regardless of any contractual relationship alleged to 
exist between the contractor and such person.''' NAHB further asserted 
that the Department's proposals would constitute an expansion of joint 
employer liability, and thus, in NAHB's view, would place nearly all 
the burden for subcontractor compliance on the prime contractor. 
Consequently, NAHB requested that the Department clarify in the final 
rule that ``joint employer'' status will be governed by FLSA case law.
    The Department believes that NAHB's concerns about changes to 
employment terms in the existing regulations are misplaced. As 
explained in the NPRM, the Department seeks to reinforce the well-
established principle that, as already reflected in the statute and 
existing regulations, Davis-Bacon labor standards requirements apply 
even when there is no employment

[[Page 57687]]

relationship between a contractor and worker. The existing regulations 
at 29 CFR part 3 and part 5 have long stated that workers are 
considered to be ``employed'' for the purposes of prevailing wage and 
certified payroll requirements, regardless of any contractual 
relationship which may be alleged to exist. The definitional changes 
adopted in this final rule simply emphasize this fact. Similarly, 
defining ``employed'' in part 1 clarifies that, just as workers are 
entitled to prevailing wage rates even where there is no employment 
relationship, it is appropriate to include wage data for independent 
contractors and others who are not ``employed'' by a contractor or 
subcontractor within the meaning of the FLSA in determining prevailing 
wages under the Davis-Bacon wage survey program. Thus, this final rule 
does not change the standard for joint employer liability for 
contractors on Davis-Bacon contracts, as the concept of an employment 
relationship is simply not relevant to the application of prevailing 
wage requirements to workers. The Department specifically rejects 
NAHB's suggestion to incorporate or cross-reference the FLSA standard 
for joint employer liability in parts 1, 3, and 5, because contractor 
obligations under the DBA may exist even in the absence of an 
employment relationship with covered laborers and mechanics. Despite 
NAHB's assertion that the proposal was contrary to legal precedent, the 
ARB has repeatedly affirmed that DBRA requirements apply even in the 
absence of an employment relationship as discussed above in this 
section.
    NAHB's concerns with respect to the proposed changes in Sec.  
5.5(a)(6) are more fully discussed in that section of the preamble. 
However, the Department notes here that a prime contractor's liability 
for subcontractor violations is based primarily on statutory language 
of the DBRA and the contract provisions that flow from that language, 
rather than based on any concept of joint employment between the prime 
contractor and the workers of its subcontractors.
    For the foregoing reasons, the final rule adopts the described 
changes to reinforce the well-established principle that Davis-Bacon 
labor standards apply even when there is no employment relationship 
between a contractor and worker in parts 1, 3, and 5 as proposed.
xxiii. Withholding
    The DBA, CWHSSA, and the regulations at 29 CFR part 5 authorize 
withholding from the contractor accrued payments or advances equal to 
the amount of unpaid wages due laborers and mechanics under the DBRA. 
See 40 U.S.C. 3142(c)(3), 3144(a)(1) (DBA withholding), 3702(d), 
3703(b)(2) (CWHSSA withholding); 29 CFR 5.5(a)(2) and (b)(3) and 5.9. 
Withholding helps to realize the goal of protecting workers by ensuring 
that money is available to pay them for the work they performed but for 
which they were undercompensated. Withholding plays an important role 
in the statutory schemes to ensure payment of prevailing wages and 
overtime to laborers and mechanics on Federal and federally assisted 
construction projects. The regulations currently require, among other 
things, that upon a request from the Department, contracting agencies 
must withhold so much of the contract funds as may be considered 
necessary to pay the full amount of wages required by the contract, and 
in the case of CWHSSA, liquidated damages. See 29 CFR 5.5(a)(2) and 
(b)(3) and 5.9. The Department proposed a number of regulatory 
revisions to reinforce the current withholding provisions.
(A) Cross-Withholding
    Cross-withholding is a procedure through which agencies withhold 
contract monies due a contractor from contracts other than those on 
which the alleged violations occurred. Prior to the 1981-1982 
rulemaking, Federal agencies generally refrained from cross-withholding 
for DBRA liabilities because neither the DBA nor the CWHSSA regulations 
specifically provided for it. In 1982, however, the Department amended 
the contract clauses to expressly provide for cross-withholding. See 47 
FR 23659-60 \273\ (cross-withholding permitted as stated in Sec.  
5.5(a)(2) and (b)(3)); Grp. Dir., Claims Grp./GGD, B-225091, 1987 WL 
101454, at *2 (Comp. Gen. Feb. 20, 1987) (the Department's 1983 Davis-
Bacon regulatory revisions, e.g., Sec.  5.5(a)(2), ``now provide that 
the contractor must consent to cross-withholding by an explicit clause 
in the contract'').
---------------------------------------------------------------------------

    \273\ The May 28, 1982, final rule was implemented in part, 
including Sec.  5.5(a)(2) and (b)(3), in 1983. 48 FR 19540, 19540, 
19545-47 (Apr. 29, 1983).
---------------------------------------------------------------------------

    In the NPRM, the Department proposed additional amendments to the 
cross-withholding contract clause language at Sec.  5.5(a)(2) and 
(b)(3) to clarify and strengthen the Department's ability to cross-
withhold when contractors use single-purpose entities, joint ventures 
or partnerships, or other similar vehicles to bid on and enter into 
DBRA-covered contracts. As noted in the earlier discussion of the 
definition of prime contractor in section III.B.3.ii.(D), the 
interposition of another entity between the contracting agency and the 
general contractor is not a new phenomenon. However, the use of single-
purpose LLC entities and similar joint ventures and teaming agreements 
in government contracting generally has been increasing in recent 
decades. See, e.g., John W. Chierichella & Anne Bluth Perry, ``Teaming 
Agreements and Advanced Subcontracting Issues,'' Fed. Publ'ns LLC, 
TAASI GLASS-CLE A, at *1-6 (2007); A. Paul Ingrao, ``Joint Ventures: 
Their Use in Federal Government Contracting,'' 20 Pub. Cont. L.J. 399 
(1991).
    The Department explained in the NPRM that in response to this 
increase in the use of such single-purpose legal entities or 
arrangements, Federal agencies have often required special provisions 
to assure that liability among joint venturers will be joint and 
several. See, e.g., Ingrao, supra, at 402-03 (``Joint and several 
liability special provisions vary with each procuring agency and range 
from a single statement to complex provisions regarding joint and 
several liability to the government or third parties.''). While the 
corporate form may be a way for joint venturers to attempt to insulate 
themselves from liability, commenters have noted that this ``advantage 
will rarely be available in a Government contracts context, because the 
Government will customarily demand financial and performance guarantees 
from the parent companies as a condition of its `responsibility' 
determination.'' Chierichella & Perry, supra, at *15-16.
    Under the existing regulations, however, the Government is not able 
to obtain similar guarantees to secure performance of Davis-Bacon labor 
standards and CWHSSA requirements. It is necessary for the cross-
withholding regulations to be amended to ensure that the core DBRA 
remedy of cross-withholding is available when single-purpose LLCs and 
similar contracting vehicles are used to contract with the Federal 
Government. This enforcement gap exists because, as a general matter, 
cross-withholding (referred to as ``offset'' under the common law) is 
not available unless there is a ``mutuality of debts'' in that the 
creditor and debtor involved are exactly the same person or legal 
entity. See R.P. Newsom, 39 Comp. Gen. 438, 439 (1959). That general 
rule, however, can be waived by agreement of the parties. See Lila 
Hannebrink, 48 Comp. Gen. 365, 365 (1968) (allowing cross-withholding 
against a joint venture for debt of an individual joint

[[Page 57688]]

venturer on a prior contract, where all parties agreed).
    The structure of the Davis-Bacon Act, with its implementation in 
part through the mechanism of contract clauses, provides both the 
opportunity and the responsibility of the Government to ensure--by 
contract--that the use of the corporate form does not interfere with 
Congress's mandate that workers be paid the required prevailing wage 
and that withholding ensures the availability of funds to pay any back 
wages and other monetary relief owed. It is a cardinal rule of law that 
``the interposition of a corporation will not be allowed to defeat a 
legislative policy, whether that was the aim or only the result of the 
arrangement.'' Anderson v. Abbott, 321 U.S. 349, 363 (1944). This 
principle is generally applied to allow, in appropriate circumstances, 
for corporate forms to be disregarded by ``piercing the corporate 
veil.'' \274\ However, where a policy is effectuated through contract 
terms, it can be inefficient and unduly limiting to rely on post hoc 
veil-piercing to implement that policy. The Government may instead, by 
contract, make sure that the use of single-purpose entities, 
subsidiaries, or joint ventures interposed as nominal ``prime 
contractors'' does not frustrate the Congressional mandate to ensure 
back wages are available through withholding.\275\
---------------------------------------------------------------------------

    \274\ The Department has long applied corporate veil-piercing 
principles under the DBRA. See, e.g., Thomas J. Clements, Inc., ALJ 
No. 82-DBA-27, 1984 WL 161753, at *9 (June 14, 1984) (recognizing, 
in the context of a Davis-Bacon Act enforcement action, that a court 
may ``pierce the corporation veil where failure to do so will 
produce an unjust result''), aff'd, WAB No. 84-12, 1985 WL 167223, 
at *1 (Jan. 25, 1985) (adopting ALJ's decision as the WAB's own 
decision); Griffin v. Sec'y of Lab., ARB Nos. 00-032, 00-033, 2003 
WL 21269140, at *8, n.2 (May 30, 2003) (various contractors and 
their common owner, who ``made all decisions regarding operations of 
all of the companies,'' were one another's ``alter egos'' in a DBRA 
debarment action), aff'd sub nom Phoenix-Griffin Grp. II, Ltd. v. 
Chao, 376 F. Supp. 2d 234, 247 (D.R.I. 2005).
    \275\ Cf. Robert W. Hamilton, The Corporate Entity, 49 Tex. L. 
Rev. 979, 984 (1971) (noting the difference in application of 
``piercing the veil'' concepts in contract law because ``the 
creditor more or less assumed the risk of loss when he dealt with a 
`shell'; if he was concerned, he should have insisted that some 
solvent third person guarantee the performance by the 
corporation'').
---------------------------------------------------------------------------

    Accordingly, the Department proposed to amend the withholding 
contract clauses at Sec.  5.5(a)(2) and Sec.  5.5(b)(3), as well as to 
amend Sec.  5.9, to ensure that any entity that directly enters into a 
contract covered by Davis-Bacon labor standards must agree to cross-
withholding against it to cover liabilities for any DBRA violations on 
not just that contract, but also on other covered contracts entered 
into by the entity that directly entered into the contract or by 
specified affiliates. The covered affiliates were those entities 
included within the proposed definition of prime contractor in Sec.  
5.2, including controlling shareholders or members and joint venturers 
or partners. Thus, for example, if a general contractor secures two 
prime contracts for two Related Act-covered housing projects through 
separate single-purpose entities that it controls, the proposed cross-
withholding language would allow the Department to seek cross-
withholding against either contract even though the contracts are 
nominally with separate legal entities.
    The Department also proposed to add language to Sec.  5.5(a)(2) and 
(b)(3) to clarify that the Government may pursue cross-withholding 
regardless of whether the contract on which withholding is sought was 
awarded by, or received Federal assistance from, the same agency that 
awarded or assisted the prime contract on which the violations 
necessitating the withholding occurred. This revision is in accordance 
with the Department's longstanding policy, the current language of the 
withholding clauses, and case law on the use of setoff procedures in 
other contexts dating to 1946. See, e.g., United States v. Maxwell, 157 
F.3d 1099, 1102 (7th Cir. 1998) (``[T]he federal government is 
considered to be a single-entity that is entitled to set off one 
agency's debt to a party against that party's debt to another 
agency.''); Cherry Cotton Mills, Inc. v. United States, 327 U.S. 536, 
539 (1946) (same). However, because the current Davis-Bacon regulatory 
language does not explicitly state that funds may be withheld from 
contracts awarded or assisted by other Federal agencies, some agencies 
have questioned whether cross-withholding is appropriate in such 
circumstances. This proposed addition would expressly dispel any such 
uncertainty or confusion. Conforming edits were also proposed to Sec.  
5.9.
    The Department also proposed certain non-substantive changes to 
streamline the withholding clauses. The Department proposed to include 
in the withholding clause at Sec.  5.5(a)(2)(i) similar language as in 
the CWHSSA withholding clause at Sec.  5.5(b)(3) authorizing 
withholding necessary ``to satisfy the liabilities . . . for the full 
amount of wages . . . and monetary relief'' of the contractor or 
subcontractor under the contract without reference to the specific, and 
duplicative, language currently in Sec.  5.5(a)(2) that re-states the 
lists of the types of covered workers already listed in Sec.  
5.5(a)(1)(i). The Department also proposed using the same phrase ``so 
much of the accrued payments or advances'' in both Sec.  5.5(a)(2) and 
(b)(3), instead of simply ``sums'' as currently written in Sec.  
5.5(b)(3). Finally, the Department proposed to adopt in Sec.  5.5(b)(3) 
the use of the term ``considered,'' as used in Sec.  5.5(a)(2), instead 
of ``determined'' as currently used in Sec.  5.5(b)(3), to refer to the 
determination of the amount of funds to withhold, as this mechanism 
applies in the same manner under both clauses.
    Conforming edits for each of the above changes to the withholding 
clauses at Sec.  5.5(a)(2) and (b)(3) were also proposed for Sec.  5.9. 
In addition, the Department proposed clarifying in a new paragraph (c) 
of Sec.  5.9 that cross-withholding from a contract held by a different 
legal entity is not appropriate unless the withholding provisions in 
that different legal entity's contract were incorporated in full or by 
reference. Absent exceptional circumstances, cross-withholding would 
not be permitted from a contract held by a different legal entity where 
Davis-Bacon labor standards were incorporated only by operation of law 
into that contract.
    The Department received multiple comments in support of the 
proposed revisions to the regulatory language for cross-withholding. 
Several commenters noted that as the construction industry has evolved 
over the years to include an increased use of contracting entities that 
are closely related, particularly single-purpose contracting entities, 
the Department's regulations must similarly change to ensure that the 
use of such contracting vehicles does not undercut the remedial purpose 
of the DBA. These commenters noted that the proposed revisions are 
necessary both to ensure that workers receive the prevailing wages that 
they are entitled to for their work and to prevent law-abiding 
contractors from being undercut by contractors taking advantage of 
these contracting entities to underpay their workers. They also pointed 
out that the provisions would make it more difficult for entities to 
move from contract to contract without making their workers whole for 
any wage underpayment. See, e.g., ACT Ohio, FFC, III-FFC, LIUNA, NCDCL, 
REBOUND, SMACNA, UBC. The Department agrees with such commenters that 
it is necessary for the Davis-Bacon regulations to take modern 
contracting processes into account, to safeguard the payment of 
applicable prevailing wages to workers, and to ensure uniform 
compliance across the industry.
    ABC and IEC opposed the proposal and stated that cross-withholding 
in any circumstances is not authorized by the

[[Page 57689]]

Davis-Bacon Act. They asserted the DBA limits withholding to the 
contract on which the violations occurred. A comment from Practus, LLP 
claimed that legislative action was required for the ``ambiguous'' 
cross-withholding policy. An individual commenter argued that the 
Davis-Bacon Act does not expressly provide for cross-withholding, and 
that cross-withholding could result in violations of the ``Purpose 
Statute'' and the Anti-Deficiency Act when the cross-withholding is 
effectuated by a contracting agency other than the agency with the 
contract on which DBRA violations had been found. This commenter 
requested that language be added to the regulation to clarify that 
cross-withholding is ``subject to availability of funds in accordance 
with law.'' IEC also claimed that the Department's explanation for the 
proposed language acknowledged that there is no ``mutuality of debts'' 
between a contractor and the government when a contractor owes a worker 
wages that would justify a cross-withholding. FTBA did not object to 
cross-withholding as a whole, but objected to cross-withholding on 
contracts held by separate legal entities that merely have some form of 
common ownership or control, on the ground that cross-withholding in 
such circumstances ignores the separate legal status (for contract 
award, tax, payroll, and myriad other purposes) of such contracting 
entities.
    FTBA and ABC also stated that there is no indication that cross-
withholding is necessary to ensure that workers receive back pay for 
prevailing wage violations. ABC suggested that the Department has ample 
resources available to enforce findings of violations on a particular 
DBA-covered contract without the use of cross-withholding. IEC and the 
group of U.S. Senators also expressed general concern that the cross-
withholding process would not provide sufficient due process for 
contractors, and IEC proposed that the regulations should prohibit 
funds from being withheld until the ARB had reviewed and approved the 
proposed withholding. Practus similarly emphasized the need for 
specific due process safeguards especially when ``underlying claims 
involving a subcontractor are not yet liquidated or ripe for 
adjudication.'' Finally, APCA stated that the changes (among others) 
would have negative effects on contractors' costs, compliance 
responsibilities, enforcement exposure, and penalties.
    The Department does not agree with comments that suggest the DBRA 
does not permit the use of cross-withholding. The DBA provides that 
``there may be withheld from the contractor so much of accrued payments 
as the contracting officer considers necessary to pay to laborers and 
mechanics employed by the contractor or any subcontractor on the work 
the difference between the rates of wages required by the contract to 
be paid laborers and mechanics on the work and the rates of wages 
received by the laborers and mechanics and not refunded to the 
contractor or subcontractors or their agents.'' 40 U.S.C. 3142(c)(3). 
The statute does not specify from which contract the funds should be 
withheld or state that the funds should be only withheld from the 
contract on which the violations occurred or from payments due for work 
on that specific contract.\276\ The Department rejects IEC's claim that 
the use of the term ``the work'' in section 3142(c)(3) limits the 
contracts from which accrued payments may be withheld to the contract 
on which ``the work'' occurred for which workers were not properly 
paid, and that this statutory provision therefore does not authorize 
withholding of funds from a DRBA contract on which no violations were 
found. The term ``on the work'' in section 3142(c)(3) specifies which 
workers are to benefit from the withholding--those on the DBRA-covered 
work on which the violations occurred; ``on the work'' does not limit 
the accrued payments from which monies can be withheld. Rather, the 
statute directs that funds may be ``withheld from the contractor'' in 
an amount considered necessary to pay the difference between the rates 
required and the rates paid to laborers and mechanics on the work.\277\ 
The regulations have expressly provided for cross-withholding for the 
past 40 years, as previously explained. And, contrary to commenters' 
assertions that cross-withholding is unnecessary to make workers whole, 
the Department has repeatedly used the cross-withholding process to 
obtain back wages for workers where there would otherwise be 
insufficient contract funds available to ensure that workers are paid 
the applicable prevailing wages. Cf. Silverton Constr. Co., Inc., WAB 
No. 92-09, 1992 WL 515939, at *2-3 (Sept. 29, 1992) (reversing ALJ's 
decision that prime contractor was not liable for its subcontractor's 
underpayments because no money had been withheld under the contract on 
which violations were found because this decision was inconsistent with 
the Department's regulations in effect since 1983 that permit cross-
withholding if necessary to satisfy Davis-Bacon and CWHSSA 
obligations).
---------------------------------------------------------------------------

    \276\ Similarly, CWHSSA does not specify the contract from which 
funds should be withheld for the payment of unpaid wages, as it 
states that ``the governmental agency . . . may withhold, or have 
withheld, from money payable because of work performed by a 
contractor or subcontractor, amounts administratively determined to 
be necessary to satisfy the liabilities of the contractor or 
subcontractor for unpaid wages and liquidated damages as provided in 
this section.'' 40 U.S.C. 3702(d).
    \277\ One commenter indicated that by stating that withholding 
should be for the difference between wages paid and the prevailing 
wage due to laborers or mechanics on the work, Congress intended to 
say that funds could only be withheld from the contract on which the 
violations occurred. However, this language merely addresses the 
amount of funds that may be withheld, and hence does not identify or 
limit the contracts from which such withholding may occur.
---------------------------------------------------------------------------

    Moreover, as noted in this section above, cross-withholding is 
related to the common-law right of ``offset.'' It is well settled that 
no statutory authority at all is necessary for the Federal government 
to assert the right of offset. ``Like private creditors, the federal 
government has long possessed the right of offset at common law.'' 
Amoco Prod. Co. v. Fry, 118 F.3d 812, 817 (D.C. Cir. 1997) (citing, 
among other cases, Gratiot v. United States, 40 U.S. 336, 370 
(1841)).\278\ To accept the commenters' assertion that the DBA does not 
permit cross-withholding would mean that, by enacting the withholding 
provisions in the Act, Congress had limited--and not expanded--the 
government's authority. There is no basis for such a conclusion. To the 
contrary, the legislative history of the 1935 amendments to the Act 
reflects Congress's intent that withholding operate to ensure that 
workers would be made whole. See Liberty Mut. Ins. Co., ARB No. 00-018, 
2003 WL 21499861, at *6 (citing S. Rep. No. 74-1155 (1935)). As the ARB 
noted in the Liberty Mutual decision, ``neither the DBA's terms nor the 
legislative history indicate Congress's intention to limit the 
Administrator's withholding authority to the detriment of the laborers 
and mechanics that are the intended beneficiaries of the Act.'' Id.
---------------------------------------------------------------------------

    \278\ In Gratiot, the Supreme Court explained that ``[t]he 
United States possess[es] the general right to apply all sums due 
for such pay and emoluments, to the extinguishment of any balances 
due to them by the defendant, on any other account, whether owed by 
him as a private individual, or as chief engineer. It is but the 
exercise of the common right, which belongs to every creditor, to 
apply the unappropriated moneys of his debtor, in his hands, in 
extinguishment of the debts due to him.'' Gratiot, 40 U.S. at 370.
---------------------------------------------------------------------------

    The Department also disagrees with the individual commenter that 
cross-withholding contravenes the Anti-Deficiency Act, the Purpose 
Statute, or other statutes governing the use of appropriated funds, and 
declines to revise the regulatory text as they

[[Page 57690]]

requested. The Anti-Deficiency Act prohibits, in relevant part, an 
officer or employee of the United States from ``mak[ing] or 
authoriz[ing] an expenditure or obligation exceeding an amount 
available in an appropriation or fund for the expenditure or 
obligation.'' 31 U.S.C. 1341(a)(1)(A). The commenter appears to have 
conflated the Anti-Deficiency Act with another general prohibition on 
unauthorized transfers of funds between appropriations accounts. See 
U.S. Gov't Accountability Off., 1 Principles of Federal Appropriations 
Law ch. 2, at 2-38-39 (3d ed. 2015) (GAO Red Book). Specifically, 31 
U.S.C. 1532 provides that ``[a]n amount available under law may be 
withdrawn from one appropriation account and credited to another or to 
a working fund only when authorized by law.'' An unauthorized transfer 
could lead to a violation of the Anti-Deficiency Act or Purpose Statute 
if the transfer ``led to overobligating the receiving appropriation'' 
or ``the use of appropriations for other than their intended purpose,'' 
respectively. GAO Red Book ch. 2 at 38-40. The commenter also 
apparently relies on ``a general rule that an agency may not augment 
its appropriations from outside sources without specific statutory 
authority.'' NRC Authority to Collect Annual Charges From Federal 
Agencies, 15 Op. O.L.C. 74, 78 (1991) (referring to the ``anti-
augmentation principle''). The commenter's concerns are misplaced 
because cross-withholding does not involve any impermissible transfer 
or augmentation, and because cross-withholding and disbursement of 
cross-withheld funds are authorized by law.
    Contrary to this individual commenter's concerns, cross-withholding 
does not involve an impermissible augmentation of any agency's 
appropriation. Nor, relatedly, is the cross-withholding agency making 
payments on the other agency's contract (i.e., augmenting that agency's 
appropriation) as the individual commenter also appeared to suggest. 
First, when funds are cross-withheld, they remain in the account of the 
contracting agency from whose contract the funds are being withheld, 
typically before being disbursed to workers by the Department, as 
discussed below. The contracting agency implementing an inter-agency 
cross-withholding does not actually or effectively transfer the cross-
withheld funds to the contracting agency on whose contract DBRA 
violations occurred. The contracting agency on whose contract DBRA 
violations were found has no remaining payment obligations to the 
contractor, thereby creating the need for cross-withholding in the 
first place, which underscores why cross-withholding does not implicate 
the purpose of, or impermissibly augment, that agency's appropriation. 
Second, in the context of inter-agency cross-withholding, contracting 
agencies neither make payments on another agency's contract nor could 
be required to do so, as the DBA imposes liability for paying back 
wages on contractors, not contracting agencies. See 40 U.S.C. 
3142(c)(1) (``[T]he contractor or subcontractor shall pay all mechanics 
and laborers employed directly on the site of the work . . . the full 
amounts accrued at time of payment.'' (emphasis added)); see also 40 
U.S.C. 3702(b)(2) (``[T]he contractor and any subcontractor responsible 
for the [CWHSSA overtime] violation are liable''). Rather, the cross-
withholding agency is ensuring, at the Department's request, that the 
contractor is not overpaid given the contractor's (or its 
subcontractor(s)'s) failure to satisfy their statutory and contractual 
obligation to workers. As such, inter-agency cross-withholding 
functions as a mechanism to satisfy the contractor's DBRA underpayment 
liability. The cross-withholding contracting agency thus is not 
augmenting (by transfer or otherwise) appropriated funds of the 
contracting agency on whose contract the DBRA violations occurred.
    Consistent with the DBA's directive that the Department pay 
withheld monies ``directly to laborers and mechanics,'' 40 U.S.C. 
3144(a), see also 40 U.S.C. 3703(b)(3), the cross-withholding 
contracting agency may eventually transfer the cross-withheld funds to 
WHD--in its capacity as enforcement agency--for distribution directly 
to workers to whom the contractor owes DBRA back wages. WHD in turn may 
only distribute cross-withheld funds to such workers after any 
challenge to the finding of violations has been resolved. Until then, 
the withheld funds are effectively held in trust for the benefit of the 
underpaid workers and cannot be used by DOL for purposes other than 
disbursement to workers. Cf. In re Quinta Contractors, Inc., 34 B.R. 
129, 131 (Bankr. M.D. Pa. 1983) (invoking statutory trust principles in 
concluding that funds withheld under the DBA were not property of an 
estate in bankruptcy except to the extent that the amount withheld 
exceeded the amount of the debtor's liability under the DBA).\279\ If 
there are any unclaimed funds after 3 years, WHD is required to send 
such funds to the U.S. Treasury.\280\ Cf. B-256568 (Comp. Gen. Mar. 18, 
1994) (finding that, under predecessor provision of DBA under which 
Comptroller General, not the Department, disbursed withheld funds to 
workers, 3 years was a suitable period of time for GAO to wait before 
transferring unclaimed withheld funds to the Treasury). The 
Department's cross-withholding and distribution process is thus an 
enforcement mechanism authorized by statute under which WHD acts as an 
intermediary to return funds to the workers to whom they are owed. Cf. 
Grp. Dir., Claims Grp./GGD, B-225091, 1987 WL 101454, at *2 (stating 
that under CWHSSA, disbursement of withheld funds is ``purely 
ministerial''); Glaude d/b/a Nationwide Indus. Svcs., ARB No. 98-081, 
1999 WL 1257839, at *1-2, *4 (Nov. 24, 1999) (affirming pre-hearing 
withholding and cross-withholding from contractor under contracts with 
two Federal agencies for SCA back wages ALJ found due to contractor's 
workers on one of those contracts); Nissi Corp., BSCA No. SCA-1233, 
1990 WL 656138 (Sept. 25, 1990) (finding it was proper to cross-
withhold funds on a contract with one agency for SCA underpayments that 
an ALJ had found due on another agency's contract with the same 
contractor).
---------------------------------------------------------------------------

    \279\ Similarly, when an SCA-covered contractor fails to pay 
required prevailing wages and fringe benefits, the underpaid funds 
are ``impressed with a trust, either constructive or statutory, for 
the benefit of the undercompensated employees.'' Brock v. Career 
Consultants, Inc. (In re Career Consultants, Inc.), 84 B.R. 419, 424 
(Bankr. E.D. Va. 1988); see also, e.g., In re Frank Mossa Trucking, 
Inc., 65 B.R. 715, 718 (Bankr. D. Mass. 1985).
    \280\ See, e.g., ``Workers Owed Wages,'' Wage & Hour Div., Dep't 
of Lab., https://www.dol.gov/agencies/whd/wow.
---------------------------------------------------------------------------

    In any event, the Anti-Deficiency Act permits transfers, 
expenditures, and obligations where ``specified in . . . any other 
provision of law.'' 31 U.S.C. 1341(a)(1). The ``other provision of 
law'' exception applies here because the DBA and CWHSSA authorize 
contracting agencies to withhold accrued payments needed to pay back 
wages, see 40 U.S.C. secs. 3142(c)(3) & 3702(d), respectively, and 
require the Department to distribute back wages to underpaid workers, 
see 40 U.S.C. 3144(a)(1) (``The Secretary of Labor shall pay directly 
to laborers and mechanics from any accrued payments withheld under the 
terms of a contract any wages found due to laborers and mechanics under 
this subchapter.''); 40 U.S.C. 3703(b)(3) (``The Secretary of Labor 
shall pay the amount administratively determined to be due directly to 
the laborers and mechanics from amounts withheld on account of

[[Page 57691]]

underpayments of wages if the amount withheld is adequate. If the 
amount withheld is not adequate, the Secretary of Labor shall pay an 
equitable proportion of the amount due.''). Thus, these statutes 
expressly contemplate that the funds withheld will be transferred to 
the custody of the Department of Labor so that it can distribute those 
withheld funds to remedy violations of the DBRA. The Department's 
authority to disburse withheld funds to underpaid workers would be 
meaningless if contracting agencies could not transfer cross-withheld 
(and withheld) funds to DOL--or withhold accrued payments to begin 
with.
    For similar reasons, cross-withholding does not violate the Purpose 
Statute. The Purpose Statute states that appropriations ``shall be 
applied only to the objects for which the appropriations were made 
except as otherwise provided by law.'' See 31 U.S.C. 1301(a). As with 
the Anti-Deficiency Act, the DBA and CWHSSA satisfy the ``otherwise 
provided by law'' element. Specifically, contrary to the individual 
commenter's assertion, both the DBA and CWHSSA authorize contracting 
agencies to withhold accrued payments needed to pay back wages and 
expressly authorize the Department to pay such funds directly to 
underpaid workers. To the extent such withholding and payments could be 
construed as outside ``the objects for which'' the appropriation 
underlying the withheld funds was made, the withholding and payment 
nonetheless are consistent with the Purpose Statute because Congress 
expressly authorized such actions through the DBA and CWHSSA.
    The fact that Congress in the SCA expressly stated that withholding 
may be from ``the contract or any other contract between the same 
contractor and the Federal government,'' as this individual commenter 
noted, does not mean that Congress did not authorize the same practice 
in the DBA or any Related Acts. As noted above, the DBA authorizes the 
withholding of funds ``from the contractor,'' without limiting such 
withholding to the contract on which Davis-Bacon violations occurred. 
That the SCA and DBA contain differently worded withholding provisions 
does not establish that cross-withholding is not also authorized under 
the DBA, or that the DBA should be interpreted as prohibiting cross-
withholding. Indeed, Congressional hearings shortly before the SCA's 
enactment reflect Congressional awareness that both the SCA and DBA 
provided for withholding, without suggesting that withholding under the 
SCA was broader than under the DBA. Service Contract Act of 1965: 
Hearing before the Subcomm. on Lab. of the S. Comm. on Lab. & Pub. 
Welfare, 89th Cong. 11, 15-16 (1965). Moreover, as detailed further in 
sections II.A (``Statutory and regulatory history'') and III.B.3.xix 
(``Anti-Retaliation''), in 1984, Congress ratified and affirmed as law 
Reorganization Plan No. 14 of 1950 and declared that previous actions 
taken pursuant to such reorganization plans were considered to have 
been taken pursuant to a reorganization expressly approved by Congress. 
The 1983 cross-withholding regulation is one such prior action.
    It is also not accurate to state that the Department's explanation 
of the proposed language in the NPRM acknowledged that there is no 
``mutuality of debts'' between a contractor and the government when a 
contractor owes back wages that would justify a cross-withholding. As 
explained above, under the common law, cross-withholding is generally 
not available unless there is a ``mutuality of debts'' in that the 
creditor and debtor involved are exactly the same person or legal 
entity. Under the DBA, however, Congress specifically implemented a 
withholding provision with the goal of ensuring that workers receive 
the prevailing wages they are owed, and the provision contemplated that 
the withholding would be made effective through the use of a contract 
clause. As the Department noted in the NPRM, any question about 
mutuality of debts does not prohibit offset or withholding where the 
parties have expressly contracted to provide for such withholding. For 
these same reasons, the Department does not agree that the proposed 
language ignores the separate legal status of such contracting entities 
for a variety of other purposes; it merely recognizes that while this 
separate legal status may be valid in other situations, it should not 
be permitted to undermine one of the DBA's key enforcement mechanisms.
    The Department appreciates commenters' suggestion that the 
Department should be able to obtain back wages for workers in all 
instances where there has been a finding of violations even without the 
use of cross-withholding. In WHD's experience in Davis-Bacon 
enforcement, withholding is the remedy of first resort when Davis-Bacon 
violations are identified and funds remain to be paid on the contract. 
However, cross-withholding is necessary and appropriate to satisfy the 
contractor's potential DBRA liability when there are insufficient funds 
remaining to be paid under the contract on which violations have been 
found. In some instances, the Department does not learn of, and does 
not have the opportunity to fully investigate, potential violations 
until contract performance is well underway, nearing completion, or 
even completed. In such circumstances, it is not realistic that the 
Department or the relevant contracting agency will be able to determine 
whether violations have occurred, and determine the back wage amount 
from such violations, in sufficient time to ensure that 100 percent of 
the back wage liability can be satisfied by straight withholding on the 
contract. Resource constraints also contribute to the need for cross-
withholding as a remedy. As discussed in section V.A.2, approximately 
61,200 firms currently hold DBA contracts or subcontracts and 
approximately 91,700 firms perform on Related Act contracts. While 
there is probably some overlap in those numbers, many of these 
contractors hold multiple contracts or subcontracts, resulting in 
hundreds of thousands of DBRA contracts or subcontracts each year. In 
contrast, the Department had only 757 Wage and Hour investigators as of 
December 31, 2021, each of whom is also responsible for enforcing 
multiple other employment laws. In these circumstances, it is clearly 
not possible that the Department will be able to determine the nature 
and extent of any Davis-Bacon violations on every contract before all 
funds due on the prime contract have been disbursed. Where all funds 
have been disbursed on such a prime contract, cross-withholding is 
critical to obtaining the wages that workers are owed.
    Similarly, while the Department appreciates commenters' concerns as 
to whether the cross-withholding procedure provides sufficient due 
process to contractors, the Department believes that the withholding 
process, which is the same for both withholding and cross-withholding, 
provides ample due process. Contractors and subcontractors that choose 
to dispute WHD's violation findings are afforded an opportunity to 
request an administrative hearing and appellate process before any 
withheld funds are disbursed to workers. If the appeal process results 
in a final determination in favor of the contractor or subcontractor, 
WHD requests that the contracting agency release withheld funds in 
accordance with applicable law and contract documents. Moreover, 
contractors do not have a present entitlement to contract funds, as the 
contractor is only entitled to payment under the contract to the extent 
that the contractor has complied with the

[[Page 57692]]

contract terms, including the requirement to pay laborers and mechanics 
the applicable prevailing wage rate. See Ray Wilson Co., ARB No. 02-
086, 2004 WL 384729, at * 3-4 (citing Lujan v. G & G Fire Sprinklers, 
Inc., 532 U.S. 189, 195-97 (2001)).
    For the foregoing reasons, the final rule adopts these changes as 
proposed, except for the following additional clarifying edits to the 
proposed withholding contract clauses in Sec. Sec.  5.5(a)(2), (b)(3), 
and 5.9(b).
    First, the Department deletes the references to Sec.  5.5(a)(1), 
(a)(11), (b)(2), and (b)(5) to make clear that the scope of withholding 
has been and continues to be broad. The final rule therefore states 
that withholding for the full amount of unpaid wages and monetary 
relief, including interest, and liquidated damages required by the 
clauses in Sec.  5.5(a) or (b) is appropriate. The references to 
paragraphs Sec.  5.5(a)(1) and (11) and (b)(2) and (5) are deleted so 
as not to unintentionally exclude from the scope of withholding any 
monies determined to be due under other paragraphs of Sec.  5.5, such 
as Sec.  5.5(a)(6) or (b)(4) for lower-tier subcontractor violations. 
Similarly, the final rule in Sec.  5.5(a)(2) replaces the current 
reference to ``Davis-Bacon prevailing wage requirements'' with ``Davis-
Bacon labor standards requirements'' to be consistent with the 
definition of Davis-Bacon labor standards in Sec.  5.2.
    Second, the Department deleted ``under this contract'' from the 
first paragraph of Sec.  5.5(a)(2) to clarify (consistent with current 
Sec.  5.5(a)(2)) that withholding may be from the prime contract, as 
well as from other contracts or federally assisted contracts with the 
same prime contractor as defined in Sec.  5.2.
    Third, the Department added clauses to Sec.  5.5(a)(2)(i) and 
5.5(b)(3)(i) to emphasize that withheld and cross-withheld funds ``may 
be used to satisfy the contractor liability for which the funds were 
withheld,'' as well as a similar clause in Sec.  5.9(b). These 
additions were made in response to questions about the source of the 
DBRA liability, to clarify that the back wage liability is the 
contractor's and not the contracting agency's.
    Fourth, the Department changed ``loan or grant recipient'' to 
``recipient of Federal assistance'' in the first sentences of Sec.  
5.5(a)(2) and (b)(3) to encompass Related Act assistance other than 
loans and grants.
    Fifth, the Department revised Sec.  5.5(b)(3) to refer to contracts 
subject to CWHSSA (consistent with current Sec.  5.5(b)(3)) instead of 
subject to ``Davis-Bacon prevailing wage requirements'' as proposed in 
the NPRM.
    Sixth, the Department clarified in Sec. Sec.  5.5(a)(2)(i), 
5.5(b)(3)(i), and 5.9(a) that Federal and other agencies may withhold 
on their own initiative and must withhold at the Department's request.
    The Department also added language to Sec.  5.9(a) to specify that, 
as in the withholding contract clause provisions, the suspension of 
funds must occur until funds are withheld ``as may be considered 
necessary''--like the similar language in current Sec.  5.5(a)(2) and 
(b)(3)--to compensate workers, even though there may not yet be a final 
administrative determination of the back wages and other monetary 
relief which workers are owed, or of liquidated damages, at the time of 
the withholding.
(B) Suspension of Funds for Recordkeeping Violations
    The Department also proposed to add language in Sec.  5.5(a)(3)(iv) 
to clarify that funds may be suspended when a contractor has failed to 
submit certified payroll or provide the required records as set forth 
at Sec.  5.5(a)(3). Comments relating to this proposal are discussed in 
the preamble regarding Sec.  5.5(a)(3). In accordance with that 
discussion, the final rule adopts this change as proposed.
(C) The Department's Priority to Withheld Funds
    The Department proposed to revise Sec. Sec.  5.5(a)(2), 5.5(b)(3), 
and 5.9 to codify the Department's longstanding position that, 
consistent with the DBRA's remedial purpose to ensure that prevailing 
wages are fully paid to covered workers, the Department has priority to 
funds withheld (including funds that have been cross-withheld) for 
violations of Davis-Bacon prevailing wage requirements and CWHSSA 
overtime requirements. See also PWRB,\281\ DBA/DBRA/CWHSSA Withholding 
and Disbursement, at 4. To ensure that underpaid workers receive the 
monies to which they are entitled, contract funds that are withheld to 
reimburse workers owed Davis-Bacon or CWHSSA wages, or both, must be 
reserved for that purpose and may not be used or set aside for other 
purposes until such time as the prevailing wage and overtime issues are 
resolved.
---------------------------------------------------------------------------

    \281\ See note 19, supra.
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    Affording the Department first priority to withheld funds, above 
competing claims, ``effectuate[s] the plain purpose of these federal 
labor standards laws . . . [to] insure that every laborer and mechanic 
is paid the wages and fringe benefits to which [the DBA and DBRA] 
entitle them.'' Quincy Hous. Auth. LaClair Corp., WAB No. 87-32, 1989 
WL 407468, at *3 (Feb. 17, 1989) (holding that ``the Department of 
Labor has priority rights to all funds remaining to be paid on a 
federal or federally-assisted contract, to the extent necessary to pay 
laborers and mechanics employed by contractors and subcontractors under 
such contract the full amount of wages required by federal labor 
standards laws and the contract''). Withholding priority serves an 
important public policy of providing restitution for work that laborers 
and mechanics have already performed, but for which they were not paid 
the full DBA or Related Act wages they were owed.
    Specifically, the Department proposed to set forth expressly that 
it has priority to funds withheld for DBA, CWHSSA, and other Related 
Act wage underpayments over competing claims to such withheld funds by:
    (1) A contractor's surety(ies), including without limitation 
performance bond sureties, and payment bond sureties;
    (2) A contracting agency for its reprocurement costs;
    (3) A trustee(s) (either a court-appointed trustee or a U.S. 
trustee, or both) in bankruptcy of a contractor, or a contractor's 
bankruptcy estate;
    (4) A contractor's assignee(s);
    (5) A contractor's successor(s); or
    (6) A claim asserted under the Prompt Payment Act, 31 U.S.C. 3901-
07.
    To the extent that a contractor did not have rights to funds 
withheld for Davis-Bacon wage underpayments, its sureties, assignees, 
successors, creditors (e.g., IRS), or bankruptcy estate likewise do not 
have such rights, as it is well established that such entities do not 
have greater rights to contract funds than the contractor does. See, 
e.g., Liberty Mut. Ins. Co., ARB No. 00-018, 2003 WL 21499861, at *7-9 
(The Department's priority to DBA withheld funds where surety ``ha[d] 
not satisfied all of the bonded [and defaulted prime] contractor's 
obligations, including the obligation to ensure the payment of 
prevailing wages''); Unity Bank & Tr. Co. v. United States, 5 Cl. Ct. 
380, 384 (1984) (assignees acquire no greater rights than their 
assignors); Richard T. D'Ambrosia, 55 Comp. Gen. 744, 746 (1976) (IRS 
tax levy cannot attach to money withheld for DBA underpayments in which 
contractor has no interest).
    Withheld funds always should, for example, be used to satisfy DBA 
and Related Act wage claims before any

[[Page 57693]]

reprocurement costs (e.g., following a contractor's default or 
termination from all or part of the covered work) are collected by the 
Government. See WHD Opinion Letter DBRA-132 (May 8, 1985). The 
Department has explained that ``[t]o hold otherwise . . . would be 
inequitable and contrary to public policy since the affected employees 
already have performed work from which the Government has received the 
benefit and that to give contracting agency reprocurement claims 
priority in such instances would essentially require the employees to 
unfairly pay for the breach of contract between their employer and the 
Government.'' Id.; see also PWRB, DBA/DBRA/CWHSSA Withholding and 
Disbursement, at 4.\282\ This rationale applies with equal force in 
support of the Department's priority to withheld funds over the other 
types of competing claims listed in this proposed regulation.
---------------------------------------------------------------------------

    \282\ See note 19, supra.
---------------------------------------------------------------------------

    The Department's rights to withheld funds for unpaid earnings also 
are superior to performance and payment bond sureties of a DBA or DBRA 
contractor. See Westchester Fire Ins. Co. v. United States, 52 Fed. Cl. 
567, 581-82 (2002) (surety did not acquire rights that contractor 
itself did not have); Liberty Mut. Ins. Co., ARB No. 00-018, 2003 WL 
21499861, at *7-9 (ARB found that Administrator's claim to withheld 
contract funds for DBA wages took priority over performance (and 
payment) bond surety's claim); Quincy Hous. Auth. LaClair Corp., WAB 
No. 87-32, 1989 WL 407468, at *3-4. The Department can withhold 
unaccrued funds such as advances until ``sufficient funds are withheld 
to compensate employees for the wages to which they are entitled'' 
under the DBA. Liberty Mut. Ins. Co., ARB No. 00-018, 2003 WL 21499861, 
at *6 (quoting 29 CFR 5.9).
    Similarly, the Department also explained that it has priority over 
assignees (e.g., assignees under the Assignment of Claims Act, see 31 
U.S.C. 3727, 41 U.S.C. 6305) to DBRA withheld funds. For example, in 
Unity Bank & Trust Co., 5 Cl. Ct. at 383, the employees' claim to 
withheld funds for a subcontractor's DBA wage underpayments had 
priority over a claim to those funds by the assignee--a bank that had 
lent money to the subcontractor to finance the work.
    Nor are funds withheld pursuant to the DBRA for prevailing wage 
underpayments property of a contractor's (debtor's) bankruptcy estate. 
See In re Quinta Contractors, Inc., 34 B.R. 129; cf. Pearlman v. 
Reliance Ins. Co., 371 U.S. 132, 135-36 (1962) (concluding, in a case 
under the Miller Act, that ``[t]he Bankruptcy Act simply does not 
authorize a trustee to distribute other people's property among a 
bankrupt's creditors''). When a contractor has violated its contract 
with the government--as well as the DBA or DBRA--by failing to pay 
required wages and fringe benefits, it has not earned its contractual 
payment. Therefore, withheld funds are not property of the contractor-
debtor's bankruptcy estate. Cf. Pro. Tech. Servs., Inc. v. IRS, No. 87-
780C(2), 1987 WL 47833, at *2 (E.D. Mo. Oct. 15, 1987) (when the 
Department finds [an SCA] violation and issues a withholding letter, 
that act ``extinguishe[s]'' whatever property right the debtor 
(contractor) might otherwise have had to the withheld funds, subject to 
administrative review if the contractor chooses to pursue it); In re 
Frank Mossa Trucking, Inc., 65 B.R. 715, 718-19 (Bankr. D. Mass. 1985) 
(pre-petition and post-petition SCA withholding was not property of the 
contractor-debtor's bankruptcy estate).
    Various Comptroller General decisions further underscore these 
principles. See, e.g., Carlson Plumbing & Heating, B-216549, 1984 WL 
47039 (Comp. Gen. Dec. 5, 1984) (DBA and CWHSSA withholding has first 
priority over IRS tax levy, payment bond surety, and trustee in 
bankruptcy); Watervliet Arsenal, B-214905, 1984 WL 44226, at *2 (Comp. 
Gen. May 15, 1984) (DBA and CWHSSA wage claims for the benefit of 
unpaid workers had first priority to retained contract funds, over IRS 
tax claim and claim of payment bond surety), aff'd on reconsideration 
sub nom. Int'l Fid. Ins. Co., B-214905, 1984 WL 46318 (Comp. Gen. July 
10, 1984); Forest Serv. Request for Advance Decision, B-211539, 1983 WL 
27408, at *1 (Comp. Gen. Sept. 26, 1983) (The Department's withholding 
claim for unpaid DBA wages prevailed over claims of payment bond surety 
and trustee in bankruptcy).
    The Department proposed codifying its position that DBRA 
withholding has priority over claims under the Prompt Payment Act, 31 
U.S.C. 3901-07. The basis for this proposed provision is that a 
contractor's right to prompt payment does not have priority over 
legitimate claims--such as withholding--arising from the contractor's 
failure to fully satisfy its obligations under the contract. See, e.g., 
31 U.S.C. 3905(a) (requiring that payments to prime contractors be for 
performance by such contractor that conforms to the specifications, 
terms, and conditions of its contract).
    The Department welcomed comments on whether the listed priorities 
should be effectuated by different language in the contract clause, 
such as an agreement between the parties that a contractor forfeits any 
legal or equitable interest in withheld payments once it commits 
violations, subject to procedural requirements that allow the 
contractor to contest the violations.
    The Department received multiple comments generally supporting the 
proposed language explicitly stating that the Department has priority 
to funds withheld for violations of Davis-Bacon prevailing wage 
requirements and CWHSSA overtime requirements over other competing 
claims. These commenters noted that the Department's priority over 
other competing claims is necessary to ensure that funds are available 
to pay workers the prevailing wages that they are due. NCDCL and FFC 
additionally noted that these provisions are particularly important as 
contractors who underpay their workers frequently have other 
significant debts. The Department did not receive any suggestions as to 
alternative language in the contract clause to effectuate these 
priorities, nor did the Department receive any comments opposing the 
proposed language prioritizing DBRA withholding over other competing 
claims. Accordingly, the final rule adopts the changes as proposed.
xxiv. Subpart C--Severability
    The Department proposed to add a new subpart C, titled 
``Severability,'' which would contain a new Sec.  5.40, also titled 
``Severability.'' The proposed severability provision explained that 
each provision is capable of operating independently from one another, 
and that if any provision of part 5 is held to be invalid or 
unenforceable by its terms, or as applied to any person or 
circumstance, or stayed pending further agency action, the Department 
intended that the remaining provisions remain in effect.
    The Department received no comments on this proposal. The final 
rule therefore adopts this change as proposed. An expanded discussion 
of severability is below in section III.B.5.
4. Non-Substantive Changes
i. Plain Language
    The Plain Writing Act of 2010 (Pub. L. 111-274) requires Federal 
agencies to write documents in a clear, concise, well-organized manner. 
The Department has written this document to be consistent with the 
Plain Writing Act as well as the Presidential Memorandum, ``Plain 
Language in Government Writing,'' published June 10, 1998 (63 FR 
31885). The Department encouraged comment with respect to clarity and

[[Page 57694]]

effectiveness of the language used. Comments addressing plain language 
and plain meaning are discussed in their respective sections.
ii. Other Changes
    The Department proposed to make non-substantive revisions 
throughout the regulations to address typographical and grammatical 
errors and to remove or update outdated or incorrect regulatory and 
statutory cross-references. The Department also proposed to adopt more 
inclusive language, including terminology that is gender-neutral, in 
the proposed regulations. These changes are consistent with general 
practice for Federal government publications; for example, guidance 
from the Office of the Federal Register advises agencies to avoid using 
gender-specific job titles (e.g., ``foremen'').\283\ These non-
substantive revisions do not alter the substantive requirements of the 
regulations.
---------------------------------------------------------------------------

    \283\ See Office of the Federal Register, ``Drafting Legal 
Documents: Principles of Clear Writing'' section 18, available at 
https://www.archives.gov/Federal-register/write/legal-docs/clear-writing.html.
---------------------------------------------------------------------------

5. Severability
    With respect to this final rule, it is the Department's intent that 
all provisions and sections be considered separate and severable and 
operate independently from one another. In this regard, the Department 
intends that: (1) In the event that any provision within a section of 
the rule is stayed, enjoined, or invalidated, all remaining provisions 
within that section will remain effective and operative; (2) in the 
event that any whole section of the rule is stayed, enjoined, or 
invalidated, all remaining sections will remain effective and 
operative; and (3) in the event that any application of a provision is 
stayed, enjoined, or invalidated, the provision will be construed so as 
to continue to give the maximum effect to the provision permitted by 
law.
    It is the Department's position, based on its experience enforcing 
and administering the DBRA, that with limited exceptions described 
below, the provisions and sections of the rule can function sensibly in 
the event that any specific provisions, sections, or applications are 
invalidated, enjoined, or stayed. As an initial matter, the Department 
notes that this is the first comprehensive update of the DBRA 
regulations in four decades, and as such covers a wide range of diverse 
topics. Moreover, parts 1, 3, and 5 function independently as a legal 
and practical matter. The regulations in part 1 concern the procedures 
for predetermination of wage rates and fringe benefits, such as the 
definition of the prevailing wage, the Department's wage surveys, and 
the circumstances under which state or local wage rates may be adopted. 
The regulations in part 5, in contrast, establish rules providing for 
the payment of these minimum wages and fringe benefits, coverage 
principles and enforcement mechanisms for these obligations, and the 
clauses to be included in all covered contracts. The incorporation and 
enforcement of wage determinations and fringe benefits contained within 
part 5 are functionally independent from the development of those wage 
determinations discussed in part 1. Therefore, the Department's intent 
is that all the provisions of part 5 remain in effect if a court should 
invalidate, stay, or enjoin any provision of part 1, or vice versa. The 
same is true with regard to part 3, which concerns the anti-kickback 
and other provisions of the Copeland Act.
    Similarly, the Department believes that the various provisions 
within part 1 and part 5 are generally able to operate independently 
from one another and need not rise or fall as a whole. For example, the 
three-step process for calculating the prevailing wage in Sec.  1.2 
operates independently from Sec.  1.6, which concerns the appropriate 
use of general and project wage determinations and when and how wage 
determinations should be incorporated into contracts, and the 
description of the wage survey process in Sec.  1.3 operates 
independently from agencies' obligations to furnish an annual report on 
their construction programs to the Administrator. Each provision 
addressing various aspects of how wages are determined also stands on 
its own as a practical matter, including, for example, the various 
definitions within Sec.  1.2, and the scope of consideration at Sec.  
1.7. Likewise, the final rule's provisions describing specific 
principles applicable to fringe benefits in Sec. Sec.  5.22-5.33 are 
wholly separate from the provisions in Sec.  5.6 concerning enforcement 
or provisions in Sec.  5.12 concerning debarment proceedings. 
Accordingly, as described above in sections III.B.1.ix and 
III.B.3.xxiv, the Department has finalized, as proposed, new 
severability provisions in Sec. Sec.  1.10 and 5.40.
    The Department recognizes that a limited exception to the general 
principle of severability will apply where provisions of the final rule 
or the regulations are contingent upon other provisions for their 
existence and viability. For example, as discussed in section 
III.B.3.xx.C above, the Department's proposed revisions to Sec.  3.11 
were made to conform this section to the operation-of-law provision in 
Sec.  5.5(e). If a court were to stay, invalidate, or enjoin Sec.  
5.5(e), the Department would have to consider whether changes to Sec.  
3.11 would be necessary. However, the Department intends that this 
exception be applied as narrowly as practicable so as to give maximum 
effect to the final rule and each regulatory provision within it.

C. Applicability Date

    As a part of the Department's general review of potential reliance 
interests affected by this final rule, it has considered how the rule 
will affect contractors with contracts that were entered into before 
the final rule's effective date. With limited exceptions, the final 
rule will not affect such contracts. The Department concluded, however, 
that it would be helpful to address the timing of implementation in an 
``Applicability Date'' subsection within the DATES section of the final 
rule.
    The Applicability Date section of the final rule states that the 
provisions of the rule regarding wage determination methodology and 
related part 1 provisions prescribing the content of wage 
determinations may be applied only to wage determination revisions 
completed by the Department on or after the effective date of the final 
rule on October 23, 2023. This means that the Department will apply the 
amendments to Sec. Sec.  1.2 (including the definitions of ``prevailing 
wage'' and ``area''), 1.3 (discussion of functional equivalence), and 
1.7 (scope of consideration) only to wage surveys for which data 
collection is completed after the effective date of the final rule. 
Similarly, the Department will be able to implement the new provisions 
in Sec. Sec.  1.3(f) (frequently conformed rates), 1.3(g)-(j) (adoption 
of State/local prevailing rates), 1.5(b) (project wage determinations), 
and 1.6(c)(1) (periodic adjustments to non-collectively bargained 
rates) only in wage determination revisions and project wage 
determinations that are issued and applicable after that date.
    The Department's wage determination methodology and related 
provisions prescribing the content of wage determinations, as amended 
in this final rule, will generally apply only to contracts that are 
entered into after the effective date of the final rule. This is 
because, as explained in Sec.  1.6 (``Use and effectiveness of wage 
determinations''), whenever a new wage determination or wage 
determination revision is issued (for example, after the completion of 
a new wage survey or through the new periodic adjustment mechanism), 
that revision will only apply to contracts that are entered into after 
the wage

[[Page 57695]]

determination is issued and will not apply to contracts which have 
already been entered into, with three exceptions. These exceptions are 
explained in Sec.  1.6(c)(2)(iii). The first exception, discussed in 
Sec.  1.6(c)(2)(iii)(A), is where a contract or order is changed to 
include substantial covered work that was not within the scope of work 
of the original contract. The second exception, discussed in the same 
paragraph of the rule, is where an option to extend the term of a 
contract is exercised. Each of these situations is effectively 
considered to be a new contract for which the most recent wage 
determination must be included, even if the wage determination was 
issued after the date that the original contract was first entered 
into. The third exception is for certain ongoing contracts that are not 
tied to the completion of any particular project (such as multiyear 
IDIQ contracts) for which new wage determinations must be incorporated 
on an annual basis under Sec.  1.6(c)(2)(iii)(B) of the final rule. 
Accordingly, only for these limited types of contracts may wage 
determinations issued in accordance with the final rule be incorporated 
into contracts that were entered into prior to the effective date of 
the final rule.
    The Applicability Date section provides that contracting agencies 
must apply the terms of Sec.  1.6(c)(2)(iii) to existing contracts of 
the types referenced in that regulatory provision, without regard to 
the date of contract award, ``if practicable and consistent with 
applicable law.'' With regard to ongoing contracts covered by Sec.  
1.6(c)(2)(iii), such as long-term IDIQ contracts, this language 
requires contracting agencies to ensure, to the extent practicable, 
that any existing umbrella contract be amended to include the most 
updated wage determination on an annual basis, and to do so through the 
exercise of any and all authority that may be needed, including, where 
necessary, a contracting agency's authority to negotiate or amend, its 
authority to pay any necessary additional costs, and its authority 
under any contract provision authorizing changes, cancellation, and 
termination. This requirement applies to both FAR-covered contracts and 
those that are not. Because this requirement only applies where 
practicable, it is not necessary for contracting agencies to amend 
contracts to retroactively impose recent wage determinations. Rather, 
umbrella contracts must be amended only if they are indefinite or if 
more than one year remains in their period of performance. In addition, 
amendment need not be immediate following the effective date of the 
final rule. Rather, contracting agencies only need to amend covered 
umbrella contracts within one year of the effective date.
    The Department considered whether the applicability of the new wage 
determination methodologies in this manner would result in harm to 
reliance interests of contractors that have entered into contracts 
covered by the exceptions in Sec.  1.6(c)(2)(iii) and determined that 
there are no such reliance interests that would outweigh the benefits 
of the implementation of the final rule as described above. The final 
rule's exceptions for new substantial out-of-scope covered work and for 
exercises of options represent regulatory codifications of existing 
subregulatory principles, not substantive changes to the Davis-Bacon 
program. They are consistent with the Department's guidance, case law, 
and historical practice, under which such modifications are considered 
new contracts. See discussion above in section III.B.1.vi.(B). 
Accordingly, contractors should already expect that in any such covered 
circumstance, any new wage determination will be incorporated into the 
contract, and contracts therefore should already account for any 
resulting changes to prevailing wage rates in a manner that does not 
adversely affect contractors. Finally, as noted above in section 
III.B.1.vi.(B), many existing umbrella contracts that might be affected 
by this requirement may well have mechanisms requiring the contracting 
agency to compensate the contractor for increases in labor costs over 
time generally. Other contracts may not currently have such mechanisms, 
but compensation may be negotiated consistent with applicable law.
    With the exception of Sec.  1.6(c)(2)(iii), all of the remaining 
provisions of parts 1, 3, and 5 will be applicable only to new 
contracts entered into after the effective date of October 23, 2023. 
For any contracts entered into before October 23, 2023, the terms of 
those contracts and the regulations that were effective at the time 
those contracts were entered into (as interpreted by case law and the 
Department's guidance) will continue to govern the duties of 
contractors and contracting agencies and the enforcement actions of the 
Department. Accordingly, with regard to the new operation-of-law 
provision at Sec.  5.5(e), if a contract was entered into prior to the 
effective date and is missing a required contract clause or wage 
determination, the Department will seek to address the omission solely 
through the modification provisions in the existing regulation at Sec.  
1.6(f) as it has been interpreted prior to this rulemaking. In other 
circumstances, where the Department has acted in this final rule only 
to clarify or codify existing interpretations and practices, the 
question of whether a contract was entered into prior to or after the 
applicability date of this final rule may not in practical terms change 
contractor duties or the parameters of any enforcement action. For 
contracts entered into after the effective date of this final rule, but 
before the Federal Acquisition Regulation or the relevant Related Act 
program regulations are amended to conform to this rule, agencies must 
use the contract clauses set forth in Sec.  5.5(a) and (b) of this rule 
to the maximum extent possible under applicable law.

IV. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (PRA), 44 U.S.C. 3501 et seq., 
and its attendant regulations, 5 CFR part 1320, require the Department 
to consider the agency's need for its information collections, their 
practical utility, as well as the impact of paperwork and other 
information collection burdens imposed on the public, and how to 
minimize those burdens. The PRA typically requires an agency to provide 
notice and seek public comments on any proposed collection of 
information contained in a proposed rule. See 44 U.S.C. 3506(c)(2)(B); 
5 CFR 1320.8. The Department invited public comments as part of the 
NPRM. 87 FR 15762 (Mar. 18, 2022).
    This final rule would affect existing information collection 
requirements previously approved under OMB control number 1235-0008 
(Davis-Bacon Certified Payroll) and OMB control number 1235-0023 
(Requests to Approve Conformed Wage Classifications and Unconventional 
Fringe Benefit Plans Under the Davis-Bacon and Related Acts/Contract 
Work Hours and Safety Standards Act). As required by the PRA, the 
Department submitted proposed information collection revisions as part 
of the NPRM to OMB for review to reflect changes that will result from 
this rulemaking. OMB issued a Notice of Action related to each 
Information Collection Request (ICR) continuing the collection and 
asking the Department to address any comments received and resubmit 
with the final rule.
    Circumstances Necessitating this Collection: The Department 
administers enforcement of the Davis-Bacon labor standards that apply 
to Federal and federally assisted construction projects. The Copeland 
Act requires contractors

[[Page 57696]]

and subcontractors performing work on federally financed or assisted 
construction contracts to furnish weekly a statement on the wages paid 
each employee during the prior week. See 40 U.S.C. 3145; 29 CFR 3.3(b). 
The Copeland Act specifically requires the regulations to ``include a 
provision that each contractor and subcontractor each week must furnish 
a statement on the wages paid each employee during the prior week.'' 40 
U.S.C. 3145(a). This requirement is implemented by 29 CFR 3.3 and 3.4 
and the standard Davis-Bacon contract clauses set forth at 29 CFR 5.5. 
The provision at 29 CFR 5.5 (a)(3)(ii)(A) requires contractors to 
submit weekly a copy of all payrolls to the Federal agency contracting 
for or financing the construction project. This information collection 
is assigned OMB control number 1235-0008. Regulations at 29 CFR part 5 
prescribe labor standards for federally financed and assisted 
construction contracts subject to the DBA, 40 U.S.C. 3141 et seq., and 
Related Acts, including all contracts subject to the CWHSSA, 40 U.S.C. 
3701, et seq. The DBA and DBRA require payment of locally prevailing 
wages and fringe benefits, as determined by the Department, to laborers 
and mechanics on most federally financed or federally assisted 
construction projects. See 40 U.S.C. 3142(a); 29 CFR 5.5(a)(1). CWHSSA 
requires the payment of one and one-half times the basic rate of pay 
for hours worked over 40 in a week on most Federal contracts involving 
the employment of laborers or mechanics. See 40 U.S.C. 3702(c); 29 CFR 
5.5(b)(1). The requirements of this information collection consist of 
(A) reports of conformed classifications and wage rates, and (B) 
requests for approval of unfunded fringe benefit plans. This 
information collection is assigned OMB control number 1235-0023.
    Summary: This final rule amends regulations issued under the Davis-
Bacon and Related Acts that set forth rules for the administration and 
enforcement of the Davis-Bacon labor standards that apply to Federal 
and federally assisted construction projects.
    In the NPRM, the Department proposed to add a new paragraph to 
Sec.  5.5(a)(1), and has recodified the paragraphs as follows:

------------------------------------------------------------------------
             Current paragraph                      New paragraph
------------------------------------------------------------------------
Sec.   5.5(a)(1)(ii)(A)...................  Sec.   5.5(a)(1)(iii)(A).
                                            Sec.   5.5(a)(1)(iii)(B)
                                             [paragraph added].
Sec.   5.5(a)(1)(ii)(B)...................  Sec.   5.5(a)(1)(iii)(C).
Sec.   5.5(a)(1)(ii)(C)...................  Sec.   5.5(a)(1)(iii)(D).
Sec.   5.5(a)(1)(ii)(D)...................  Sec.   5.5(a)(1)(iii)(E).
------------------------------------------------------------------------

    The final rule adopts the additions and revisions to Sec.  
5.5(a)(1) as proposed in the NPRM.
    The Department also proposed to make non-substantive revisions to 
Sec.  5.5(a)(1)(iii)(C) and (D) to describe the conformance request 
process more clearly, including by providing that contracting officers 
should submit the required conformance request information to WHD via 
email using a specified WHD email address. The Department adopted these 
proposals without changes as the changes merely clarified the existing 
conformance request process and did not alter the information 
collection burden on the public or on the Department.
    Additionally, in the NPRM, the Department proposed adding a new 
paragraph (b)(5) to Sec.  5.28, explicitly stating that unfunded 
benefit plans or programs must be approved by the Secretary in order to 
qualify as bona fide fringe benefits, and to replace the text in 
current paragraph (c) with language explaining the process contractors 
and subcontractors must use to request such approval. To accommodate 
these changes, the Department proposed to add a new paragraph (d) that 
contains the text currently located in paragraph (c) with non-
substantive edits for clarity and readability. These changes are 
summarized as follows:

------------------------------------------------------------------------
             Current paragraph                      New paragraph
------------------------------------------------------------------------
                                            Sec.   5.28(b)(5) [paragraph
                                             added].
                                            Sec.   5.28(c) [paragraph
                                             added].
Sec.   5.28(c)............................  Sec.   5.28(d).
------------------------------------------------------------------------

    The final rule adopts the additions and revisions to Sec.  5.28 as 
proposed in the NPRM, as these changes merely conformed regulatory 
language in Sec.  5.28 to the existing approval process for unfunded 
fringe benefit plan under 29 CFR 5.5(a)(1)(iv). These changes did not 
alter the information collection burden on the public. The Department 
is adding regulatory citations to the collection under 1235-0023, 
however there is no change in burden.
    The Department is adding two new recordkeeping requirements for 
contractors (telephone number and email address) to the collection 
under 1235-0008. However, it did not propose that such data be added to 
the ``certified payrolls'' submission (often collected on the WH-347 
instrument); rather, this information must be provided to DOL and 
contracting agencies on request. The Department is adding a new 
requirement to 29 CFR 5.5 at renumbered paragraph (a)(3)(iii), which 
will require all contractors, subcontractors, and recipients of Federal 
assistance to maintain and preserve Davis-Bacon contracts, 
subcontracts, and related documents for 3 years after all the work on 
the prime contract is completed. These related documents include 
contractor and subcontractor bids and proposals, amendments, 
modifications, and extensions to contracts, subcontracts, and 
agreements. The Department is amending Sec.  5.5(a)(3)(i) to clarify 
that regular payrolls and other basic records required by this section 
must be preserved for a period of at least 3 years after all the work 
on the prime contract is completed. In other words, even if a project 
takes more than 3 years to complete, contractors and subcontractors 
must keep payroll and basic records for at least 3 years after all the 
work on the prime contract has been completed. This revision expressly 
states the Department's longstanding interpretation and practice 
concerning the period of time that contractors and subcontractors must 
keep payroll and basic records required by Sec.  5.5(a)(3). This is not 
a change. The Department notes that it is a normal business practice to 
keep such documents and previously explained that it does not expect an 
increase in burden associated with this requirement.
    Purpose and use: This final rule continues the already existing 
requirements that contractors and subcontractors must certify their 
payrolls by attesting that persons performing work on DBRA covered 
contracts have received the proper payment of wages and fringe 
benefits. Contracting officials and WHD personnel use the records and 
certified payrolls to verify contractors pay the required rates for 
work performed.
    Additionally, the Department reviews a proposed conformance action 
report to determine the appropriateness of a conformance action. Upon 
completion of review, the Department approves, modifies, or disapproves 
a conformance request and issues a determination. The Department also 
reviews requests for approval of unfunded fringe benefit plans to 
determine the propriety of the plans.
    WHD obtains PRA clearance under control number 1235-0008 for an 
information collection covering the Davis-Bacon Certified Payroll. An 
ICR Revision will be submitted with this final rule to incorporate the 
regulatory citations in this final rule and adjust burden estimates to 
reflect a slight increase in burden associated with the new 
recordkeeping requirements finalized in this document.

[[Page 57697]]

    WHD obtains PRA clearance under OMB control number 1235-0023 for an 
information collection related to reporting requirements related to 
Conformance Reports and Unfunded Fringe Benefit Plans. An ICR Revision 
will be submitted with the final rule that includes the shifting 
regulation citations as well as the addition of references to 29 CFR 
5.28. The Agencies will notify the public when OMB approves the ICRs.
    Information and technology: There is no particular order or form of 
records prescribed by the regulations. A respondent may meet the 
requirements of this final rule using paper or electronic means.
    Public comments: The Department invited public comment on its 
analysis that the final rule created a slight increase in paperwork 
burden associated with ICR 1235-0008 and no increase in burden to ICR 
1235-0023. The Department received some comments related to the PRA 
aspect of the NPRM.
    The FFC-CT indicated their support for an update to the 
Department's recordkeeping requirements, expressing the view that 
accurate records are critical to transparency and accountability in the 
construction industry. McKanna, Bishop, Joffe, LLP, and WA BCTC also 
expressed that they fully support strengthened recordkeeping 
requirements. Weinberg, Roger, and Rosenfeld, on behalf of the NCDCL 
concurred, stating the recordkeeping requirements in the proposed rule 
were ``vast improvements'' that would ``increase transparency and allow 
the District Council and other organizations to ensure that contractors 
are complying with the law.'' The comment also stated that the proposed 
rule's ``clarifications and supplemental requirements modernize the 
DBRA's recordkeeping requirements and ensure that contractors maintain 
their records for years after projects are completed.'' The UBC 
suggested that additional recordkeeping requirements should be enacted, 
including requirements to retain timesheets, job site orientation 
records, contact information for subcontractors, and records of 
payments to subcontractors.
    Alternatively, a comment submitted by the group of U.S. Senators 
expressed the view that adding to recordkeeping requirements places an 
impermissible administrative burden on small to mid-size contractors, 
many of whom lack the administrative resources to keep up with 
paperwork burdens. The commenters indicated that in addition to the 
certified payroll data, contractors are required to maintain all 
contracts and subcontracts, as well as bids, proposals, amendments, 
modifications, and extensions for those contracts and subcontracts. 
This requirement is not novel, and the time period for DBRA record 
retention is consistent with other such regulatory requirements for 
contractors. For example, the SCA requires that contractors and 
subcontractors maintain many pay and time records ``for 3 years from 
the completion of the work.'' 29 CFR 4.6(g)(1). The FAR requires 
contractors to retain certain records for 3 or 4 years. See, e.g., 48 
CFR 4.705-2(a) (contractors must retain certain pay administration 
records for 4 years); 48 CFR 4.703(a)(1) (requiring contractor 
retention for 3 years after final payment of ``records, which includes 
books, documents, accounting procedures and practices, and other data, 
regardless of type and regardless of whether such items are in written 
form, in the form of computer data, or in any other form, and other 
supporting evidence to satisfy contract negotiation, administration, 
and audit requirements of the contracting agencies and the Comptroller 
General'').
    Moreover, maintaining copies of contracts to which you are a party 
is a sound business practice to document the parties' obligations under 
the contracts, among other reasons. Not only are DBRA-covered 
construction contracts needed for reference during performance and 
completion about scope of work, specifications, pricing, etc., but if 
there is any dispute about the contract provisions, performance, etc., 
contract documents are the starting point for resolving contractual 
disputes. In addition, contract payment terms may be supporting 
documents for a contractor's business tax filings. The Department is 
not requiring that contractors maintain originals or even paper copies 
of contracts and related documents; electronic copies are acceptable so 
long as they contain a valid electronic signature.
    The III-FFC wrote in support of the Department's proposal to add a 
recordkeeping requirement to retain telephone number and email address, 
noting that ``[t]he proposed requirements, including maintaining 
relevant bid and contract information, as well as payroll record 
information like contact information and correct classifications, help 
further the purpose of the Act.'' III-FFC added that such requirements 
are ``particularly necessary where DOL must contact a worker for 
investigation or audit purposes and will further reduce the incentive 
to misclassify workers and commit wage theft.'' Some individual 
commenters supported recordkeeping requirements indicating that it 
effectively deters misclassification.
    However, ABC opposed this requirement, writing that a requirement 
to disclose worker telephone numbers and email addresses ``constitutes 
an invasion of employee privacy and exposes employees to the increased 
possibility of identity theft.'' At a minimum, ABC stated, ``such 
information should be redacted and not publicly disclosed under any 
circumstances.''
    After consideration of the comments on this topic, the final rule 
adopts the changes to Sec.  5.5(a)(3)(i) as proposed. As the various 
comments in support indicate, the proposed changes will clarify the 
recordkeeping requirements for contractors, discourage 
misclassification of workers, and increase the efficiency of the 
Department's enforcement. While the Department appreciates ABC's 
concerns for workers' privacy and the need to protect workers from the 
danger of identity theft, the final rule does not require contractors 
to provide workers' telephone numbers or emails on certified payrolls 
or post them on a publicly available database, but rather requires 
contractors to maintain this, like other worker contact information, in 
contractors' internal records, and make this information available to 
DOL and contracting agencies upon request for use in the enforcement 
and administration of the DBRA.
    The Department believes that email and telephone number are minimal 
additional recordkeeping requirements and does not require in this 
final rule that such data be added to the weekly certified payroll 
thereby minimizing burden. The Department is, therefore, finalizing 
these additional recordkeeping requirements as proposed.
    The Department received some comments on the proposed changes to 
Sec.  5.5(a)(1)(iii)(B), which prohibits the use of conformances to 
``split, subdivide or otherwise avoid application of classifications 
listed in the wage determination.'' Similarly, the Department also 
received comments regarding other revisions to part 1 and part 5 of the 
DBA regulations. Commenters like the SNBTU supported the Department's 
proposed rule, as did SMART and SMACNA, and LIUNA.
    The Department also received some comments expressing concern about 
scrutiny related to unfunded fringe benefit plans. CC&M, and IUOE 
expressed their concerns. The comments appear to be premised on a 
misconception that the revisions impose

[[Page 57698]]

new substantive requirements with respect to unfunded plans. Nothing in 
these revisions alters the four substantive conditions for unfunded 
plans set out in Sec.  5.28(b)(1)-(4) or the overall requirements that 
an unfunded plan must be ``bona fide'' and able to ``withstand a test . 
. . of actuarial soundness.'' Consistent with Sec. Sec.  5.5(a)(1)(iv) 
and 5.29(e), the Department has long required written approval if a 
contractor seeks credit for the reasonably anticipated costs of an 
unfunded benefit plan towards its Davis-Bacon prevailing wage 
obligations, including with respect to vacation and holiday plans. The 
revisions to Sec.  5.28 merely clarify this preexisting requirement and 
detail the process through which contractors may request such approval 
from the Department.
    The FTBA expressed the view that the Department's proposal that 
contractors and subcontractors must make available ``any other 
documents deemed necessary to determine compliance with the labor 
standards provisions of any of the statutes referenced by Sec.  5.1'' 
is too broad and vague, and they expressed concern that such a 
requirement would have the effect of subjecting contractors to 
``burdensome, varied, unreasonable requests'' left to the discretion of 
enforcement staff. Alternatively, LIUNA supported the proposed 
recordkeeping requirements as ``clarifying DOL's `longstanding' 
approach to requiring contractors to maintain basic records and 
certified payrolls, including regular payroll and additional records 
relating to fringe benefit and apprenticeship and training.''
    Smith, Summerset & Associates, LLC, suggested that the WH-347 
collection instrument used to collect data for the Davis-Bacon 
Certified Payroll (under OMB control number 1235-0008) is difficult to 
understand and indicated that the form needs simplification and 
rearrangement. The commenter added that, ``[t]he same changes--
replacing `employee' references with `worker' references--should also 
be made asap to the WH-347 payroll reporting form. The WH-347 is the 
primary customer-facing document in the DBRA universe. It is used by 
thousands of contractors who still submit paper CPRs and, via operation 
of the computer programs, by other thousands of contractors who submit 
e-CPRs. It is frequently their main source of information about DBRA. 
WH-347 page 2, the signature page, still uses the terms `employees' and 
`employed by.' Those references need to be changed asap.'' Smith, 
Summerset & Associates also suggested additional changes to WH-347 to 
expand the universe of authorized persons who may sign the WH-347 and 
to simplify the tool for users. As we note below, changes to the WH-347 
are beyond the scope of this rulemaking, but the Department will 
consider comments submitted as part of the form's revision process.
    The MnDOT, commenting on the Department's proposal to require the 
Social Security number and last known address in payroll records, added 
that this information should also be included in the certified payroll. 
They suggested that excluding such data on the certified payroll would 
make it more difficult to track workers between contractors. With 
respect to comments about the WH-347, the Department reiterates that it 
proposed no changes to the form in the NPRM. However, the form is 
currently under review and the Department is considering such comments 
in the revision process. The Department appreciates this feedback and 
invites commenters to provide feedback and suggestions when the notice 
for revision is published in the Federal Register.
    A copy of these ICRs may be obtained at https://www.reginfo.gov or 
by contacting the Wage and Hour Division as shown in the FOR FURTHER 
INFORMATION CONTACT section of this preamble.
    Total burden for the subject information collections, including the 
burdens that will be unaffected by this final rule and any changes are 
summarized as follows:

    Type of review: Revision to currently approved information 
collections.
    Agency: Wage and Hour Division, Department of Labor.
    Title: Davis-Bacon Certified Payroll.
    OMB Control Number: 1235-0008.
    Affected public: Private sector, businesses or other for-profits 
and Individuals or Households.
    Estimated number of respondents: 152,900 (0 from this rulemaking).
    Estimated number of responses: 9,194,616 (1,200,000 from this 
rulemaking).
    Frequency of response: On occasion.
    Estimated annual burden hours: 7,464,975 (3,333 burden hours due to 
this rulemaking).
    Capital/Start-up costs: $1,143,229 ($0 from this rulemaking).

    Type of review: Revision to currently approved information 
collections.
    Agency: Wage and Hour Division, Department of Labor.
    Title: Requests to Approve Conformed Wage Classifications and 
Unconventional Fringe Benefit Plans Under the Davis-Bacon and Related 
Acts and Contract Work Hours and Safety Standards Act.
    OMB Control Number: 1235-0023.
    Affected public: Private sector, businesses or other for-profits 
and Individuals or Households.
    Estimated number of respondents: 8,518 (0 from this rulemaking).
    Estimated number of responses: 8,518 (0 from this rulemaking).
    Frequency of response: on occasion.
    Estimated annual burden hours: 2,143 (0 from this rulemaking).
    Estimated annual burden costs: 0.
    Capital/Start-up costs: $5,366 ($0 from this rulemaking).

V. Executive Order 12866, Regulatory Planning and Review; Executive 
Order 13563, Improved Regulation and Regulatory Review

    Under Executive Order 12866, OMB's Office of Information and 
Regulatory Affairs (OIRA) determines whether a regulatory action is 
significant and, therefore, subject to the requirements of the 
Executive Order and OMB review.\284\ Section 3(f) of Executive Order 
12866 defines a ``significant regulatory action'' as a regulatory 
action that is likely to result in a rule that may: (1) have an annual 
effect on the economy of $100 million or more, or adversely affect in a 
material way a sector of the economy, productivity, competition, jobs, 
the environment, public health or safety, or State, local, or Tribal 
governments or communities (also referred to as economically 
significant); (2) create serious inconsistency or otherwise interfere 
with an action taken or planned by another agency; (3) materially alter 
the budgetary impact of entitlements, grants, user fees or loan 
programs or the rights and obligations of recipients thereof; or (4) 
raise novel legal or policy issues arising out of legal mandates, the 
President's priorities, or the principles set forth in the Executive 
Order. OIRA has determined that this final rule is a ``significant 
regulatory action'' within the scope of section 3(f)(1) of Executive 
Order 12866. OIRA has also designated this rule as a major rule under 
Subtitle E of the Small Business Regulatory and Enforcement Fairness 
Act of 1996. Although the Department has only quantified costs of $39.3 
million in Year 1, there are multiple components of the rule that could 
not be quantified due to data limitations, so it is possible that the 
aggregate effect of the rule is larger.
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    \284\ See 58 FR 51735, 51741 (Oct. 4, 1993).
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    Executive Order 13563 directs agencies to, among other things, 
propose or adopt a regulation only upon a reasoned determination that 
its benefits

[[Page 57699]]

justify its costs; that it is tailored to impose the least burden on 
society, consistent with obtaining the regulatory objectives; and that, 
in choosing among alternative regulatory approaches, the agency has 
selected those approaches that maximize net benefits. Executive Order 
13563 recognizes that some costs and benefits are difficult to quantify 
and provides that, when appropriate and permitted by law, agencies may 
consider and discuss qualitatively values that are difficult or 
impossible to quantify, including equity, human dignity, fairness, and 
distributive impacts. The analysis below outlines the impacts that the 
Department anticipates may result from this rule and was prepared 
pursuant to the above-mentioned executive orders.

A. Introduction

1. Background and Need for Rulemaking
    In order to provide greater clarity and enhance their usefulness in 
the modern economy, the Department is updating and modernizing the 
regulations that implement the Davis-Bacon and Related Acts. The DBA, 
enacted in 1931, requires the payment of locally prevailing wages and 
fringe benefits on Federal contracts for construction. See 40 U.S.C. 
3142. The law applies to workers on contracts awarded directly by 
Federal agencies and the District of Columbia that are in excess of 
$2,000 and for the construction, alteration, or repair of public 
buildings or public works. Congress subsequently incorporated DBA 
prevailing wage requirements into numerous statutes (referred to as 
Related Acts) under which Federal agencies assist construction projects 
through grants, loans, guarantees, insurance, and other methods.
    The Department seeks to address a number of outstanding challenges 
in the program while also providing greater clarity in the DBRA 
regulations and enhancing their usefulness in the modern economy. In 
this rulemaking, the Department is updating and modernizing the 
regulations implementing the DBRA at 29 CFR parts 1, 3, and 5. Among 
other updates, as discussed more fully earlier in this preamble, under 
this rule the Department will:
     Return to the definition of ``prevailing wage'' in Sec.  
1.2 that it used from 1935 to 1983.\285\ Currently, a wage rate may be 
identified as prevailing in the area only if it is paid to a majority 
of workers in a classification on the wage survey; otherwise, a 
weighted average is used. The Department will return instead to the 
``three-step'' method in effect before 1983. Under that method, in the 
absence of a wage rate paid to a majority of workers in a particular 
classification, a wage rate will be considered prevailing if it is paid 
to at least 30 percent of such workers. Only if no wage rate is paid to 
at least 30 percent of workers in a classification will an average rate 
be used.
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    \285\ The 1981-1982 rulemaking went into effect Apr. 29, 1983. 
48 FR 19532.
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     Revise Sec.  1.6(c)(1) to provide a mechanism to regularly 
update certain non-collectively bargained prevailing wage rates based 
on the ECI. The mechanism is intended to keep such rates more current 
between surveys so that they do not become out-of-date and fall behind 
prevailing wage rates in the area.
     Expressly give the Administrator authority and discretion 
to adopt State or local wage determinations as the Davis-Bacon 
prevailing wage where certain specified criteria are satisfied.
     Return to a prior policy made during the 1981-1982 
rulemaking related to the delineation of wage survey data submitted for 
``metropolitan'' or ``rural'' counties in Sec.  1.7(b). Through this 
change, the Department seeks to more accurately reflect modern labor 
force realities, to allow more wage rates to be determined at smaller 
levels of geographical aggregation, and to increase the sufficiency of 
data at the statewide level.
     Include provisions to reduce the need for the use of 
``conformances'' where the Department has received insufficient data to 
publish a prevailing wage for a classification of worker--a process 
that currently is burdensome for contracting agencies, contractors, and 
the Department.
     Strengthen enforcement, including by making effective, by 
operation of law, any contract clauses or wage determinations that were 
wrongly omitted from contracts, and by codifying the principle of 
annualization used to calculate the amount of Davis-Bacon credit that a 
contractor may receive for contributions to a fringe benefit plan when 
the contractor's workers also work on private projects.
     Clarify and strengthen the scope of coverage under the 
DBRA, including by revising the definition of ``site of the work'' to 
further encompass certain construction of significant portions of a 
building or work at secondary worksites, to better clarify when 
demolition and similar activities are covered by the Davis-Bacon labor 
standards, and to clarify that the regulatory definitions of ``building 
or work'' and ``public building or public work'' can be met even when 
the construction activity involves only a portion of an overall 
building, structure, or improvement.
2. Summary of Affected Contractors, Workers, Costs, Transfers, and 
Benefits
    The Department evaluates the impacts of two components of this rule 
in this regulatory impact analysis:
     The return to the ``three-step'' method for determining 
the prevailing wage, and
     The provision of a mechanism to regularly update certain 
non-collectively bargained prevailing wage rates based on ECI data.
    The numbers presented in this final rule are generally very similar 
to the numbers in the proposed rule. Differences are due to the use of 
more recent data and a larger time estimate for regulatory 
familiarization costs in response to comments. This rule predominantly 
affects firms that hold federally funded or assisted construction 
contracts, with the primary impact resulting from the rule's changes 
affecting prevailing wage and fringe benefit rate determinations. The 
Department identified a range of potentially affected firms. The more 
narrowly defined population (those actively holding DBRA-covered 
contracts) includes 152,900 firms. The broader population (including 
those bidding on contracts but without active contracts, or those 
considering bidding in the future) includes 184,500 firms. Only a 
subset of potentially affected firms will be substantively affected and 
fewer may experience a change in payroll costs because some firms 
already pay above the prevailing wage rates that may result from this 
proposal.
    The Department estimated there are 1.2 million workers on DBRA-
covered contracts and who therefore may be potentially affected by this 
final rule. Some of these workers will not be affected because they 
work in occupations not covered by DBRA or, if they are covered by 
DBRA, workers may not be affected by the prevailing wage updates of 
this final rule because they may already earn above the updated 
prevailing wage and fringe benefit rates.
    The Department estimated both regulatory familiarization costs and 
implementation costs for affected firms. Year 1 costs are estimated to 
total $39.3 million. Average annualized costs across the first 10 years 
are estimated to be $7.3 million (using a 7 percent discount rate). The 
transfer analysis discussed in section V.D. (``Transfer Payments'') 
draws on two illustrative analyses conducted by the Department. 
However, the Department does not definitively quantify annual transfer

[[Page 57700]]

payments due to data limitations and uncertainty. Similarly, benefits 
are discussed qualitatively due to data limitations and uncertainty. 
See Table 1 for a summary of affected contractor firms, workers, and 
costs.

                        Table 1--Summary of Affected Contractor Firms, Workers, and Costs
                                                 [2021 Dollars]
----------------------------------------------------------------------------------------------------------------
                                                                Future years         Average annualized value
                                                   Year 1  -----------------------------------------------------
                                                              Year 2    Year 10    3% Real rate    7% Real rate
----------------------------------------------------------------------------------------------------------------
Firms: Narrow definition \a\...................    152,900    152,900    152,900  ..............  ..............
Firms: Broad definition \b\....................    184,500    184,500    184,500  ..............  ..............
Potentially affected workers (millions)........        1.2        1.2        1.2  ..............  ..............
Direct employer costs (million)................      $39.3       $2.4       $2.4            $7.5            $7.3
    Regulatory familiarization.................      $36.9       $0.0       $0.0            $5.1            $4.9
    Implementation.............................       $2.4       $2.4       $2.4            $2.4            $2.4
----------------------------------------------------------------------------------------------------------------
\a\ Firms actively holding DBRA-covered contracts.
\b\ Firms actively holding DBRA-covered contracts or who may be bidding on DBRA contracts or considering bidding
  in the future.

B. Number of Potentially Affected Contractor Firms and Workers

1. Number of Potentially Affected Contractor Firms
    The Department identified a range of potentially affected firms. 
The more narrowly defined population (firms actively holding DBRA-
covered contracts) includes 152,900 firms: 61,200 impacted by DBA and 
91,700 impacted by the Related Acts (Table 2). The broader population 
(including those bidding on DBA contracts but without active contracts, 
or those considering bidding in the future) includes 184,500 firms: 
92,800 impacted by DBA and 91,700 impacted by the Related Acts. The 
Department explains how the three components of affected contractor 
firms were derived separately: (1) firms currently holding DBA 
contracts, (2) all potentially affected DBA contractors, and (3) firms 
holding DBRA contracts.
    The Department notes that only a subset of these firms will 
experience a change in payroll costs. Those firms that already pay 
above the new wage determination rates will not be substantively 
affected. Because there are no readily usable data on the earnings of 
workers of these affected firms, the Department cannot definitively 
identify the number of firms that will experience changes in payroll 
costs due to changes in prevailing wage rates.
i. Firms Currently Holding DBA Contracts
    USASpending.gov--the official source for spending data for the U.S. 
Government--contains Government award data from the Federal Procurement 
Data System Next Generation (FPDS-NG), which is the system of record 
for Federal procurement data. The Department used these data to 
identify the number of firms that currently hold DBA contracts. 
Although more recent data are available, the Department used data from 
2019 to avoid any shifts in the data associated with the COVID-19 
pandemic that began in 2020. Additionally, for the final rule, the 
Department considered updating to 2021 data, but ultimately decided 
against it because of the reasoning above as well as variable 
differences between the 2019 and 2021 data. Any long-run impacts of 
COVID-19 are speculative because this is an unprecedented situation, so 
using data from 2019 may be the best approximation the Department has 
for future impacts. However, the pandemic could cause structural 
changes to the economy, resulting in shifts in industry employment and 
wages.
    The Department identified firms working on DBA contracts as 
contracts with either an assigned NAICS code of 23 or if the 
``Construction Wage Rate Requirements'' element is ``Y,'' meaning that 
the contracting agency flagged that the contract is covered by 
DBA.286 287 The Department excluded (1) contracts for 
financial assistance such as direct payments, loans, and insurance; and 
(2) contracts performed outside the U.S. because DBA coverage is 
limited to the 50 states, the District of Columbia, and the U.S. 
territories.\288\
---------------------------------------------------------------------------

    \286\ The North American Industry Classification System (NAICS) 
is a method by which Federal statistical agencies classify business 
establishments in order to collect, analyze, and publish data about 
certain industries. Each industry is categorized by a sequence of 
codes ranging from two digits (most aggregated level) to six digits 
(most granular level). https://www.census.gov/naics/.
    \287\ The Department acknowledges that there may be affected 
firms that fall under other NAICS codes and for which the 
contracting agency did not flag in the FPDS-NG system that the 
contract is covered by DBA. Including these additional NAICS codes 
could result in an overestimate because they would only be affected 
by this rule if DBA-covered construction occurs. The data does not 
allow the Department to determine this.
    \288\ The DBA only applies in the 50 States and the District of 
Columbia and does not apply in the territories. However, some 
Related Acts provide Federal funding of construction in the 
territories that, by virtue of the Related Act, is subject to DBA 
prevailing wage requirements. For example, the DBA does not apply in 
Guam, but a Related Act provides that base realignment construction 
in Guam is subject to DBA requirements.
---------------------------------------------------------------------------

    In 2019, there were 14,000 unique prime contractors with active 
construction contracts in USASpending. However, subcontractors are also 
impacted by this final rule. The Department examined 5 years of 
USASpending data (2015 through 2019) and identified 47,200 unique 
subcontractors who did not hold contracts as primes in 2019. The 
Department used 5 years of data for the count of subcontractors to 
compensate for lower-tier subcontractors that may not be included in 
USASpending.gov. In total, the Department estimates 61,200 firms 
currently hold DBA contracts and are potentially affected by this 
rulemaking under the narrow definition; however, to the extent that any 
of these firms already pay above the prevailing wage rates as 
determined under this final rule they will not actually be impacted by 
the rule.
ii. Potentially Affected Contractors Under the DBA
    The Department also cast a wider net to identify other potentially 
affected contractors, both those directly affected (i.e., holding 
contracts) and those that plan to bid on DBA-covered contracts in the 
future. To determine the number of these firms, the Department 
identified construction firms registered in the GSA's System for Award 
Management (SAM) since all entities bidding on Federal procurement 
contracts or grants must register in SAM. The Department believes that 
firms registered in SAM include those that may be affected if the 
rulemaking impacts their decision to bid on contracts or their 
competitiveness in the bidding process. However, it is possible that 
some firms that are not already registered in SAM could decide

[[Page 57701]]

to bid on DBA-covered contracts after this rulemaking; these firms are 
not included in the Department's estimate. The rule could also impact 
them if they are awarded a future contract.
    Using August 2022 SAM data, the Department identified 45,600 
registered firms with construction listed as the primary NAICS 
code.\289\ The Department excluded firms with expired registrations, 
firms only applying for grants,\290\ government entities (such as city 
or county governments),\291\ foreign organizations, and companies that 
only sell products and do not provide services. SAM includes all prime 
contractors and some subcontractors (those who are also prime 
contractors or who have otherwise registered in SAM). However, the 
Department is unable to determine the number of subcontractors that are 
not in the SAM database. Therefore, the Department added the 
subcontractors identified in USASpending to this estimate. Adding these 
47,200 firms identified in USASpending to the number of firms in SAM, 
results in 92,800 potentially affected firms.
---------------------------------------------------------------------------

    \289\ Data released in monthly files. Available at: https://www.sam.gov/SAM/pages/public/extracts/samPublicAccessData.jsf.
    \290\ Entities registering in SAM are asked if they wish to bid 
on contracts. If the firm answers ``yes,'' then they are included as 
``All Awards'' in the ``Purpose of Registration'' column in the SAM 
data. The Department included only firms with a value of ``Z2,'' 
which denotes ``All Awards.''
    \291\ The Department believes that there may be certain limited 
circumstances in which State and local governments may be 
contractors but believes that this number would be minimal and 
including government entities would result in an inappropriate 
overestimation.
---------------------------------------------------------------------------

iii. Firms Impacted by the Related Acts
    USASpending does not adequately capture all work performed under 
the Related Acts. Additionally, there is not a central database, such 
as SAM, where contractors working on Related Acts contracts must 
register. Therefore, the Department used a different methodology to 
estimate the number of firms impacted by the Related Acts. The 
Department estimated 883,900 workers work on Related Acts contracts 
(see section V.B.2.iii.), then divided that number by the average 
number of workers per firm (9.6) in the construction industry.\292\ 
This results in 91,700 firms. Some of these firms likely also perform 
work on DBA contracts. However, because the Department has no 
information on the size of this overlap, the Department has assumed all 
are unique firms.
---------------------------------------------------------------------------

    \292\ 2019 Statistics of U.S. Businesses (SUSB). U.S., NAICS 
sectors, larger employment sizes up to 20,000+. https://www.census.gov/data/tables/2019/econ/susb/2019-susb-annual.html.

         Table 2--Range of Number of Potentially Affected Firms
------------------------------------------------------------------------
                            Source                               Number
------------------------------------------------------------------------
               Total Count (Davis-Bacon and Related Acts)
------------------------------------------------------------------------
Narrow definition \a\.........................................   152,900
Broad definition \b\..........................................   184,500
------------------------------------------------------------------------
                         DBA (Narrow Definition)
------------------------------------------------------------------------
Total.........................................................    61,200
    Prime contractors from USASpending........................    14,000
    Subcontractors from USASpending...........................    47,200
------------------------------------------------------------------------
                         DBA (Broad Definition)
------------------------------------------------------------------------
Total.........................................................    92,800
    SAM.......................................................    45,600
    Subcontractors from USASpending...........................    47,200
------------------------------------------------------------------------
                              Related Acts
------------------------------------------------------------------------
Total.........................................................    91,700
    Related Acts workers......................................   883,900
    Employees per firm (SUSB).................................       9.6
------------------------------------------------------------------------
\a\ Firms actively holding DBRA-covered contracts
\b\ Firms actively holding DBRA-covered contracts or who may be bidding
  on DBRA contracts or considering bidding in the future.

2. Number of Potentially Affected Workers
    There are no readily available government data on the number of 
workers working on DBA contracts; therefore, to estimate the number of 
these workers, the Department employed the approach used in the 2021 
final rule, ``Increasing the Minimum Wage for Federal Contractors,'' 
which implemented Executive Order 14026.\293\ That methodology is based 
on the 2016 rulemaking implementing Executive Order 13706's paid sick 
leave requirements, which contained an updated version of the 
methodology used in the 2014 rulemaking for Executive Order 13658.\294\ 
Using this methodology, the Department estimated the number of workers 
who work on DBRA contracts, representing the number of ``potentially 
affected workers,'' is 1.2 million potentially affected workers. Some 
of these workers will not be affected because while they work on DBRA-
covered contracts, they are not in occupations covered by the DBRA 
prevailing wage requirements.
---------------------------------------------------------------------------

    \293\ See 86 FR 38816, 38816-38898.
    \294\ See 81 FR 9591, 9591-9671 and 79 FR 60634-60733.
---------------------------------------------------------------------------

    The Department estimated the number of potentially affected workers 
in three parts. First, the Department estimated employees and self-
employed workers working on DBA contracts in the 50 States and the 
District of Columbia. Second, the Department estimated the number of 
potentially affected workers working on contracts covered by the 
Related Acts in the 50 States and the District of Columbia. Third, the 
Department estimated the number of potentially affected workers working 
on contracts covered by the Related Acts in the territories.
i. Workers on DBA Contracts in the 50 States and the District of 
Columbia
    First, the Department calculated the share of construction activity 
that is covered by DBA by taking the ratio of Federal contracting 
expenditures \295\ to gross output in NAICS 23: Construction.\296\ This 
results in an estimated 3.27 percent of output in the construction 
industry covered by Federal Government contracts (Table 3).
---------------------------------------------------------------------------

    \295\ The Department used 2019 Federal contracting expenditures 
from USASpending.gov data excluding (1) financial assistance such as 
direct payments, loans, and insurance; and (2) contracts performed 
outside the U.S.
    \296\ Bureau of Economic Analysis. (2020). Table 8. Gross Output 
by Industry Group. https://www.bea.gov/news/2020/gross-domestic-product-industry-fourth-quarter-and-year-2019. ``Gross output of an 
industry is the market value of the goods and services produced by 
an industry, including commodity taxes. The components of gross 
output include sales or receipts and other operating income, 
commodity taxes, plus inventory change. Gross output differs from 
value added, which measures the contribution of the industry's labor 
and capital to its gross output.''
---------------------------------------------------------------------------

    The Department then multiplied the ratio of covered-to-gross output 
by private sector employment in the construction industry (9.1 million) 
to estimate the share of employees working on covered contracts. The 
Department's private sector employment number is primarily comprised of 
construction industry employment from the May 2019 OEWS, formerly the 
Occupational Employment Statistics.\297\ However, the OEWS excludes 
unincorporated self-employed workers, so the Department supplemented 
OEWS data with data from the 2019 Current Population Survey Merged 
Outgoing Rotation Group (CPS MORG) to include the unincorporated self-
employed.
---------------------------------------------------------------------------

    \297\ BLS. OEWS. May 2019. Available at: https://www.bls.gov/oes/.

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[[Page 57702]]

[GRAPHIC] [TIFF OMITTED] TR23AU23.000

    According to this methodology, the Department estimated there are 
297,900 workers on DBA covered contracts in the 50 States and the 
District of Columbia. However, this estimate is imprecise for two 
reasons; one of which results in an overestimate and one that results 
in an underestimate. First, these laws only apply to wages for 
mechanics and laborers, so some of these workers would not be affected 
by these changes to DBA. Second, this methodology represents the number 
of year-round-equivalent potentially affected workers who work 
exclusively on DBA contracts. Thus, when the Department refers to 
potentially affected employees in this analysis, the Department is 
referring to this conceptual number of people working exclusively on 
covered contracts. Because workers often work on a combination of 
covered and non-covered contracts, this bias underestimates the number 
of unique workers.
ii. Workers on Related Acts Contracts in the 50 States and the District 
of Columbia
    This rulemaking will also impact workers on Related Acts contracts 
in the 50 States and the District of Columbia. Data are not available 
on the number of workers covered by the Related Acts. Additionally, 
neither USASpending nor any other database fully captures this 
population.\298\ Therefore, the Department used a different approach to 
estimate the number of potentially affected workers for Related Acts 
contracts.
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    \298\ USASpending includes information on grants, assistance, 
and loans provided by the Federal government. However, this does not 
include all covered projects, it does not capture the full value of 
the project because it is just the Federal share (i.e., excludes 
spending by State and local governments or private institutions that 
are also subject to DBRA labor standards because of the Federal 
share on the project), and it cannot easily be restricted to 
construction projects because there is no NAICS or product service 
code (PSC) variable.
---------------------------------------------------------------------------

    The Census Bureau reports total State and local government 
construction spending was $318 billion in 2019.\299\ The Department 
then applied an adjustment factor to account for the share of State and 
local expenditures that are covered by the Related Acts. The Department 
assumed half of the total State and local government construction 
expenditures are subject to a DBRA, resulting in estimated expenditures 
of $158 billion. To this, the Department added $3 billion to represent 
HUD backed mortgage insurance for private construction projects.\300\
---------------------------------------------------------------------------

    \299\ Census Bureau. ``Annual Value of Public Construction Put 
in Place 2009-2020.'' Available at: https://www.census.gov/construction/c30/historical_data.html.
    \300\ Estimate based on personal communications with the Office 
of Labor Standards Enforcement and Economic Opportunity at HUD.
---------------------------------------------------------------------------

    As was done for DBA, the Department divided contracting 
expenditures ($161 billion) by gross output ($1.7 billion) and 
multiplied that ratio by the estimate of private sector employment used 
above (9.1 million) to estimate the share of workers working on Related 
Acts-covered contracts (883,900).
iii. Workers on Related Acts Contracts in the U.S. Territories
    The methodology to estimate potentially affected workers in the 
U.S. territories is similar to the methodology above for the 50 States 
and the District of Columbia. The primary difference is that data on 
gross output in the territories are not available, and so the 
Department had to make some additional assumptions. The Department 
approximated gross output in the territories by calculating the ratio 
of gross output to Gross Domestic Product (GDP) for the U.S. (1.8), 
then multiplying that ratio by GDP in each territory to estimate total 
gross output.\301\ To limit gross output to the construction industry, 
the Department multiplied it by the share of the territory's payroll in 
NAICS 23. For example, the Department estimated that Puerto Rico's 
gross output in the construction industry totaled $3.6 billion.\302\
---------------------------------------------------------------------------

    \301\ GDP limited to personal consumption expenditures and gross 
private domestic investment.
    \302\ In Puerto Rico, personal consumption expenditures plus 
gross private domestic investment equaled $71.2 billion. Therefore, 
Puerto Rico gross output was calculated as $71.2 billion x 1.8 x 2.7 
percent.
[GRAPHIC] [TIFF OMITTED] TR23AU23.001

---------------------------------------------------------------------------
where

i = territory

    The rest of the methodology follows the methodology for the 50 
States and the District of Columbia. To determine the share of all 
output associated with Government contracts, the Department divided 
contract expenditures by gross output. Federal contracting expenditures 
from USASpending.gov data show that the Government spent $993.3 million 
on construction contracts in 2019 in American Samoa, the Commonwealth 
of the Northern Mariana Islands, Guam, Puerto Rico, and the U.S. Virgin 
Islands. The Department then multiplied the ratio of covered contract 
spending to gross output by private sector employment to estimate the 
number of workers working on covered contracts (6,100).\303\
---------------------------------------------------------------------------

    \303\ For the U.S. territories, the unincorporated self-employed 
are excluded because CPS data are not available on the number of 
unincorporated self-employed workers in U.S. territories.

                                                     Table 3--Number of Potentially Affected Workers
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                 Share output from   Private-sector   Workers on covered
                                                          Private output    Contracting output        covered       workers (1,000s)  contracts (1,000s)
                                                          (billions)  \a\     (millions)  \b\     contracting (%)          \c\                \d\
--------------------------------------------------------------------------------------------------------------------------------------------------------
DBA, excl. territories................................              $1,662             $54,400                3.27             9,100               297.9
Related Acts, territories.............................                   5                 993                 (e)                35                 6.1
                                                       -------------------------------------------------------------------------------------------------

[[Page 57703]]

 
Related Acts, excl. territories.......................  ..................             161,297                9.68             9,135               883.9
    Total.............................................               1,667             216,700  ..................  ................             1,188.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ Bureau of Economic Analysis, NIPA Tables, Gross output. 2019. For territories, gross output estimated by multiplying (1) total GDP for the territory
  by the ratio of total gross output to total GDP for the U.S. and (2) the share of national gross output in the construction industry.
\b\ For DBA, and Related Acts in the territories, data from USASpending.gov for contracting expenditures for covered contracts in 2019. For Related
  Acts, data from Census Bureau on value of State and local government construction put in place, adjusted for coverage ratios. The Census data includes
  some data for territories but may be underestimated.
\c\ OEWS May 2019. For non-territories, also includes unincorporated self-employed workers from the 2019 CPS MORG.
\d\ Assumes share of expenditures on contracting is same as share of employment. Assumes workers work exclusively, year-round on DBRA covered contracts.
\e\ Varies by U.S. Territory.

3. Demographics of the Construction Industry
    To provide information on the types of workers that may be affected 
by this rule, the Department presents demographic characteristics of 
production workers in the construction industry. For purposes of this 
demographic analysis only, the Department is defining the construction 
industry as workers in the following occupations:

     Construction and extraction occupations
     Installation, maintenance, and repair occupations
     Production occupations
     Transportation and material moving occupations

    The Department notes that the demographic characteristics of 
workers on DBRA projects may differ from the general construction 
industry; however, data on the demographics of workers on DBRA projects 
is unavailable. Demographics of the general workforce are also 
presented for comparison. Tabulated numbers are based on 2019 CPS data 
for consistency with the rest of the analysis and to avoid potential 
impacts of COVID-19. Additional information on the demographics of 
workers in the construction industry can be found in ``The Construction 
Chart Book: The U.S. Construction Industry and Its Workers.'' \304\
---------------------------------------------------------------------------

    \304\ Dong, Xiuwen, Xuanwen Wang, Rebecca Katz, Gavin West, and 
Bruce Lippy, ``The Construction Chart Book: The U.S. Construction 
Industry and Its Workers,'' (6th ed. Silver Spring: CPWR--The Center 
for Construction Research and Training, 2018) at 18. https://www.cpwr.com/wp-content/uploads/publications/The_6th_Edition_Construction_eChart_Book.pdf.
---------------------------------------------------------------------------

    The vast majority of workers in the construction industry are men, 
97 percent (Table 4), which is significantly higher than the general 
workforce where 53 percent are men. Workers in construction are also 
significantly more likely to be Hispanic than the general workforce; 38 
percent of construction workers are Hispanic, compared with 18 percent 
of the workforce.
    Lastly, while many construction workers may have completed 
registered apprenticeship programs, 84 percent of workers in the 
construction industry have a high school diploma or less, compared with 
54 percent of the general workforce. The Department also looked at data 
on disability status in the construction industry and found that 6.4 
percent of workers with a disability work in the construction industry, 
compared to 7.2 percent of workers with no disability.\305\
---------------------------------------------------------------------------

    \305\ Persons with a Disability: Labor Force Characteristics--
2019. Table 4. https://www.bls.gov/news.release/archives/disabl_02262020.pdf.

      Table 4--Demographics of Workers in the Construction Industry
------------------------------------------------------------------------
                                            Production
                                            workers in         Total
                                           construction    workforce (%)
                                                (%)
------------------------------------------------------------------------
                                By Region
------------------------------------------------------------------------
Northeast...............................            16.4            17.9
Midwest.................................            16.4            21.9
South...................................            41.7            36.9
West....................................            25.5            23.3
------------------------------------------------------------------------
                                 By Sex
------------------------------------------------------------------------
Male....................................            97.1            53.4
Female..................................             2.9            46.6
------------------------------------------------------------------------
                                 By Race
------------------------------------------------------------------------
White only..............................            87.1            77.2
Black only..............................             7.5            12.4
All others..............................             5.4            10.4
------------------------------------------------------------------------
                              By Ethnicity
------------------------------------------------------------------------
Hispanic................................            38.0            18.1

[[Page 57704]]

 
Not Hispanic............................            62.0            81.9
------------------------------------------------------------------------
                          By Race and Ethnicity
------------------------------------------------------------------------
White only, not Hispanic................            52.2            61.1
Black only, not Hispanic................             6.2            11.6
------------------------------------------------------------------------
                                 By Age
------------------------------------------------------------------------
16-25...................................            15.2            16.7
26-55...................................            71.6            64.2
56+.....................................            13.3            19.1
------------------------------------------------------------------------
                              By Education
------------------------------------------------------------------------
No degree...............................            23.0             8.9
High school diploma.....................            60.6            45.3
Associate's degree......................             9.3            10.7
Bachelor's degree or advanced...........             7.2            35.1
------------------------------------------------------------------------
Note: CPS data for 2019.

    The Department has also presented some demographic data on 
Registered Apprentices, as they are the pipeline for future 
construction workers. These demographics come from Federal Workload 
data, which covers the 25 states administered by the Department's OA 
and national registered apprenticeship programs.\306\ Note that this 
data includes apprenticeships for other industries beyond construction, 
but 68 percent of the active apprentices are in the construction 
industry, so the Department believes this data could be representative 
of that industry. Of the active apprentices in this data set, 9.1 
percent are female, and 90.9 percent are male. The data show that 78.7 
percent of active apprentices are White, 14.1 percent are Black or 
African American, 3.2 percent are American Indian or Alaska Native, 2.1 
percent are Asian, and 1.1 percent are Native Hawaiian or Other Pacific 
Islander.\307\ The data also show that 23.6 percent of active 
apprentices are Hispanic.
---------------------------------------------------------------------------

    \306\ U.S. Department of Labor, Office of Apprenticeship. 
``FY2019 Data and Statistics.'' https://www.dol.gov/agencies/eta/apprenticeship/about/statistics/2019.
    \307\ This excludes apprentices who did not wish to answer or 
for whom race was not provided.
---------------------------------------------------------------------------

C. Costs of the Final Rule

    This section quantifies direct employer costs associated with the 
final rule. The Department estimated both (1) regulatory 
familiarization costs and (2) implementation costs associated with more 
frequently updated rates. Year 1 costs are estimated to total $39.3 
million. Average annualized costs across the first 10 years of 
implementation are estimated to be $7.3 million (using a 7 percent 
discount rate). These cost estimates are higher than presented in the 
proposed rule due a larger estimate of the time required to review the 
regulation. Non-quantified costs are discussed in sections V.C.3 and 
V.C.4. Transfers resulting from these provisions are discussed in 
section V.D.
1. Regulatory Familiarization Costs
    This rule's direct costs on some covered contractors who will 
review the regulations to understand how the prevailing wage 
determination methodology will change and how certain non-collectively 
bargained rates will be periodically updated will likely be small 
because not all of these firms will choose to familiarize themselves 
with the methodologies used to develop those prevailing wage rates, or 
any periodic adjustments to them. Regulatory familiarization time for 
other components of this final rule, such as the provisions clarifying 
regulatory language and coverage, are likely to take time when reviewed 
but will only be reviewed by a subset of firms. For example, a roofing 
company does not need to understand how the rule relates to 
prefabrication or truckers. Costs associated with ensuring compliance 
are included as implementation costs.
    For this analysis, the Department has included all firms that 
either hold DBA or Related Acts contracts or are considering bidding on 
work (184,500 firms). However, this may be an overestimate, because 
firms that are registered in SAM might not bid on a DBRA contract, and 
therefore may not review these regulations. ABC asserted that this rule 
extends coverage to new types of construction, industries, and 
occupations and the associated firms are not covered by the 
Department's estimate. The Department believes most of these firms are 
already included in the estimate because the methodology covers all 
firms bidding, or considering bidding, on Federal construction 
contracts, not just DBA contracts. Furthermore, as explained below in 
section V.C.4.v, while some covered firms engaged in construction at 
secondary worksites may not be classified in the construction industry 
under NAICS and consequently may not be captured by this methodology, 
the Department believes that the number of such firms is small given 
the limited scope of this change to ``site of the work'' in the final 
rule.
    The Department assumes that, on average, 4 hours of a human 
resources staff member's time will be spent reviewing the rulemaking. 
This time estimate is the average time per firm; some firms will spend 
more time reviewing the rule, but others will spend less or no time 
reviewing the rule. In the proposed rule, the Department used a time 
estimate of 1 hour. In response to commenters asserting that it would 
take more time, the Department increased this estimate to 4 hours. 
Commenters emphasized that the length of the rule and the need to have 
several employees review necessitate a longer review time estimate. For 
example, ABC noted,

[[Page 57705]]

``reading the 432-page NPRM-clocking in at a robust 118,450 words--
would actually take 8.3 hours per person at an average silent reading 
rate.'' The Department acknowledges that it may take some reviewers at 
least this long to read the entire rule but, because some of the firms 
in the cost calculation will not bid on a Davis-Bacon contract and 
therefore will not spend any time reviewing this rule, an average time 
estimate of 4 hours is more appropriate.
    The cost of this time is the median loaded wage for a Compensation, 
Benefits, and Job Analysis Specialist of $49.94 per hour.\308\ 
Therefore, the Department has estimated regulatory familiarization 
costs to be $36.9 million ($49.94 per hour x 4.0 hours x 184,500 
contractors) (Table 5). The Department has included all regulatory 
familiarization costs in Year 1. New entrants who would have been 
covered by previous DBA regulations will not incur any additional 
regulatory familiarization costs attributable to this rule; had this 
rule not been proposed, they still would have incurred the costs of 
regulatory familiarization with existing provisions. In addition, while 
the provision regarding periodic adjustments is new and could involve 
additional review time, the Department believes that any increased 
costs associated with that familiarization will be offset by a decrease 
in time needed to review some of the simplified or harmonized 
provisions, such as debarment. ABC disagreed with this approach to new 
entrants and claimed that this rule constitutes an added regulation and 
cost. The Department acknowledges that for the subset of firms that 
would not have been covered by Davis-Bacon prior to the implementation 
of this rule and who may enter Davis-Bacon covered contracting in 
future years, they may incur future rule familiarization costs. 
However, the Department does not have data to determine how many firms 
would be newly-covered in future years. Given these considerations, the 
Department believes it is appropriate to assume that new entrants in 
future years would not spend significantly more time reviewing this 
rule than they would the existing regulations.
---------------------------------------------------------------------------

    \308\ This includes the median base wage of $30.83 from the 2021 
OEWS plus benefits paid at a rate of 45 percent of the base wage, as 
estimated from the BLS's Employer Costs for Employee Compensation 
(ECEC) data, and overhead costs of 17 percent. OEWS data available 
at: http://www.bls.gov/oes/current/oes131141.htm.
---------------------------------------------------------------------------

    Average annualized regulatory familiarization costs over 10 years, 
using a 7 percent discount rate, are $4.9 million.
2. Implementation Costs for More Frequently Updated Rates
    Firms will incur costs associated with implementing updated 
prevailing wage rates. When preparing a bid on a DBRA-covered contract, 
the contractor must review the wage determination identified by the 
contracting agency as appropriate for the work and determine the wage 
rates applicable for each occupation or classification to perform work 
on the contract. Once that contract is signed, the specified prevailing 
wages generally remain in effect through the life of that 
contract.\309\ This section considers only the additional time 
necessary to update pay rates that change more frequently over time due 
to the provision to periodically adjust out-of-date prevailing wage and 
fringe rates. Implementation costs associated with other provisions, 
such as the provision to clarify and strengthen the scope of coverage 
under the DBRA, are discussed in section V.C.4.
---------------------------------------------------------------------------

    \309\ With the exception of certain significant changes; see 
section III.B.1.vi.(B).
---------------------------------------------------------------------------

    The periodic adjustment rule will generally affect the frequency 
with which prevailing wage rates are updated on wage determinations, 
through both the anticipated initial updates to old, outmoded rates, 
and moving forward, the periodic updates to certain rates that have not 
been published through the survey process for the past 3 or more years 
(see section V.D.). Affected firms may incur implementation costs if 
they need to update compensation rates in their payroll systems. 
Currently, only a fraction of non-collectively bargained prevailing 
wages can be expected to change each year. Firms may spend more time 
than they have in the past updating payroll systems to account for new 
prevailing wage rates that the firms must pay as a result of being 
awarded a DBRA contract that calls for such new rates. This change is 
because the Department will update older non-collectively bargained 
rates--as it currently does with collectively bargained prevailing 
rates--to better represent current wages and benefits being paid in the 
construction industry. In addition, moving forward, WHD expects to 
publish wage rates more frequently than in the past.
    To estimate the additional cost attributable updated non-
collectively bargained rates, it is necessary to estimate the number of 
firms with DBRA contracts that will need to pay updated rates, the 
subset of such firms that do not already pay updated prevailing wage 
rates regularly, and the additional time these firms will spend 
implementing the new wage and fringe benefit rates. To do so, the 
Department estimated the number of firms with DBRA contracts that 
already pay updated prevailing wage rates regularly and will not incur 
additional implementation costs attributable to the periodic update 
provision.
    First, the Department estimates that new wage rates are published 
from on average 7.8 wage surveys per year.\310\ These surveys may cover 
an entire State or a subset of counties, and multiple construction 
types or a single type of construction. For simplicity, the Department 
assumed that each survey impacts all contractors in the State, all 
construction types, and all classes of laborers and mechanics covered 
by DBRA. Under these assumptions, the Department assumed that each year 
15.6 percent of firms with DBRA contracts, roughly 23,900 firms (0.156 
x 152,900 firms), might already be affected by changes in prevailing 
wage rates in any given year and thus will not incur additional 
implementation costs attributable to the rule.\311\
---------------------------------------------------------------------------

    \310\ The Department used the number of surveys started between 
2002 (first year with data readily available) and 2019 (last year 
prior to COVID-19) to estimate that 7.8 surveys are started 
annually. This is a proxy for the number of surveys published on 
average in a year.
    \311\ The Department divided 7.8 surveys per year by 50 States 
to arrive at the 15.6 percent of firms assumption. The District of 
Columbia and the territories were excluded from the denominator 
because these tend to be surveyed less often (with the exception of 
Guam which is surveyed regularly due to Related Act funding).
---------------------------------------------------------------------------

    Additionally, there may be some firms that already update 
prevailing wage rates periodically to reflect CBA increases. These 
firms generally will not incur any additional implementation costs 
because of this rule. The Department lacks specific data on how many 
firms fall into this category but used information on the share of 
rates that are collectively bargained under the current method to help 
refine the estimate of firms with implementation costs. According to 
section V.D., 24 percent of rates are CBA rates under the current 
method, meaning 31,000 firms (0.24 x (152,900-23,900)) might already be 
affected by changes in prevailing wages in any given year. Combining 
this number with the 23,900 firms calculated above, 54,800 firms in 
total would not incur additional implementation costs with this rule.
    Therefore, 98,100 firms (152,900 firms-54,800 firms) are assumed to 
not update prevailing wage information in any given year, absent this 
rule, because prevailing wage rates were unchanged in their areas of 
operation and would therefore incur implementation costs. The 
Department intends to first update

[[Page 57706]]

certain outdated non-collectively bargained rates \312\ (currently 
designated as ``SU'' rates) up to their current value to better track 
wages and benefits being paid in the construction industry, as soon as 
reasonably possible. Then, in the future, the Department intends to 
update non-collectively bargained rates afterward as needed, and not 
more frequently than every 3 years. The Department assumes that 98,100 
firms may be expected to incur additional costs updating rates each 
year. The Department acknowledges that this estimate of firms may be an 
overestimate because this rule states that rates will be updated no 
more frequently than every 3 years. In each year, only a fraction of 
firms will have to update their prevailing wage rates, but the 
Department has included all firms in the estimate to not underestimate 
costs.
---------------------------------------------------------------------------

    \312\ The ``SU'' designation currently is used on general wage 
determinations when the prevailing wage is set through the weighted 
average method based on non-collectively bargained rates or a mix of 
collectively bargained rates and non-collectively bargained rates, 
or when a non-collectively bargained rate prevails.
---------------------------------------------------------------------------

    The Department estimated it will take a half hour on average for 
firms to adjust their wage rates each year for purposes of bidding on 
DBRA contracts. The Department believes that this average estimated 
time is appropriate because only a subset of firms will experience a 
change in costs associated with adjusting payroll systems. Firms that 
already pay above the new wage determination rates will not need to 
incur any implementation costs.
    Several commenters criticized the Department's implementation time 
estimate as too low. For example, ABC noted that according to their 
2022 survey of member contractors, the proposed rule would take more 
than 30 minutes to implement. ABC states that a more accurate 
implementation cost is more likely closer to 10-15 hours per impacted 
company but does not provide specifics as to how that estimate was 
derived. The Department clarifies here that the time estimate used in 
the implementation cost calculation is strictly for the marginal time 
to identify updated rates and insert those rates into the contractor's 
bid and/or payroll system. Costs associated with other provisions are 
discussed in section V.C.4. The Department also notes that the estimate 
of 30 minutes represents an average, because although some firms may 
spend more time adjusting payroll systems, firms that already pay above 
the new wage determination rates will not need to spend any time 
adjusting payroll.
    Implementation time will be incurred by human resource workers (or 
a similarly compensated employee) who will implement the changes. As 
with previous costs, these workers earn a loaded hourly wage of $49.94. 
Therefore, total Year 1 implementation costs were estimated to equal 
$2.4 million ($49.94 x 0.5 hour x 98,100 firms). The average annualized 
implementation cost over 10 years, using a 7 percent discount rate, is 
$2.4 million.

                                            Table 5--Summary of Costs
                                                 [2021 Dollars]
----------------------------------------------------------------------------------------------------------------
                                                                                                 Implementation
                                                                                 Regulatory      costs for more
                           Variable                             Total costs   familiarization      frequently
                                                                                   costs          updated rates
----------------------------------------------------------------------------------------------------------------
                                                  Year 1 Costs
----------------------------------------------------------------------------------------------------------------
Potentially affected firms...................................  ............            184,500            98,100
Hours per firm...............................................  ............                  4               0.5
Loaded wage rate \a\.........................................  ............             $49.94            $49.94
Cost ($1,000s)...............................................       $39,300            $36,900            $2,400
----------------------------------------------------------------------------------------------------------------
                                              Years 2-10 ($1,000s)
----------------------------------------------------------------------------------------------------------------
Annual cost..................................................        $2,400                 $0            $2,400
----------------------------------------------------------------------------------------------------------------
                                       Average Annualized Costs ($1,000s)
----------------------------------------------------------------------------------------------------------------
3% discount rate.............................................        $7,500             $5,100            $2,400
7% discount rate.............................................        $7,300             $4,900            $2,400
----------------------------------------------------------------------------------------------------------------
\a\ 2021 OEWS median wage for Compensation, Benefits, and Job Analysis Specialists (SOC 13-1141) of $30.83
  multiplied by 1.62: the ratio of loaded wage to unloaded wage from the 2021 ECEC (45 percent) plus 17 percent
  for overhead.

3. Construction Costs and Inflation
    Several commenters asserted that this rule will increase wages and 
construction costs, thereby increase government expenditures, and 
contribute to inflation. The Department believes both the impact on 
wages will be marginal, as demonstrated in the conceptual transfers 
analyses (see section V.D.) and the direct employer costs will be 
manageable. Additionally, the estimated 1.2 million potentially 
affected workers represent less than 1 percent of the total national 
workforce. Therefore, any impact on government budgets or inflation 
should be small. The III-FFC reviewed the relevant literature and 
reached the same conclusion. They assert that ``[t]he economic 
consensus is that prevailing wages have no impact on total construction 
costs.'' \313\ This conclusion is drawn based on ``19 studies on the 
impact of prevailing wages on the cost of school construction, highway 
construction, and municipal building projects that have been published 
in peer-reviewed academic journals since 2000.''
---------------------------------------------------------------------------

    \313\ Kevin Duncan & Russell Ormiston, ``What Does the Research 
Tell Us about Prevailing Wage Laws,'' 44 Lab. Stud. J., 139 (2018).
---------------------------------------------------------------------------

4. Other Provisions Not Analyzed
    The Department provides a qualitative discussion of other 
provisions of the rule in this section.
i. Adopting of State and Local Governments Prevailing Wage Rates
    Under the final rule, prevailing wage rates set by State and local 
governments may be adopted as Davis-Bacon

[[Page 57707]]

prevailing wage rates under specified conditions. Specifically, the 
Department proposes that the Administrator may adopt such a rate if the 
Administrator determines that: (1) the State or local government sets 
wage rates, and collects relevant data, using a survey or other process 
that is open to full participation by all interested parties; (2) the 
wage rate reflects both a basic hourly rate of pay as well as any 
prevailing fringe benefits, each of which can be calculated separately; 
(3) the State or local government classifies laborers and mechanics in 
a manner that is recognized within the field of construction; and (4) 
the State or local government's criteria for setting prevailing wage 
rates are substantially similar to those the Administrator uses in 
making wage determinations. These conditions are intended to provide 
WHD with the flexibility to adopt State and local rates where 
appropriate while also ensuring that adoption of such rates is 
consistent with the statutory requirements of the Davis-Bacon Act. 
These conditions are also intended to ensure that arbitrary 
distinctions are not created between jurisdictions where WHD makes wage 
determinations using its own surveys and jurisdictions where WHD adopts 
State or local prevailing wage rates.
    The Department does not currently possess sufficient data to 
conduct an analysis comparing all prevailing wage rates set by State 
and local governments nationwide to those established by the 
Department. However, by definition, any adopted State or local 
prevailing wage must be set using criteria that are substantially 
similar to those used by the Administrator, so the resulting wage rates 
are likely to be similar to those which would have been established by 
the Administrator. This change will also allow WHD to have more current 
rates in places where wage surveys are out-of-date, and to avoid WHD 
duplicating wage survey work that States and localities are already 
doing. The Department believes that this could result in cost savings, 
which are discussed further in section V.E.
ii. Combining Rural and Metropolitan County Data
    This final rule also eliminates the across-the-board restriction on 
combining rural and metropolitan county data to allow for a more 
flexible case-by-case approach to using such data. If sufficient data 
are not available to determine a prevailing wage in a county, the 
Department is permitted to use data from surrounding counties, 
regardless of whether those counties are designated as rural or 
metropolitan. While sufficient data for analyzing the impact of this 
provision are not available, the Department believes this provision 
will improve the quality and accuracy of wage determinations by 
including data from counties that likely share and reflect the same 
labor market conditions when appropriate.
iii. Publishing Prevailing Wages When Receiving Insufficient Data
    The provision to expressly authorize WHD to list classifications 
and corresponding wage and fringe benefit rates on wage determinations 
even when WHD has received insufficient data through its wage survey 
process is expected to ease the burden on contracting entities, both 
public and private, by improving the timeliness of information about 
conformed wage rates. For classifications for which conformance 
requests are regularly submitted, the Administrator would be authorized 
to list the classification on the wage determination along with wage 
and fringe benefit rates that bear a ``reasonable relationship'' to the 
wage and fringe benefit rates contained in the wage determination, in 
the same manner that such classifications and rates are currently 
conformed by WHD pursuant to current Sec.  5.5(a)(1)(ii)(A)(3). In 
other words, for a classification for which conformance requests are 
regularly submitted, WHD would be expressly authorized to essentially 
``pre-approve'' certain conformed classifications and wage rates, 
thereby providing contracting agencies, contractors, and workers with 
advance notice of the minimum wage and fringe benefits required to be 
paid for work within those classifications, reducing uncertainty and 
delays in determining wage rates for the classifications.
    For example, suppose the Department was not able to publish a 
prevailing wage rate for carpenters on a building wage determination 
for a county due to insufficient data. Currently, every contractor in 
that county working on a Davis-Bacon building project that needed a 
carpenter would have to submit a conformance request for each of their 
building projects in that county. Moreover, because conformances cannot 
be submitted until after contract award, those same contractors would 
have a certain degree of uncertainty in their bidding procedure, as 
they would not know the exact rate that they would have to pay to their 
carpenters. This proposal would eliminate that requirement for 
classifications where conformance requests are common. While the 
Department does not have information on how much administrative time 
and money is spent on these tasks, for the commonly requested 
classifications, this provision could make the process more streamlined 
and efficient for the contractors.
iv. Clarification of Existing Policies
    The final rule adds language in a few places to clarify existing 
policies. For example, the Department added language to the definitions 
of ``building or work'' and ``public building or public work'' to 
clarify that these definitions can be met even when the construction 
activity involves only a portion of an overall building, structure, or 
improvement. Also, the Department added or revised language regarding 
the ``material suppliers'' exemption, application of the ``site of the 
work'' principle to flaggers, when crew members are laborers or 
mechanics, and coverage requirements for truck drivers. Although, for 
the most part, this language is just a clarification of existing 
guidelines and not a change in policy, the Department understands that 
contracting agencies may have differed in their implementation of 
Davis-Bacon labor standards. In these cases, there may be firms that 
are newly applying Davis-Bacon labor standards because of the 
clarifications in this rule. This could result in additional rule 
familiarization, implementation, and administrative costs for these 
firms, and transfers to workers in the form of higher wages and 
benefits if the contractors are currently paying below the prevailing 
wage. Commenters asserted that these provisions would result in 
additional firms being covered and consequently incurring 
familiarization, implementation, and administration costs. The 
Department continues to believe that these provisions are generally 
clarifications rather than an expansion of scope and, therefore, has 
not estimated the number of potentially affected small businesses.
v. Modification of Site of the Work Definition To Include Certain 
Secondary Worksites
    In this final rule, the Department revises the definition of ``site 
of the work'' to further encompass certain construction of significant 
portions of a building or work at secondary worksites that are 
dedicated exclusively or nearly so to a project covered by the DBRA. 
Under this provision, some additional companies may be covered by the 
DBRA. Specifically, some firms that engage in construction at secondary 
worksites, such as modular construction firms, may potentially engage 
in work that was not previously covered by the DBRA regulations, but is 
now covered.

[[Page 57708]]

These firms could incur larger familiarization and implementation costs 
than currently covered firms (whose costs are discussed above). 
However, the Department does not have data to determine how many firms 
would be newly covered by DBRA requirements as a result of this 
provision and is unable to provide a quantitative estimate of these 
costs.
    Although some commenters asserted that the increased costs under 
this aspect of the proposed rule would be substantial, no commenters 
provided applicable data that the Department could use to quantify the 
costs. The Department does not anticipate that any increased costs 
associated with this aspect of the final rule will be substantial. 
Whereas the proposed rule would have revised Davis-Bacon coverage of 
off-site construction to include sites at which ``significant 
portions'' of covered buildings or works were constructed for specific 
use in a designated building or work, the final rule significantly 
limits the scope of this expansion to sites dedicated exclusively or 
nearly so to the covered contract or project. Thus, while the 
Department does not have data to determine how many firms and workers 
will be newly covered by DBRA requirements as a result of this 
provision, these significant limitations will ensure that any 
associated costs will similarly be extremely limited.\314\ Cf. 65 FR 
80277 (projecting that the prevailing wage implications associated with 
a similar expansion of coverage of off-site construction in the 2000 
final rule would not be substantial).
---------------------------------------------------------------------------

    \314\ A theoretical upper bound of newly-covered firms would 
likely be the 1,364 total firms in NAICS codes 321991, Manufactured 
Home (Mobile Home) Manufacturing, 321992, Prefabricated Wood 
Building Manufacturing, and 332311 Prefabricated Metal Building and 
Component Manufacturing. See U.S. Census Bureau, 2019 Survey of U.S. 
Businesses data, https://www2.census.gov/programs-surveys/susb/datasets/2019/us_state_naics_detailedsizes_2019.txt. However, as a 
result of the limits in the final rule, Davis-Bacon coverage will 
apply only when such firms (1) are working on DBRA-covered projects, 
(2) are constructing ``significant portions'' of such projects, as 
defined in the final rule, as opposed to prefabricated components, 
(3) are building such significant portions for specific use in a 
designated building or work, and (4) are doing so at a site either 
established for a particular covered contract or project or 
dedicated exclusively or nearly so to a single covered contract or 
project. While the Department does not have the data to estimate how 
many firms not already covered by the DBRA would meet all of these 
criteria, the Department believes that the number be small, 
particularly given the numerous comments from stakeholders 
indicating that modular construction facilities typically work on 
multiple projects at a time and therefore will not be covered under 
the final rule. See supra section III.B.3.ii.G.2.a.
---------------------------------------------------------------------------

    Commenters also noted other potential costs associated with this 
provision. The CHC stated this provision will ``limit the use of this 
technology which is currently facilitating construction of affordable 
housing developments in rural areas where labor is scarcer and costs 
can be higher.'' Several commenters asserted that this will increase 
the price of modular construction.
    The Department believes any potential cost increases related to 
this issue will be minimal and will not materially impact the use of 
modular construction technology. As explained above, based on the 
comments received, the Department believes that most modular 
construction facilities are engaged in more than one project at a time 
and therefore will not be considered ``sites of the work'' under this 
rule. Conversely, at secondary worksites that are dedicated exclusively 
or nearly so to a single DBRA-covered project for a period of time, 
application of the appropriate wage determination to workers at the 
site during that period of time should not be appreciably more 
difficult or burdensome than the application of a wage determination at 
such a site established specifically for contract performance, which is 
required under current regulations. Additionally, as noted above, the 
Department intends to work with contractors, agencies, and other 
stakeholders to resolve any questions associated with the application 
of wage determinations and classifications at secondary sites as early 
as possible. Finally, the Department notes that at least two state 
prevailing wage laws--Washington's and New Jersey's--cover custom 
components of public buildings or works to a greater degree than this 
final rule, and the Department is unaware of such laws having had 
significant detrimental impacts to modular construction in those 
states. See N.J.S.A. section 34:11-56.26(5), (12) (applying state 
prevailing wage requirements to components and structures ``pre-
fabricated to specifications for a particular project of public 
work''); Wash. Admin. Code section 296-127-010(7)(a)(vi) (applying 
prevailing wage regulations to ``[t]he fabrication and/or manufacture 
of nonstandard items produced by contract specifically for a public 
works project''). The revisions regarding offsite construction are 
significantly less expansive than those proposed in the NPRM. The final 
rule only expands coverage to sites dedicated exclusively or nearly so 
to a single covered contract or project, and therefore will not 
encompass offsite facilities engaged in modular construction for more 
than one project or area.
vi. Post-Award Determinations and Operation-of-Law
    This final rule also updates and codifies the procedures through 
which the Department enforces DBRA requirements when contract clauses 
and appropriate wage determinations are wrongly omitted from a 
contract. The final rule includes a provision that requires contract 
clauses and applicable wage determinations to be effective by operation 
of law in covered contracts, a requirement that will affect those cases 
in which the clauses and/or wage determinations have not been either 
properly included in a covered contract when awarded or otherwise 
retroactively incorporated at a later date by contract modification. 
These changes are intended to improve efficiency, reduce delays in 
investigations, and remedy enforcement challenges WHD has encountered 
under current regulations.
    The Department does not have sufficient data to estimate how many 
firms would be affected by this provision, because any calculation 
would require information on the number of contracts that do not 
already include contract clauses and appropriate wage determinations, 
and those that would not include these requirements in absence of this 
rule. However, the Department believes that any impacts associated with 
this rule change will be minimal, because the Department already 
interprets the post-award modification provision at 29 CFR 1.6(f) to 
require agencies to incorporate missing contract clauses and wage 
determinations with retroactive effect in appropriate circumstances, 
and the new operation-of-law provision will therefore affect only a 
limited subset of matters in which the current regulations would not 
have resulted in timely compliance.
    Some commenters expressed concerns that this provision would lead 
to increased costs, because firms would need to spend more time 
familiarizing themselves with the regulations in order to ensure that 
they are in compliance even if the contract clauses are not included in 
a contract. The Department notes that many such compliance costs are 
already borne by contractors as a best practice because under the 
current regulations contracts may be modified post-award to incorporate 
missing clauses retroactively--which has a similar effect as the 
operation-of-law provision. In addition, the Department's cost 
estimates already account for rule familiarization.
    To the extent that there are any workers who, in the absence of 
this final

[[Page 57709]]

rule, would not have received timely compensation required under the 
DBRA, this provision could lead to limited transfers to workers in the 
form of increased wages. Because the operation-of-law provision 
requires contractors to be compensated for any increases in wages that 
result from a determination of missing clauses or wage determinations, 
any transfers associated with the rule change would ultimately come 
from the government in the way of reimbursement to contractors. The 
Department has not estimated these limited transfers because there is 
not sufficient data on the prevalence of missing contract clauses or 
wage determinations, or the extent to which the inclusion of these 
items by operation-of-law would lead to increases in wages for contract 
workers.
vii. Other Provisions
    Some contracts call for construction, alteration, and/or repair 
work over a period of time that is not tied to the completion of any 
particular project. The requirement for the contracting agency to 
incorporate into the contract the most recent revision(s) of any 
applicable wage determination(s) on each anniversary date of the 
contract's award could result in some minimal increased burden for 
contracting agencies. The contracting officer would need to locate the 
wage determinations that are currently incorporated in the master 
contract and incorporate the applicable wage determinations into their 
task or purchase order. As noted in the preamble, however, in the 
Department's experience contracting agencies' procedures for updating 
wage determinations for these types of contracts vary widely. Some 
contracting agencies incorporate the most recent wage determination 
modification in effect at the time each task order is issued, a process 
that would generally take more time than merely flowing down wage 
determination modifications that have already been incorporated into 
the master contract, as those contracting officers must identify the 
correct wage determination modification on sam.gov before incorporating 
it for each of the multiple task orders issued each year. Other 
agencies are already updating these orders annually and incorporating 
the updated wage determination, while others do not update wage 
determinations at all for at least some of these contracts. The 
Department does not have data to determine how many additional 
contracts would have to be updated annually following this rule or how 
many contracts currently require wage determinations to be flowed down 
to or updated for each task order. As a result, the Department cannot 
determine the extent to which this revision would result in an 
increased or reduced administrative burden across agencies. However, 
the Department anticipates that to the extent that additional time 
would be needed to update these contracts and task orders, the total 
amount of time involved would not be significant.
    Other provisions are also likely to have no significant economic 
impact, such as the provision regarding the applicable apprenticeship 
ratios and wage rates when work is performed by apprentices in a 
different State than the State in which the apprenticeship program was 
originally registered. Recordkeeping revisions are also expected to 
have a negligible cost and to generate benefits from enhanced 
compliance, enforcement, and clarity for the regulated community that 
outweigh such costs. The Department expanded on this topic and 
addressed public comments in section III.B.3.iii.B.

D. Transfer Payments

    The Department conducted demonstrations to provide an indication of 
the possible transfers attributable to the provision revising the 
definition of ``prevailing wage,'' and the provision to update out-of-
date SU rates using the ECI. Both provisions may cause some prevailing 
wage rates to increase (relative to the existing method), while the 
former may cause other prevailing wage rates to decrease (relative to 
the existing method). However, due to many uncertainties in calculating 
a transfer estimate, the Department instead only presents this 
demonstration characterizing how wage and fringe rates may change.
1. The Return to the ``Three-Step'' Method for Determining the 
Prevailing Wage
i. Overview
    The revision to the definition of prevailing wage (i.e., the return 
to the ``three-step process'') may lead to income transfers to or from 
workers. Under the ``three-step process'' when a wage rate is not paid 
to a majority of workers in a particular classification, a wage rate 
will be considered prevailing if it is paid to at least 30 percent of 
such workers. Thus, fewer future wage determinations will be 
established based on a weighted average. The Department is not able to 
quantify the impact of this change because it will apply to surveys yet 
to be conducted, covering classifications and projects in locations not 
yet determined. Nonetheless, in an effort to illustrate the potential 
impact, the Department conducted a retrospective analysis that 
considers the impact of the 30-percent threshold had it been used to 
set the wage determinations for several occupations in recent years.
    Specifically, to demonstrate the impact of this provision, the 
Department compiled data for 7 key classifications from 19 surveys 
across 17 states from 2015 to 2018 (see Appendix A).\315\ This sample 
covers all four construction types, and includes metro and rural 
counties, and a variety of geographic regions. The seven select key 
classifications considered are as follows:
---------------------------------------------------------------------------

    \315\ Data were obtained from the Automated Survey Data System 
(ASDS), the data system used by the Department to compile and 
process WD-10 submissions. Out of the 21 surveys that occurred 
during this time period and met sufficiency standards, these 19 
surveys are all of the ones with usable data for this analysis; the 
other two had anomalies that could not be reconciled.
---------------------------------------------------------------------------

     Building and residential construction: Bricklayers, common 
laborers, plumbers, and roofers.
     Heavy and highway construction: Common laborers, cement 
masons, and electricians.
    In total, the sample is comprised of 3,097 county-classification 
observations. Because this sample only covers seven out of the many 
occupations covered by DBRA and all classification-county observations 
are weighted equally in the analysis, the Department believes the 
results need to be interpreted with care and cannot be extrapolated to 
definitively quantify the overall impact of the 30-percent threshold. 
Instead, these results should be viewed as an informative illustration 
of the potential direction and magnitude of transfers that will be 
attributed to this provision.
    The Department began its retrospective analysis by applying the 
current prevailing wage setting protocols (see Appendix B) to this 
sample of wage data to calculate the current prevailing wage and fringe 
benefit rates.\316\ The Department then applied the 30-percent 
threshold to the same sample of wage data.\317\ Then the Department 
compared the wage rates determined under the two methods. Results are 
reported at the county level

[[Page 57710]]

(i.e., one observation represents one classification in one county).
---------------------------------------------------------------------------

    \316\ The calculated current rates generally match the published 
wage and the fringe benefit rates within a few cents. However, there 
are a few instances that do not match, but the Department does not 
believe these differences bias the comparisons to the calculated 30 
percent prevailing definition.
    \317\ This model, while useful for this illustrative analysis, 
may not be relevant for future surveys. The methodology assumes that 
the level of participation by firms in WHD's wage survey process 
would be the same if the standard were 30 percent and is mostly 
reflective of states with lower union densities.
---------------------------------------------------------------------------

    The results differ depending on how heavily unionized the 
construction industry is in the states analyzed (and thus how many 
union rates are submitted in response to surveys). In Connecticut, for 
example, the Department found that estimated rates were little changed 
because the construction industry in Connecticut is highly unionized 
and union rates prevail under both the 30 percent and the 50 percent 
threshold. Conversely, in Florida, which is less unionized, there is 
more variation in how wage rates would change. For the rates that 
changed in Florida, calculated prevailing wage rates generally changed 
from an average rate (e.g., insufficient identical rates to determine a 
modal prevailing rate under the current protocol) to a non-collectively 
bargained modal prevailing rate. Depending on the classification and 
county, the prevailing hourly wage rate may have increased or decreased 
because of the change in methodology.
    Results may also differ by construction type. In particular, 
changes to highway prevailing wages may differ from changes in other 
construction types because they frequently rely on certified payroll. 
Thus, many of the wages used to calculate the prevailing wage reflect 
prevailing wages at the time of the survey.
ii. Results
    Tables 6 and 7 compare the share of counties with calculated wage 
determinations by ``publication rule'' (i.e., the rule under which the 
wage rate was or would be published): (1) an average rate, (2) a 
collectively bargained single (modal) prevailing rate, and (3) a non-
collectively bargained single (modal) prevailing rate. Fringe benefit 
rate results also include the number of counties where the majority of 
workers received zero fringe benefits. The tables also show the change 
in the number of rates in each publication rule category.
    For the surveys analyzed, the majority of current county wage rates 
were based on averages (1,954 / 3,097 = 63 percent), about 25 percent 
were a single (modal) prevailing collectively bargained rate, and 12 
percent were a modal prevailing non-collectively bargained rate. Using 
the 30 percent requirement for a modal prevailing rate, the number of 
county wage rates that would be based on averages decreased to 31 
percent (948 / 3,097). The percentage of rates that would be based on a 
modal wage rate increased for both non-collectively bargained and 
collectively bargained rates, although more wage rates would be based 
on non-collectively bargained rates than collectively bargained rates.
    For fringe benefit rates, fringe benefits do not prevail for a 
similar percent in both scenarios, (i.e., ``no fringes''): 50 percent 
of current rates, 48 percent of ``three-step process'' rates. The share 
determined as average rates decreased from 22 percent to 10 percent. 
The prevalence of modal prevailing fringe benefit rates increased for 
both non-collectively bargained and collectively bargained rates, with 
slightly more becoming collectively bargained rates than non-
collectively bargained rates.
    The total number of counties will differ by classification based on 
the State, applicable survey area (e.g., statewide, metro only), and 
whether the data submitted for the classification met sufficiency 
requirements.

                      Table 6--Prevalence of Calculated Prevailing Wages in Analyzed Subset, by Publication Rule, by Classification
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                      Cement
                                                                    Laborers   Plumbers   Roofers     Bricklayers     masons    Electricians     Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Count............................................................        949        504        545             379        360             360      3,097
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Current Hourly Rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average..........................................................        82%        57%        55%             42%        68%             53%        63%
Modal Prevailing--Union..........................................        12%        40%        23%             39%         4%             44%        25%
Modal Prevailing--Non-Union......................................         6%         3%        22%             19%        28%              4%        12%
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          ``Three-Step Process'' Hourly Rate a
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average..........................................................        47%        22%        26%             18%        40%             11%        31%
Modal Prevailing-Union...........................................        21%        46%        25%             45%         7%             80%        34%
Modal Prevailing-Non-Union.......................................        32%        31%        49%             37%        53%              9%        36%
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       Change for Hourly Rate (Percentage Points)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average..........................................................        -35        -35        -29             -23        -28             -42        -32
Modal Prevailing-Union...........................................          9          7          2               5          3              36          9
Modal Prevailing-Non-Union.......................................         26         28         27              18         25               5         23
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               Current Fringe Benefit Rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average..........................................................        23%        27%        12%             13%         9%             48%        22%
Modal Prevailing-Union...........................................        14%        41%        23%             39%         4%             44%        25%
Modal Prevailing-Non-Union.......................................         4%         5%         3%              2%         2%              0%         3%
No fringes.......................................................        59%        27%        62%             46%        85%              8%        50%
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                      ``Three-Step Process'' Fringe Benefit Rate a
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average..........................................................        13%        13%         9%              6%         5%             13%        10%
Modal Prevailing-Union...........................................        21%        47%        25%             46%         7%             80%        34%
Modal Prevailing-Non-Union.......................................         9%        13%         4%              2%         3%              7%         7%
No fringes.......................................................        57%        27%        62%             46%        85%              0%        48%
--------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 57711]]

 
                                                   Change for Fringe Benefit Rate (Percentage Points)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average..........................................................        -11        -14         -3              -7         -4             -35        -11
Modal Prevailing-Union...........................................          7          6          2               7          3              36          9
Modal Prevailing-Non-Union.......................................          6          8          1               0          1               7          4
No fringes.......................................................         -2          0          0               0          0              -8         -2
--------------------------------------------------------------------------------------------------------------------------------------------------------
a Using a threshold of 30 percent of employees' wage or fringe benefit rates being identical.


Table 7--Prevalence of Calculated Prevailing Wages in Analyzed Subset, by Publication Rule, By Construction Type
----------------------------------------------------------------------------------------------------------------
                                    Residential      Building          Heavy          Highway          Total
----------------------------------------------------------------------------------------------------------------
Count...........................             563           1,436             810             288           3,097
----------------------------------------------------------------------------------------------------------------
                                               Current Hourly Rate
----------------------------------------------------------------------------------------------------------------
Average.........................             423             769             573             189           1,954
Majority--Union.................              99             456             143              64             762
Majority--Non-Union.............              41             211              94              35             381
----------------------------------------------------------------------------------------------------------------
                                  Proposed ``Three-Step Process'' Hourly Rate a
----------------------------------------------------------------------------------------------------------------
Average.........................             197             313             331             107             948
Modal Prevailing--Union.........             118             570             257             104           1,049
Modal Prevailing--Non-Union.....             248             553             222              77           1,100
----------------------------------------------------------------------------------------------------------------
                                             Change for Hourly Rate
----------------------------------------------------------------------------------------------------------------
Average.........................            -226            -456            -242             -82           -1006
Modal Prevailing--Union.........              19             114             114              40             287
Modal Prevailing--Non-Union.....             207             342             128              42             719
----------------------------------------------------------------------------------------------------------------
                                           Current Fringe Benefit Rate
----------------------------------------------------------------------------------------------------------------
Average.........................              26             347             235              65             673
Modal Prevailing--Union.........              99             470             154              64             787
Modal Prevailing--Non-Union.....               0              76              19               1              96
No fringes......................             438             543             402             158           1,541
----------------------------------------------------------------------------------------------------------------
                              Proposed ``Three-Step Process'' Fringe Benefit Rate a
----------------------------------------------------------------------------------------------------------------
Average.........................               0             185             115              23             323
Modal Prevailing--Union.........             118             578             259             105           1,060
Modal Prevailing--Non-Union.....               7             150              51              14             222
No fringes......................             438             523             385             146           1,492
----------------------------------------------------------------------------------------------------------------
                                         Change for Fringe Benefit Rate
----------------------------------------------------------------------------------------------------------------
Average.........................             -26            -162            -120             -42            -350
Modal Prevailing-Union..........              19             108             105              41             273
Modal Prevailing--Non-Union.....               7              74              32              13             126
No fringes......................               0             -20             -17             -12             -49
----------------------------------------------------------------------------------------------------------------
a Using a threshold of 30 percent of employees' wage or fringe benefit rates being identical.

    Table 8 and Table 9 summarize the difference in calculated 
prevailing wage rates using the three-step process compared to the 
current process. Table 8 disaggregates results by craft and Table 9 
disaggregated results by construction type. The first row entitled 
``Total'' refers to the number of rates for the classification in the 
subset of surveys that the Department analyzed. The results show both 
average changes across all observations and average changes when 
limited to those classification-county observations where rates are 
different (about 32 percent of all observations in the sample). 
Notably, all classification-county observations are weighted equally in 
the calculations. On average:
     Across all observations, the average hourly rate increases 
by only one cent, or 0.1 percent of the average hourly wage rate. 
Across affected classification-counties only, the calculated hourly 
rate increases by 4 cents on average, or 0.2 percent of the average 
hourly wage rate. However, there is significant variation. The 
calculated hourly rate increased by as much as $7.80 and decreased by 
as much as $5.78.
     Across all observations, the average hourly fringe benefit 
rate increases by 19 cents, or 3.7 percent of the average

[[Page 57712]]

hourly fringe rate. Across affected classification-counties only, the 
calculated hourly fringe benefit rate increases by $1.42 on average, or 
26.8 percent of the average hourly fringe rate. As a percent of the 
average fringe rate, this percent change is large because many of these 
prevailing wage rates previously did not have prevailing fringes. The 
change ranges from -$6.17 to $11.16.
     Some crafts and construction types have larger changes 
than others. However, it should be noted that when considering only one 
craft or construction type, the results are based on smaller samples 
and consequently less precise.
    Based on this demonstration of the impact of changing from the 
current to the new definition of ``prevailing,'' some published wage 
rates and fringe benefit rates may increase and others may decrease. In 
the sample considered, wage rates changed very little on average, but 
fringe benefit rates increased on average. As discussed above, the 
Department believes that these results need to be interpreted with care 
and cannot be extrapolated to definitively quantify the overall impact 
of the 30-percent threshold. Instead, these results should be viewed as 
an informative illustration of the potential direction and magnitude of 
transfers that will be attributed to this provision.

                                     Table 8--Change in Rates Attributable to Change in Definition of ``Prevailing''
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                      Cement
                                                                    Laborers   Plumbers   Roofers     Bricklayers     masons    Electricians     Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                       Hourly Rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total............................................................        949        504        545             379        360             360      3,097
Number changed...................................................        330        175        160              89        101             150      1,005
    Increased....................................................        121        130         36              66         17             106        476
    Decreased....................................................        209         45        124              23         84              44        529
Percent changed..................................................        35%        35%        29%             23%        28%             42%        32%
    Increased....................................................        13%        26%         7%             17%         5%             29%        15%
    Decreased....................................................        22%         9%        23%              6%        23%             12%        17%
Average (non-zero)...............................................      $0.37      $1.10     -$1.06           $0.44     -$1.35           $0.94      $0.04
Average (all)....................................................      $0.13      $0.38     -$0.31           $0.10     -$0.38           $0.39      $0.01
Maximum..........................................................      $7.80      $7.07      $4.40           $1.02      $2.54           $4.14      $7.80
Minimum..........................................................     -$3.93     -$4.23     -$2.51          -$0.95     -$5.78          -$4.74     -$5.78
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Fringe Benefit Rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total............................................................        949        504        545             379        360             360      3,097
Number changed...................................................        137         69         17              26         14             184        447
    Increased....................................................        109         59          9              19         11             174        381
    Decreased....................................................         28         10          8               7          3              10         66
Percent changed..................................................        14%        14%         3%              7%         4%             51%        14%
    Increased....................................................        11%        12%         2%              5%         3%             48%        12%
    Decreased....................................................         3%         2%         1%              2%         1%              3%         2%
Average (non-zero)...............................................      $2.10      $2.14     -$1.67           $1.21      $0.74           $2.11      $1.42
Average (all)....................................................      $0.30      $0.29     -$0.05           $0.08      $0.03           $1.08      $0.19
Max..............................................................      $9.42     $11.16      $1.42           $2.19      $6.00           $4.61     $11.16
Min..............................................................     -$4.82     -$1.35     -$4.61          -$0.17     -$6.17          -$0.86     -$6.17
--------------------------------------------------------------------------------------------------------------------------------------------------------


      Table 9--Change in Rates Attributable to Change in Definition of ``Prevailing,'' by Construction Type
----------------------------------------------------------------------------------------------------------------
                                    Residential      Building          Heavy          Highway          Total
----------------------------------------------------------------------------------------------------------------
                                                   Hourly Rate
----------------------------------------------------------------------------------------------------------------
Total...........................             563           1,436             810             288           3,097
Number changed..................             226             455             242              82           1,005
    Increased...................             102             215             118              41             476
    Decreased...................             124             240             124              41             529
Percent changed.................             40%             32%             30%             28%             32%
    Increased...................             18%             15%             15%             14%             15%
    Decreased...................             22%             17%             15%             14%             17%
Average (non-zero)..............           $0.45           $0.04          -$0.09           $1.10           $0.04
Average (all)...................           $0.18           $0.01          -$0.03           $0.31           $0.01
Maximum.........................           $6.57           $7.07           $7.80           $4.14           $7.80
Minimum.........................          -$1.73          -$4.23          -$5.78          -$4.74          -$5.78
----------------------------------------------------------------------------------------------------------------
                                               Fringe Benefit Rate
----------------------------------------------------------------------------------------------------------------
Total...........................             563           1,436             810             288           3,097
Number changed..................              26             201             154              66             447
    Increased...................              26             163             139              53             381
    Decreased...................               0              38              15              13              66
Percent changed.................              5%             14%             19%             23%             14%
    Increased...................              5%             11%             17%             18%             12%
    Decreased...................              0%              3%              2%              5%              2%

[[Page 57713]]

 
Average (non-zero)..............           $6.89           $1.27           $1.34           $2.95           $1.42
Average (all)...................           $0.32           $0.18           $0.26           $0.68           $0.19
Max.............................           $9.42          $11.16           $4.61           $6.19          $11.16
Min.............................           $0.01          -$4.82          -$6.17          -$2.21          -$6.17
----------------------------------------------------------------------------------------------------------------

2. Adjusting Out-of-Date Prevailing Wage and Fringe Benefit Rates
    Updating older Davis-Bacon prevailing wage and fringe benefit rates 
will increase the minimum required hourly compensation paid to workers 
on Davis-Bacon projects. This would result in transfers of income to 
workers on Davis-Bacon projects who are currently being paid only the 
required minimum hourly rate and fringe benefits. To the extent that 
the Federal Government pays for increases to the prevailing wage 
through higher contract bids, an increase in the prevailing wage will 
transfer income from the Federal Government to the worker. This 
transfer will be reflected in increased costs paid by the Federal 
Government for construction.
    However, to estimate transfers, many assumptions need to be made. 
For example, the Department would need to determine if workers really 
are being paid the prevailing wage rate; some published rates are so 
outdated that it is highly likely effective labor market rates exceed 
the published rates, and the published prevailing wage rates are 
functionally irrelevant. In addition, the Department would need to 
predict which Davis-Bacon projects would occur each year, in which 
counties these projects will occur, and the number of hours of work 
required from each class of laborer and mechanic. Because of many 
uncertainties, the Department instead characterizes the number and size 
of the changes in published Davis-Bacon hourly rates and fringe 
benefits rather than formally estimating the income change to those 
potentially affected by the proposal to update rates.
    To provide an illustrative analysis, the Department used the entire 
set of wage and fringe benefit rates published on wage determinations 
as of May 2019 to demonstrate the potential changes in Davis-Bacon wage 
and fringe benefit rates resulting from updating certain out-of-date 
non-collectively bargained rates to 2021 values using the BLS ECI. For 
this demonstration, the Department considered the impact of updating 
rates for key classifications published prior to 2019 that were based 
on weighted averages, which comprises 172,112 wage and fringe benefit 
rates lines in 3,999 wage determinations.\318\ The Department has 
focused on wage and fringe benefit rates prior to 2019 because these 
are the universe of key classification rates that are likely to be more 
than 3 years old at the time of this final rule, and the rule calls for 
updating non-collectively-bargained wage rates that are 3 or more years 
old.
---------------------------------------------------------------------------

    \318\ In each type of construction covered by the DBRA, some 
classifications are called ``key'' because most projects require 
these workers. Building construction has 16 key classifications, 
residential construction has 12 key classifications and heavy and 
highway construction each have the same eight key classifications. A 
line reflects a key classification by construction type in a 
specific geographic area. For example, a line could reflect a 
plumber in building construction in Fulton County, GA.
---------------------------------------------------------------------------

    After dropping hourly wages greater than $100 and wage rates that 
were less than $7.25 when originally published but were updated to the 
minimum wage of $7.25 in 2009, 159,562 wage rates were updated for this 
analysis.\319\ To update these wage rates, the Department used the BLS 
ECI, which measures the change over time in the cost of labor total 
compensation.\320\ The Department believes that the ECI for private 
industry workers, total compensation, ``construction, and extraction, 
farming, fishing, and forestry'' occupations, not seasonally adjusted, 
is the most appropriate index. However, the index for this group is 
only available starting in 2001. Thus, for updating wages and fringe 
benefits from 1979 through 2000, the Department determined the ECI for 
private industry workers, total compensation, in the goods-producing 
industries was the most appropriate series to use that was available 
back to 1979.\321\
---------------------------------------------------------------------------

    \319\ The 54 wage rates greater than $100 were day or shift 
rates. The remaining 12,496 rates excluded were less than $7.25 
prior to July 24, 2009, but were published from surveys conducted 
before the establishment of the Department's ASDS in 2002. The 
Department no longer has records of the original published wage 
rates in these cases.
    \320\ Available at: https://www.bls.gov/ect/.
    \321\ Continuous Occupational and Industry Series, Table 5. 
https://www.bls.gov/web/eci/eci-continuous-dollar.txt.
---------------------------------------------------------------------------

    To consider potential transfers to workers due to changes in wages, 
the full increase in the hourly rate would only occur if workers on 
DBRA projects are currently paid the exact prevailing rates.\322\ 
However, due to market conditions in some areas, workers already may be 
receiving more than the published rate. While completely comparable 
data on wages paid to workers on DBRA projects in specific 
classifications and counties are not readily available and usable for 
this analysis, the BLS OEWS data provide a general estimate of wages 
paid to certain categories of workers performing construction and 
construction-related duties. Although the OEWS data can be informative 
for this illustrative analysis, it is not a representative data set of 
professional construction workers performing work on DBRA projects and 
it does not include benefits.
---------------------------------------------------------------------------

    \322\ The hourly wage rate increase would only occur when the 
next contract goes into effect and a new wage determination with an 
updated wage rate is incorporated into the contract.
---------------------------------------------------------------------------

    To provide an example of transfers, the Department compared the 
ECI-updated Davis-Bacon wage rates to the applicable median hourly rate 
in the OEWS data.\323\ To estimate the approximate median 2021 wage 
rates, the Department used the median hourly wage rate for each key 
classification in the construction industry in the May 2021 State OEWS 
data. Using the OEWS as a general measure of the market conditions for 
construction worker wages in a given State, the Department assumed that 
an updated Davis-Bacon wage rate below the median OEWS rates would 
likely not lead to sizable income transfers to construction workers 
because most workers are likely already paid more than the updated 
Davis-Bacon rate. After removing the 99,337 updated Davis-Bacon wage 
rates that were less than the corresponding OEWS median rates, there 
remained 60,225 updated Davis-Bacon wage rates that may result in 
transfers to workers. However, the Department notes that some of the 
updated Davis-Bacon rates may be lower than the median because they are 
a wage rate for a rural county, and the OEWS data represents the 
statewide median.
---------------------------------------------------------------------------

    \323\ The Department used OEWS data for certain occupations 
matching key classifications in the construction industry by State.

---------------------------------------------------------------------------

[[Page 57714]]

    Further investigating the ECI-updated Davis-Bacon wage rates in 
this example that were substantially above the OEWS median wage rate, 
the Department found that 23,200 of the originally published Davis-
Bacon wage rates were already higher than the OEWS median. For at least 
some of these wage rates, the comparison to the OEWS median may not be 
appropriate because such Davis-Bacon wage rates are for work in 
specialty construction. For example, most of the prevailing wage rates 
published specifically for a 2014 wage determination for Iowa Heavy 
Construction River Work exceed the 2021 OEWS median rates for the same 
classifications in Iowa.\324\ This may be an indication that comparing 
Davis-Bacon rates for this type of construction to a more general 
measure of wages may not be appropriate because workers are generally 
paid more for this type of specialty construction than for other types 
of construction work measured by the OEWS data.
---------------------------------------------------------------------------

    \324\ WD IA20190002.
---------------------------------------------------------------------------

    Therefore, to measure possible transfers per hour to workers on 
Davis-Bacon projects due to the periodic updating of certain non-
collectively bargained wage rates, the Department began by taking the 
lesser of:
     The difference between the updated wage rate and the OEWS 
median wage rate.
     The difference between the updated and currently published 
wage rates.
    The second difference accounts for the 23,200 Davis-Bacon wage 
rates that were higher than the 2021 OEWS median rate even before they 
were updated, because otherwise the Department would overestimate the 
potential hourly wage transfer.
    The Department also examined an additional adjustment for DBA wage 
rates because they are also subject to Executive Order 13658: 
Establishing a Minimum Wage for Contractors, which sets the minimum 
wage paid to workers on Federal contracts at $11.25 in 2022.\325\ Thus, 
the Department analyzed an additional restriction that the maximum 
possible hourly transfer to workers on Davis-Bacon projects cannot 
exceed the difference between the updated wage rate and $11.25.
---------------------------------------------------------------------------

    \325\ The Department also ran an analysis using the minimum wage 
of $15.00 as proposed by Executive Order 14026, ``Increasing the 
Minimum Wage for Federal Contractors.'' The results were similar.
---------------------------------------------------------------------------

    However, the added restriction has no impact on estimated transfers 
because any updated wage rates that were less than $11.25 were also 
less than the OEWS median wage rate. Thus, the potential possible 
hourly transfers attributable to updated Davis-Bacon wage rates are 
identical for construction projects covered by the Davis-Bacon Act and 
by the Related Acts.
    Table 10 provides the summary statistics of the per hour transfers 
to workers that may occur due to updating out-of-date non-collectively 
bargained Davis-Bacon wage rates. Among the wage rates considered in 
this demonstration, there are 60,225 wage rate updates that may result 
in transfers to workers. On average, the potential hourly transfer is 
$4.11.

                   Table 10--Distribution of Potential per Hour Transfers Due to Updated Rates
----------------------------------------------------------------------------------------------------------------
                                                     Number of                                       Standard
                                                       rates           Mean           Median         deviation
----------------------------------------------------------------------------------------------------------------
Wage rates......................................          60,225           $4.11           $3.29           $3.93
Fringe benefits.................................          75,480            1.50            1.06            1.62
Total compensation..............................          94,050            3.83            2.32            4.70
----------------------------------------------------------------------------------------------------------------

    Of the 172,112 pre-2019 non-collectively bargained key 
classification fringe benefit rates, 75,480 were non-zero, and thus 
would be updated, possibly resulting in some transfers to workers 
(Table 10). On average, these non-zero fringe benefits would increase 
by $1.50 per hour.
    Adding the required Davis-Bacon wage and fringe benefit rates 
together measures the required total compensation rate on DBRA 
projects. Due to updating old rates, 94,050 Davis-Bacon total 
compensation hourly rates would increase by $3.83 on average.\326\
---------------------------------------------------------------------------

    \326\ The average increase in total compensation is less than 
the average wage increase because more wage and fringe benefit lines 
are included for total compensation.
---------------------------------------------------------------------------

    The two demonstrations provide an indication of the possible 
changes to Davis-Bacon wage rates and fringe benefit rates attributable 
to the proposed provision revising the definition of ``prevailing,'' 
and the provision to update out-of-date SU rates using the ECI (only 
one of which would affect a location-occupation pair at a particular 
time). Both provisions may lead to higher hourly payments, while the 
former also has the potential to lead to lower hourly payments.
    Because accurate data to measure the current county-level labor 
conditions for specific construction classifications are not available, 
it is unclear if an increase or decrease in Davis-Bacon minimum 
required rates will impact what workers earn on DBRA projects. 
Furthermore, even if some of these rate changes do lead to different 
rates paid to workers on DBRA projects, data are not available to 
estimate how large transfers might be. To do so would require detailed 
information on what federally funded construction contracts will be 
issued, the types of projects funded, where the projects will occur 
(specific county or counties), the value of the projects, and the labor 
mix needed to complete the project.

E. Cost Savings

    This final rule could lead to cost savings for both contractors and 
the Federal Government because the rule would reduce ambiguity and 
increase efficiency, which could reduce the amount of time necessary to 
comply with the rule. For example, as discussed in section V.C.4, 
expressly authorizing WHD to list classifications and corresponding 
wage and fringe benefit rates on wage determinations when WHD has 
received insufficient data through its wage survey process will 
increase certainty and reduce administrative burden for contracting 
entities. It would reduce the number of conformance requests needed, 
which could save time for the contractors, contracting agencies, and 
the Department. Additionally, permitting the Administrator to adopt 
prevailing wage rates set by State and local governments could result 
in cost savings for the Department, because it avoids WHD duplicating 
wage survey work that states and localities are already doing. It could 
also result in cost savings in the form of time savings for 
contractors, as they will only have one wage determination that they 
will have to reference.

[[Page 57715]]

    Additionally, the Department is providing clarifications throughout 
the rule, which will make clear which contract workers are covered by 
DBRA. For example, the Department is clarifying provisions related to 
the site of work, demolition and removal workers, and truck drivers and 
their assistants, among others. These clarifications will make it clear 
to both contractors and contract workers who is covered, and therefore 
could help reduce legal disputes between the two, resulting in cost 
savings.
    Because the Department does not have information on how much 
additional time contractors and the Federal Government currently spend 
complying with this rule due to lack of clarity, these cost savings are 
discussed qualitatively.

F. Benefits

    Among the multiple provisions discussed above, the Department 
recognizes that the provision to update the definition of prevailing 
wage using the ``30 percent rule'' could have various impacts on wage 
rates. The effect of this proposal on actual wages paid is uncertain 
for the reasons discussed in section V.D.1. However, the Department's 
proposal to update out-of-date wage rates using the ECI would result in 
higher prevailing wage rates due to the increases in employer costs 
over time. Any DBRA-covered workers that were not already being paid 
above these higher wage rates would receive a raise when these updated 
rates were implemented. These higher wages could lead to benefits such 
as improved government services, increased productivity, and reduced 
turnover, which are all discussed here qualitatively. The magnitude of 
these wage increases could influence the magnitude of these benefits.
    The Department notes that the literature cited in this section 
sometimes does not directly consider changes in the DBRA prevailing 
wages. Additionally, much of the literature is based on voluntary 
changes made by firms. However, the Department has presented the 
information here because the general findings may still be applicable 
in this context.
1. Improved Government Services
    For workers who are paid higher wage rates as a result of this 
rulemaking, the Department expects that the quality of construction 
could improve. Higher wages can be associated with a higher number of 
bidders for Government contracts, which can be expected to generate 
greater competition and an improved pool of contractors. Multiple 
studies have shown that the bidding for municipal contracts remained 
competitive or even improved when living wage ordinances were 
implemented (Thompson and Chapman, 2006).\327\ In a study on the impact 
of bid competition on final outcomes of State department of 
transportation construction projects, Delaney (2018) demonstrated that 
each additional bidder reduces final project cost overruns by 2.2 
percent and increases the likelihood of achieving a high-quality bid by 
4.9 times.\328\
---------------------------------------------------------------------------

    \327\ Thompson, J. and J. Chapman. (2006). ``The Economic Impact 
of Local Living Wages,'' EPI, Briefing Paper #170, 2006.
    \328\ Delaney, J. (2018). ``The Effect of Competition on Bid 
Quality and Final Results on State DOT Projects.'' https://www.proquest.com/openview/33655a0e4c7b8a6d25d30775d350b8ad/1?pq-origsite=gscholar&cbl=18750.
---------------------------------------------------------------------------

    A comment submitted by two individuals agreed with the Department's 
assertion that the number of bidders would not decrease. They pointed 
to a paper that found no difference in the number of bidders on 
federally funded projects and state-funded projects.\329\ Conversely, 
the NAHB asserted that DBRA requirements can be a deterrent to small 
businesses considering bidding and that this rule could further 
discourage these contractors from participating. The Department 
believes this final rule clarifies the requirements and thus would not 
deter small businesses from participating.
---------------------------------------------------------------------------

    \329\ Duncan, K. (2015). ``The Effect of Federal Davis-Bacon and 
Disadvantaged Business Enterprise Regulations on Highway Maintenance 
Costs.'' ILR Review, 68(1), pp. 212-237. https://doi.org/10.1177/0019793914546304.
---------------------------------------------------------------------------

2. Increased Productivity
    For workers whose wages increase as a result of the Department's 
provision to update out-of-date wage rates, these increases could 
result in increased productivity. Increased productivity could occur 
through numerous channels, such as employee morale, level of effort, 
and reduced absenteeism. A strand of economic research, commonly 
referred to as ``efficiency wage'' theory, considers how an increase in 
compensation may be met with greater productivity.\330\ Efficiency 
wages may elicit greater effort on the part of workers, making them 
more effective on the job.\331\ A comment submitted by two individuals 
affirmed the likely relationship between this final rule and increased 
productivity.
---------------------------------------------------------------------------

    \330\ Akerlof, G.A. (1982). ``Labor Contracts as Partial Gift 
Exchange.'' The Quarterly Journal of Economics, 97(4), 543-569.
    \331\ Another model of efficiency wages, which is less 
applicable here, is the adverse selection model in which higher 
wages raise the quality of the pool of applicants.
---------------------------------------------------------------------------

    Allen (1984) estimates the ratio of the marginal product of union 
and non-union labor.\332\ He finds that union workers are 17 to 22 
percent more productive than non-union members. Although it is unclear 
whether this entire productivity difference is attributable to higher 
wages, it is likely a large contributing factor. The Construction Labor 
Research Council (2004) compared the costs to build a mile of highway 
in higher wage and lower wage states using data reported to the FHWA 
from 1994 to 2002.\333\ They found that in higher wage states, 32 
percent fewer labor hours are needed to complete a mile of highway than 
in lower wage states, despite hourly wage rates being 69 percent higher 
in those states. While this increased worker productivity could be due 
in part to other factors such as greater worker experience or more 
investment in capital equipment in higher wage states, the higher wages 
likely contribute.
---------------------------------------------------------------------------

    \332\ Allen, S.G. (1984). ``Unionized Construction Workers are 
More Productive.'' The Quarterly Journal of Economics, 251-174.
    \333\ The Construction Labor Research Council (2004). ``The 
Impact of Wages on Highway Construction Costs.'' http://niabuild.org/WageStudybooklet.pdf.
---------------------------------------------------------------------------

    Conversely, Vedder (1999) compared output per worker across states 
with and without prevailing wage laws.\334\ Data on construction 
workers is from the Department of Labor and data on construction 
contracts is from the Department of Commerce. A worker in a prevailing 
wage law State produced $63,116 of value in 1997 while a worker from a 
non-prevailing wage law State produced $65,754. Based on this simple 
comparison, workers are more productive without prevailing wage laws. 
However, this is a somewhat basic comparison in that it does not 
control for other differences between states that may influence 
productivity (for example, the amount of capital used or other State 
regulations) and it is unclear whether this difference is statistically 
significant.
---------------------------------------------------------------------------

    \334\ Vedder, R. (1999). ``Michigan's Prevailing Wage Law and 
Its Effects on Government Spending and Construction Employment. 
Midland, Michigan: Mackinac Center for Public Policy,'' https://www.mackinac.org/archives/1999/s1999-07.pdf.
---------------------------------------------------------------------------

    Studies on absenteeism have demonstrated that there is a negative 
effect on firm productivity as absentee rates increase.\335\ Zhang et 
al., in their study of linked employer-employee data in Canada, found 
that a 1 percent

[[Page 57716]]

decline in the attendance rate reduces productivity by 0.44 
percent.\336\ Allen (1983) similarly noted that a 10-percentage point 
increase in absenteeism corresponds to a decrease of 1.6 percent in 
productivity.\337\ Hanna et al. (2005) find that while absenteeism 
rates of between 0 and 5 percent among contractors on electrical 
construction projects lead to no loss of productivity, absenteeism 
rates of between 6 and 10 percent can spark a 24.4 percent drop in 
productivity.\338\
---------------------------------------------------------------------------

    \335\ Allen, S.G. (1983). ``How Much Does Absenteeism Cost?,'' 
Journal of Human Resources, 18(3), 379-393. https://www.jstor.org/stable/145207?seq=1.
    \336\ Zhang, W., Sun, H., Woodcock, S., & Anis, A. (2013). 
``Valuing Productivity Loss Due to Absenteeism: Firm-level Evidence 
from a Canadian Linked Employer-Employee Data.'' Health Economics 
Review, 7(3). https://healtheconomicsreview.biomedcentral.com/articles/10.1186/s13561-016-0138-y.
    \337\ Allen, S.G. (1983). ``How Much Does Absenteeism Cost?,'' 
Journal of Human Resources, 18(3), 379-393. https://www.jstor.org/stable/145207?seq=1.
    \338\ Hanna, A., Menches, C., Sullivan, K., & Sargent, J. (2005) 
``Factors Affecting Absenteeism in Electrical Construction.'' 
Journal of Construction Engineering and Management 131(11). https://ascelibrary.org/doi/abs/10.1061/(ASCE)0733-9364(2005)131:11(1212).
---------------------------------------------------------------------------

    Fairris et al. (2005) demonstrated that as a worker's wage 
increases there is a reduction in unscheduled absenteeism.\339\ They 
attribute this effect to workers standing to lose more if forced to 
look for new employment and an increase in pay paralleling an increase 
in access to paid time off. Pfeifer's (2010) study of German companies 
provides similar results, indicating a reduction in absenteeism if 
workers experience an overall increase in pay.\340\ Conversely, Dionne 
and Dostie (2007) attribute a decrease in absenteeism to mechanisms 
other than an increase in worker pay, specifically scheduling that 
provides both the option to work-at-home and for fewer compressed work 
weeks.\341\ However, the relevance of such policies in the context of 
construction is unclear. The Department believes both the connection 
between prevailing wages and absenteeism, and the connection between 
absenteeism and productivity are well enough established that this is a 
feasible benefit of this final rule.
---------------------------------------------------------------------------

    \339\ Fairris, D., Runstein, D., Briones, C., & Goodheart, J. 
(2005). ``Examining the Evidence: The Impact of the Los Angeles 
Living Wage Ordinance on Workers and Businesses.'' LAANE. https://laane.org/downloads/Examinig_the_Evidence.pdf.
    \340\ Pfeifer, C. (2010). ``Impact of Wages and Job Levels on 
Worker Absenteeism.'' International Journal of Manpower 31(1), 59-
72. https://doi.org/10.1108/01437721011031694.
    \341\ Dionne, G., & Dostie, B. (2007). ``New Evidence on the 
Determinants of Absenteeism Using Linked Employer-Employee Data.'' 
Industrial and Labor Relations Review 61(1), 108-120. https://journals.sagepub.com/doi/abs/10.1177/001979390706100106.
---------------------------------------------------------------------------

3. Reduced Turnover
    Little evidence is available on the impact of prevailing wage laws 
and turnover, but an increase in the minimum wage has been shown to 
decrease both turnover rates and the rate of worker separation (Dube, 
Lester and Reich, 2011; Liu, Hyclak and Regmi, 2015; Jardim et al., 
2018).\342\ This decrease in turnover and worker separation can lead to 
an increase in the profits of firms, as the hiring process can be both 
expensive and time consuming. A review of 27 case studies found that 
the median cost of replacing an employee was 21 percent of the 
employee's annual salary.\343\ Fairris et al. (2005) \344\ found the 
cost reduction due to lower turnover rates ranges from $137 to $638 for 
each worker.
---------------------------------------------------------------------------

    \342\ Dube, A., Lester, T.W., & Reich, M. (2011). ``Do Frictions 
Matter in the Labor Market? Accessions, Separations, and Minimum 
Wage Effects.'' (Discussion Paper No. 5811). IZA. https://www.iza.org/publications/dp/5811/do-frictions-matter-in-the-labor-market-accessions-separations-and-minimum-wage-effects.
    Liu, S., Hyclak, T.J., & Regmi, K. (2015). ``Impact of the 
Minimum Wage on Youth Labor Markets.'' Labour 29(4). https://doi.org/10.1111/labr.12071.
    Jardim, E., Long, M.C., Plotnick, R., van Inwegen, E., Vigdor, 
J., & Wething, H. (Oct. 2018). ``Minimum Wage Increases and 
Individual Employment Trajectories'' (Working paper No. 25182). 
NBER. https://doi.org/10.3386/w25182.
    \343\ Boushey, H. and Glynn, S. (2012). ``There are Significant 
Business Costs to Replacing Employees. Center for American 
Progress.'' Available at: http://www.americanprogress.org/wp-content/uploads/2012/11/CostofTurnover.pdf.
    \344\ Fairris, D., Runstein, D., Briones, C., & Goodheart, J. 
(2005). ``Examining the Evidence: The Impact of the Los Angeles 
Living Wage Ordinance on Workers and Businesses.'' LAANE. https://laane.org/downloads/Examinig_the_Evidence.pdf.
---------------------------------------------------------------------------

    Although the impacts cited here are not limited to government 
construction contracting, because data specific to government 
contracting and turnover are not available, the Department believes 
that a reduction in turnover could be observed among those workers on 
DBRA contracts whose wages increase following this final rule. The 
potential reduction in turnover is a function of several variables: the 
current wage, the change in the wage rate, hours worked on covered 
contracts, and the turnover rate. Therefore, the Department has not 
quantified the impacts of potential reduction in turnover.
4. Additional Benefits
    A comment submitted by two individuals mentioned several other 
potential benefits. First, they noted that research has shown a 
positive correlation between state prevailing wage laws and 
apprenticeship enrollment. Second, they pointed to literature 
demonstrating that states with prevailing wage laws have lower injury 
and disability rates. Depending on the channel through which these 
correlations occur, this final rule could result in more 
apprenticeships and reduced workplace injuries, disabilities and 
fatalities. The extent to which these impacts occur would likely depend 
on the extent of coverage expansion and wage rate changes.

VI. Final Regulatory Flexibility Act (FRFA) Analysis

    The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601 et seq., 
as amended by the Small Business Regulatory Enforcement Fairness Act of 
1996, Public Law 104-121 (Mar. 29, 1996), requires Federal agencies 
engaged in rulemaking to consider the impact of their proposals on 
small entities, consider alternatives to minimize that impact, and 
solicit public comment on their analyses. The RFA requires the 
assessment of the impact of a regulation on a wide range of small 
entities, including small businesses, not-for profit organizations, and 
small governmental jurisdictions. Agencies must perform a review to 
determine whether a proposed or final rule would have a significant 
economic impact on a substantial number of small entities. 5 U.S.C. 
603, 604.
    Response to comments from small businesses and SBA's Office of 
Advocacy are incorporated throughout the FRFA where applicable.

A. Need for Rulemaking and Objectives of the Final Rule

    In order to provide greater clarity and enhance their usefulness in 
the modern economy, this final rule updates and modernizes the 
regulations at 29 CFR parts 1, 3, and 5, which implement the DBRA. The 
Department has not undertaken a comprehensive revision of the DBRA 
regulations since 1982. Since that time, Congress has expanded the 
reach of the DBRA regulations significantly, adding numerous new 
Related Act statutes to which they apply. The DBA and now more than 70 
active Related Acts collectively apply to an estimated tens of billions 
of dollars in Federal and federally assisted construction spending per 
year and provide minimum wage rates for hundreds of thousands of U.S. 
construction workers. The Department expects these numbers to continue 
to grow as Congress seeks to address the significant infrastructure 
needs in the country, including, in particular, energy and 
transportation infrastructure necessary to address climate change. 
These regulations will provide additional clarity that will be helpful 
given the increased number of

[[Page 57717]]

construction projects subject to Davis-Bacon labor standards 
requirements, due to the substantial increases in federally funded 
construction provided for in legislation such as the IIJA.
    Additionally, the Federal contracting system itself has undergone 
significant changes since 1982. Federal agencies have increased 
spending through the use of interagency Federal schedules. Contractors 
have increased their use of single-purpose entities such as joint 
ventures and teaming agreements. Offsite construction of significant 
components of public buildings and works has also increased. The 
regulations need to be updated to ensure their continued effectiveness 
in the face of changes such as these.
    In this final rule, the Department seeks to address a number of 
outstanding challenges in the program while also providing greater 
clarity in the DBRA regulations and enhancing their usefulness in the 
modern economy. Specifically, the Department returns to the definition 
of ``prevailing wage'' that was used from 1935 to 1983 to address the 
overuse of average rates and ensure that prevailing wages reflect 
actual wages paid to workers in the local community. The Department 
will also periodically update non-collectively bargained prevailing 
wage rates to address out-of-date wage rates. The final rule will allow 
WHD to adopt State or local wage determinations as the Federal 
prevailing wage where certain specified criteria are satisfied, to 
issue supplemental rates for key classifications where there is 
insufficient survey data, to modernize the scope of work to include 
energy infrastructure and the site of work to include certain secondary 
worksites, to ensure that DBRA requirements protect workers by 
operation of law, and to strengthen enforcement, including through 
debarment and anti-retaliation protections. See section III.B. for a 
full discussion of the Department's changes to these regulations.

B. Significant Issues Raised by Public Comment, Including Those Filed 
by the Chief Counsel for Advocacy of the Small Business Administration

    SBA Advocacy commented that DOL's Initial Regulatory Flexibility 
Analysis did not properly inform the public about the impact of this 
rule on small entities. They asserted that DOL should have estimated 
the compliance costs of expanding DBRA coverage to new industries and 
state that the proposed rule expands coverage to prefabrication 
companies, material suppliers, and truck drivers, professional 
surveyors, and additional small businesses.
    As explained above, neither the proposed nor the final rule 
expanded coverage to prefabrication companies, which remain generally 
outside the scope of the DBRA. While the proposed rule would have 
broadened coverage to include secondary construction sites at which 
``significant portions'' of buildings or works (as opposed to 
prefabricated components) are constructed, the final rule limits such 
coverage to facilities dedicated exclusively or nearly so to a 
particular covered contract or project. While the Department cannot 
estimate the precise number of small entities that will be impacted by 
this change, as explained above in Section V.C.4.v, the Department 
expects that number to be small since, based on the comments received, 
most modular construction companies' facilities are engaged in more 
than one project at a time and therefore will be outside the scope of 
the ``site of the work'' under the final rule. Additionally, as 
explained above, the final rule does not expand coverage to material 
suppliers or truck drivers but rather codifies existing policy with 
minor changes. Likewise, the preamble's guidance on coverage of survey 
crews is consistent with the Department's current interpretation and 
emphasizes that coverage of survey crews is highly fact-dependent. As 
such, the Department does not anticipate that it will substantially 
broaden coverage to entities not previously covered.
    Small business commenters also noted that DOL underestimated rule 
familiarization costs. As discussed further in Section V.C.1, the 
Department reconsidered the time it would take for the regulated 
community to read this Final Rule and has increased the time estimate 
to an average of 4 hours. The Department believes that this average 
estimate is appropriate, because while some firms will spend more time 
reading the rule, other firms in our estimate will not bid on a DBA 
contract and will spend zero time reading the rule.
    They also claimed that the changes to the methodology for 
calculating prevailing wages will increase wages for covered Federal 
contractors, which will add costs for covered contractors. As explained 
in Section V.D., the Department does not have data on the current wages 
of DBRA-covered workers, so it is not possible to definitively 
calculate how wages will change following this proposed rule. Although 
the Department performed an illustrative analysis of example changes in 
wage rates, without data on actual wages paid this analysis cannot be 
used to estimate the total impact of this rule on wages. Furthermore, 
if businesses do see a significant increase in the wage that they must 
pay for a classification of worker because of an increase prevailing 
wage rate for that classification (beyond the rate the business is 
already paying its workers in that classification), the business will 
be able to account for this cost by incorporating the increased cost 
into their bid or price negotiation and will be in effect reimbursed by 
the Federal government.
    Overall, the Department believes that the data analysis it has 
provided is sufficient given the lack of available data on covered 
workers.

C. Estimating the Number of Small Businesses Affected by the Rulemaking

    As discussed in section V.B., the Department identified a range of 
firms potentially affected by this rulemaking. This includes both firms 
impacted by the Davis-Bacon Act and firms impacted by the Related Acts. 
The more narrowly defined population includes firms actively holding 
Davis-Bacon contracts and firms affected by the Related Acts. The 
broader population includes those bidding on Davis-Bacon and Related 
Acts contracts but without active contracts, or those considering 
bidding in the future. As described in section V.B., the total number 
of potentially affected firms ranges from 152,900 to 184,500. This 
includes firms that pay at or above the new wage determination rates 
and thus will not be substantially affected. The Department does not 
have data to identify the number of firms that will experience changes 
in payroll costs.
    To identify the number of small firms, the Department began with 
the total population of firms and identified some of these firms as 
small based on several methods.
     For prime contractors in USASpending, the Department used 
the variable ``Contracting Officer's Determination of Business Size.'' 
\345\
---------------------------------------------------------------------------

    \345\ The description of this variable in the USAspending.gov 
Data Dictionary is: ``The Contracting Officer's determination of 
whether the selected contractor meets the small business size 
standard for award to a small business for the NAICS code that is 
applicable to the contract.'' The Data Dictionary is available at: 
https://www.usaspending.gov/data-dictionary.
---------------------------------------------------------------------------

     For subcontractors from USASpending, the Department 
identified those with ``small'' or ``SBA'' in the ``Subawardee Business 
Types'' variable.\346\
---------------------------------------------------------------------------

    \346\ The description of this variable in the USAspending.gov 
Data Dictionary is: ``Comma separated list representing sub-
contractor business types pulled from FPDS-NG or the System for 
Award Management (SAM).''

---------------------------------------------------------------------------

[[Page 57718]]

     For SAM data, the Department used the small business 
determination in the data, in variable ``NAICS Code String.'' This is 
flagged separately for each NAICS reported for the firm; therefore, the 
Department classified a company as a small business if SAM identified 
it as a small business in any 6-digit NAICS beginning with 23.
    This results in an estimated number of potentially affected small 
businesses ranging from 101,700 to 127,800 (Table 11).

      Table 11--Range of Number of Potentially Affected Small Firms
------------------------------------------------------------------------
                         Source                             Small firms
------------------------------------------------------------------------
               Total Count (Davis-Bacon and Related Acts)
------------------------------------------------------------------------
Narrow definition.......................................         101,700
Broad definition........................................         127,800
------------------------------------------------------------------------
                         DBA (Narrow Definition)
------------------------------------------------------------------------
Total...................................................          26,700
    Prime contractors from USASpending..................          11,200
    Subcontractors from USASpending [\a\]...............          15,500
------------------------------------------------------------------------
                         DBA (Broad Definition)
------------------------------------------------------------------------
Total...................................................          52,800
    SAM.................................................          37,300
    Subcontractors from USASpending [\a\]...............          15,500
------------------------------------------------------------------------
                              Related Acts
------------------------------------------------------------------------
Total...................................................          75,000
------------------------------------------------------------------------
[\a\] Determination based on inclusion of ``small'' or ``SBA'' in the
  business types.

    Several commenters believe the number of small businesses is 
underestimated. ABC and SBA's Office of Advocacy assert that the 
methodology excludes newly covered firms. The Department believes most 
of these firms are included in the estimate because the methodology 
covers all firms bidding, or considering bidding, on Federal 
construction contracts, not just those currently holding DBA contracts. 
However, the Department notes that there may be limited cases in which 
some firms covered by the final rule's modification of the ``site of 
the work'' to include certain secondary worksites may not be classified 
in the construction industry and consequently may not be captured by 
this methodology. As noted in the Executive Order 12866 analysis, the 
Department believes the extent to which these firms are not captured is 
small, given that the final rule significantly limits the circumstances 
under which such secondary worksites are covered.\347\ The Department 
estimated in section V.B. that 1.2 million employees are potentially 
affected by the rulemaking. That methodology does not include a 
variation to identify only workers employed by small firms. The 
Department therefore assumed that the share of contracting expenditures 
attributed to small businesses is the best approximation of the share 
of employment in small businesses. In USASpending, expenditures are 
available by firm size. In 2019, $55.4 billion was spent on DBA covered 
contracts (see section V.B.2.) and of that, $19.8 billion (36 percent) 
was awarded to small business prime contractors.\348\ For territories, 
the share of expenditures allocated to small businesses is 38 percent.
---------------------------------------------------------------------------

    \347\ See section V.C.4.v and supra note 314.
    \348\ If subcontractors are more likely to be small businesses 
than prime contractors, then this methodology may underestimate the 
number of workers who are employed by small businesses.
---------------------------------------------------------------------------

    Data on expenditures by firm size are unavailable for the Related 
Acts (Table 12). Therefore, the Department assumed the same percentage 
applies to such expenditures as for Davis-Bacon contracts. In total, an 
estimated 424,800 workers are employed by potentially affected small 
businesses.

               Table 12--Number of Potentially Affected Workers in Small Covered Contracting Firms
----------------------------------------------------------------------------------------------------------------
                                                                                 Percent of
                                                                               expenditures in  Workers in small
                                                              Total workers         small          businesses
                                                               (thousands)       contracting       (thousands)
                                                                                 firms [\a\]
----------------------------------------------------------------------------------------------------------------
DBA, excl. territories....................................             297.9              35.7             106.4
DBA, territories..........................................               6.1              38.2               2.3
Related Acts [\b\]........................................             883.9              35.8             316.0
                                                           -----------------------------------------------------
    Total.................................................           1,188.0  ................             424.8
----------------------------------------------------------------------------------------------------------------
[\a\] Source: USASpending.gov. Percentage of contracting expenditures for covered contracts in small businesses
  in 2019.
[\b\] Because data on expenditures by firm size are unavailable for Related Acts. The Department assumed the
  same percentage applied as for Davis-Bacon.


[[Page 57719]]

    In several places, the final rule adds or revises language to 
clarify existing policies rather than substantively changes them. For 
example, the final rule adds language to the definitions of ``building 
or work'' and ``public building or public work'' to clarify that these 
definitions can be met even when the construction activity involves 
only a portion of an overall building, structure, or improvement. Also, 
the Department added language clarifying the applicability of the 
``material supplier'' exemption, the applicability of the DBRA to truck 
drivers and flaggers, and the extent to which demolition activities are 
covered by the DBRA. However, the Department acknowledges that some 
contracting agencies may not have been applying Davis-Bacon in 
accordance with those policies. Where this was the case, the clarity 
provided by this rule could lead to expanded application of the Davis-
Bacon labor standards, which could lead to more small firms being 
required to comply with Davis-Bacon labor standards. Additionally, the 
Department's provision to revise the definition of ``site of the work'' 
to further encompass certain construction of significant portions of a 
building or work at secondary worksites, which could clarify and 
strengthen the scope of coverage under DBA and would also lead to more 
small firms being required to comply with Davis-Bacon labor standards. 
The Department does not have data to determine how many of these small 
firms exist.

D. Compliance Requirements, Including Reporting and Recordkeeping

    Many of the provisions in this rule only affect how the prevailing 
wage rate is calculated. For these provisions there will be no new 
compliance requirements for small firms, as they will still need to pay 
the published prevailing wage. The Department is also making a number 
of revisions to existing recordkeeping requirements to better 
effectuate compliance and enforcement, including revisions to clarify 
the record retention period and add requirements to maintain worker 
telephone numbers and email addresses. The Department is clarifying 
language used to better distinguish the records that contractors must 
make and maintain (regular payrolls and other basic records) from the 
payroll documents that contractors must submit weekly to contracting 
agencies (certified payrolls). The Department is also clarifying that 
electronic signatures and certified payroll submission methods may be 
used.

E. Calculating the Impact of the Final Rule on Small Business Firms

    The Department considered employer costs associated with both (a) 
the change in determining the prevailing wage based on a 30 percent 
threshold instead of a 50 percent threshold and (b) the incorporation 
of using the change in the ECI to update certain non-collectively 
bargained prevailing wage rates. The Department estimated both 
regulatory familiarization costs and implementation costs associated 
with these two provisions. An overview of these costs is explained here 
but additional details can be found in section V.C. Non-quantified 
direct employer costs are explained in section V.C.4.
    The Department acknowledges that if some wage rates increase due to 
either of the provisions listed above, there could be an increase in 
payroll costs for some small firms. Due to data limitations and 
uncertainty, the Department did not quantify payroll costs (i.e., 
transfers). The change in the definition of prevailing wage will only 
be applied to wage data received through surveys finalized after the 
effective date of this rule, for geographic areas and classifications 
that have not yet been identified. Both this provision and the updating 
of out-of-date rates will not have any impact if firms are already 
paying at or above the new prevailing wage rate because of labor market 
forces. Please see section V.D. for a more thorough discussion of these 
potential payroll costs, including an illustrative example of the 
potential impact of the rule on prevailing wage rates.
    Year 1 direct employer costs for small businesses are estimated to 
total $39.3 million. Average annualized costs across the first 10 years 
are estimated to be $7.3 million (using a 7 percent discount rate). On 
a per firm basis, direct employer costs are estimated to be $224.73 in 
Year 1. These costs are somewhat higher than the costs presented in the 
NPRM because the Department increased the time for regulatory 
familiarization in response to comments.
    The rule will impose direct costs on some covered contractors who 
will review the regulations to understand how the prevailing wage 
setting methodology will change. However, the Department believes these 
regulatory familiarization costs will be small because firms are not 
required to understand how the prevailing wage rates are set in order 
to comply with DBRA requirements, they are just required to pay the 
prevailing wage rates. The Department included all small potentially 
affected firms (127,800 firms). The Department assumed that on average, 
4 hours of a human resources staff member's time will be spent 
reviewing the rulemaking. This was increased from 1 hour in the NPRM 
per comments.
    The cost of this time is the median loaded wage for a Compensation, 
Benefits, and Job Analysis Specialist of $49.94 per hour.\349\ 
Therefore, the Department has estimated regulatory familiarization 
costs to be $25.5 million ($49.94 per hour x 4.0 hour x 127,800 
contractors) (Table 13). The Department has included all regulatory 
familiarization costs in Year 1. New entrants will not incur any 
additional regulatory familiarization costs attributable to this rule. 
Average annualized regulatory familiarization costs over 10 years, 
using a 7 percent discount rate, are $3.4 million.
---------------------------------------------------------------------------

    \349\ This includes the median base wage of $30.83 from the May 
2020 OEWS estimates plus benefits paid at a rate of 45 percent of 
the base wage, as estimated from the BLS's ECEC data, and overhead 
costs of 17 percent. OEWS data available at: http://www.bls.gov/oes/current/oes131141.htm.

                               Table 13--Direct Employer Costs to Small Businesses
                                                 (2021 Dollars)
----------------------------------------------------------------------------------------------------------------
                                                                                Regulatory
                         Variable                                Total       familiarization     Implementation
                                                                                  costs              costs
----------------------------------------------------------------------------------------------------------------
                                                  Year 1 Costs
----------------------------------------------------------------------------------------------------------------
Potentially affected firms................................  ..............            127,800             65,200
Hours per firm............................................  ..............                  4                0.5
Loaded wage rate..........................................  ..............             $49.94             $49.94

[[Page 57720]]

 
Cost ($1,000s)............................................         $27,157            $25,529             $1,628
----------------------------------------------------------------------------------------------------------------
                                              Years 2-10 ($1,000s)
----------------------------------------------------------------------------------------------------------------
Annual cost...............................................          $1,628                 $0             $1,628
Average Annualized Costs ($1,000s):
    3% discount rate......................................          $5,156             $3,528             $1,628
    7% discount rate......................................          $2,025             $3,397             $1,628
----------------------------------------------------------------------------------------------------------------

    When firms update prevailing wage rates, they can incur costs 
associated with adjusting payrolls, adjusting contracts, and 
communicating this information to employees (if applicable). This rule 
will generally affect the frequency with which prevailing wage rates 
are updated through the anticipated update of old, outmoded rates to 
their present value, and moving forward, to periodically update rates 
when that does not occur through the survey process. Currently, only a 
fraction of non-collectively bargained prevailing wages can be expected 
to change each year. Firms may spend more time than they have in the 
past updating payroll systems to account for new prevailing wage rates 
that the firms must pay as a result of being awarded a DBRA contract 
that calls for such new rates. This change is because the Department 
will update older non-collectively bargained rates--as it currently 
does with collectively bargained prevailing rates--to better represent 
current wages and benefits being paid in the construction industry. In 
addition, moving forward, WHD expects to publish wage rates more 
frequently than in the past.
    The Department does not believe that there will be additional 
implementation costs associated with the proposal to update the 
definition of the prevailing wage (30 percent threshold). This change 
will only apply to new surveys, for which employers would have already 
had to update wage rates.
    To estimate the size of the implementation cost associated with the 
periodic updates, the Department assumed that each year a share of 
potentially affected firms are already checking rates due to newly 
published surveys (section V.C.2.).\350\ Multiplying the remaining 64.1 
percent by the 101,700 small firms holding DBRA contracts results in 
65,200 firms impacted annually (Table 13). The change to update current 
non-collectively bargained rates will have a one-time implementation 
cost to firms. The change to update non-collectively bargained rates 
moving forward will result in ongoing implementation costs. Each time a 
non-collectively bargained weighted average rate is updated on a wage 
determination applicable to a newly awarded DBRA contract, firms will 
incur some costs to adjust payroll (if applicable) and communicate the 
new rates to employees. The Department assumed that this provision 
would impact all small firms currently holding DBRA contracts (65,200 
firms). For the initial increase, the Department estimated this will 
take approximately 0.5 hours for firms to adjust their rates. As with 
previous costs, implementation time costs are based on a loaded hourly 
wage of $49.94. Therefore, total Year 1 implementation costs were 
estimated to equal $1.6 million ($49.94 x 0.5 hour x 65,200 firms). The 
average annualized implementation cost over 10 years, using a 7 percent 
discount rate, is $1.6 million.
---------------------------------------------------------------------------

    \350\ 15.6 percent update rates due to newly published survey 
data and 24 percent of the remainder update rates due to CBA 
escalators. Therefore, 64.1 percent are impacted [(1-0.156) x (1-
0.24)].
---------------------------------------------------------------------------

    To determine direct employer costs on a per firm basis, the 
Department considers only those firms who are fully affected. These are 
firms who actively hold DBRA contracts, and who have new wage rates to 
incorporate into their bids and, as needed, into their payroll systems. 
For these firms, the Year 1 costs are estimated as four and a half 
hours of time (4 hour for regulatory familiarization and 0.5 hours for 
implementation) valued at $49.94 per hour. This totals $224.73 in Year 
1 costs per firm.
    Several commenters believed the costs presented here are too low. 
Some commenters noted that regulatory familiarization time will be much 
longer than the one hour estimated. The Department agrees and has 
consequently increased this time to 4 hours. Many commenters focus on 
implementation and administration costs for newly covered firms. As 
noted above, the Department only quantified implementation costs for 
impacts of the provision to update out-of-date SU rates using the ECI. 
Costs associated with provisions that clarify coverage are not 
quantified because they are merely clarifications, and thus are not an 
expansion of scope. Additionally, data are not available to estimate 
the number of newly covered firms.
    Commenters asserted that compliance costs for newly covered small 
firms will be prohibitive. MBI wrote that ``[m]any small and 
disadvantaged businesses in the modular sector will not have the budget 
to cover the costs of DBA prevailing wages.'' ABC similarly noted that 
this rule will discourage small businesses participation. They also 
presented findings from a survey of members demonstrating that many 
small businesses believe the DBA increases administrative costs and 
labor costs. The Department disagrees that costs are prohibitive and 
points to the many contractors, both large and small, who already work 
on DBRA covered projects. Additionally, the added clarity from this 
rule may increase small business participation.
    Commenters noted a range of costs for newly covered small entities. 
These commenters asserted that small businesses do not employ staff 
familiar with regulatory or legal affairs, and consequently this rule 
will entail hiring outside consultants. The Department provides 
compliance assistance resources to assist small businesses comply but 
acknowledges that sometimes businesses will want to engage their own 
counsel. The SBA noted that any potential scope expansion could also 
deter small businesses from participating due to the associated risks, 
such as citations and back wages. They also stated that newly covered 
small businesses will incur paperwork costs, such as submitting

[[Page 57721]]

certified payroll and evaluating prevailing wages, and administrative 
burdens. As discussed above, the Department believes that the number of 
newly covered entities will be small. The final rule does not 
significantly expand the scope of Davis-Bacon coverage, as most of the 
coverage-related regulatory provisions primarily represent 
clarifications of existing coverage principles, not expansions of 
coverage.
    Furthermore, the Department does not believe that this rule would 
deter small businesses from participating. For example, a study that 
looked at the highway construction industry found no difference in bids 
between Federal projects with Davis-Bacon prevailing wage 
determinations and less-regulated state projects.\351\ Also, as 
discussed above, the Department estimated that 101,700 small firms 
currently hold Davis-Bacon contracts, representing 67 percent of all 
firms holding Davis-Bacon contracts. Given the prevalence of small 
businesses in performing DBRA-covered construction, it seems reasonable 
to conclude that existing Davis-Bacon requirements do not impose a 
substantial barrier to entry for small businesses. To the extent that 
any firms would see a significant increase in wages paid to covered 
contract workers, the firms could incorporate any increased labor costs 
into their bids or contract price negotiations with the contacting 
agency.
---------------------------------------------------------------------------

    \351\ Duncan, K. ``Do Federal Davis-Bacon and Disadvantaged 
Business Enterprise Regulations Affect Aggressive Bidding? Evidence 
from Highway Resurfacing Procurement Actions,'' Journal of Public 
Procurement 15(3), 291-316. 2015.
---------------------------------------------------------------------------

F. Alternatives to the Final Rule and Steps Taken To Minimize 
Significant Economic Impact on Small Entities

    The RFA directs agencies to assess the impacts that various 
regulatory alternatives would have on small entities and to consider 
ways to minimize those impacts. Regarding the alternatives considered 
by the Department in the NPRM, the NFIB commented that the Department 
should ``tailor its Davis-Bacon regulations to meet the needs of small 
and independent businesses.'' SBA's Office of Advocacy also suggested 
the Department develop less-costly alternatives for small businesses. 
ABC noted that the Department should discuss the impact of the proposed 
rule and describe the steps the agency took to minimize the significant 
economic impact of the rule on small entities. Accordingly, the 
Department has revised its discussion of alternatives, but believes the 
approach taken in this final rule is the best way to provide greater 
clarity in the DBRA regulations and enhance their usefulness in the 
modern economy.
    One potential alternative to this rule would be to relax the 
requirements regarding recordkeeping. Currently the regulations require 
contractors and subcontractors to keep payrolls and basic records 
(including the name, address, and social security number of each 
worker, their correct classification, hourly rates of wages paid, daily 
and weekly number of hours worked, deductions made and actual wages 
paid) and records related to apprentices. It would be within the 
Department's discretion to not require some of these records, but the 
Department has decided that continuing to require these documents would 
promote substantially more effective compliance and enforcement. 
Furthermore, it is likely that many contractors already keep these 
records of their workers, so the requirement does not represent too 
large of a burden.
    Another alternative would be for the Department not to finalize the 
proposed rule, which would therefore result in no rule familiarization 
or implementation costs to small businesses. However, as discussed 
throughout the rule, the Department believes that the changes in this 
regulation will lead to improved government services, increased 
productivity, and reduced turnover. Clarifications made in this rule 
will also help businesses comply with the Davis-Bacon regulations and 
improve enforcement efforts for the Department.
    The Department notes that in other places in this final rule, the 
Department has chosen alternatives that minimize the impact of the rule 
on small businesses. For example, in their comments on the proposed 
rule, small businesses stated that the potential administrative costs 
associated with the proposed expansion to the site of the work would 
deter them from participating, because tracking time and wage rates at 
facilities engaged in work on multiple projects at once would be 
infeasible. In the final rule, the Department has chosen to narrow the 
scope of coverage at secondary construction sites to locations where 
specific portions of a building or work are constructed and were either 
established specifically for contract performance or are dedicated 
exclusively or nearly so to the contract or project. This narrower 
scope will help alleviate the cost concerns of small businesses.

VII. Unfunded Mandates Reform Act of 1995

    The Unfunded Mandates Reform Act of 1995, 2 U.S.C. 1532, requires 
agencies to prepare a written statement, which includes an assessment 
of anticipated costs and benefits, before proposing any unfunded 
Federal mandate that may result in excess of $100 million (adjusted 
annually for inflation) in expenditures in any one year by State, 
local, and Tribal governments in the aggregate, or by the private 
sector. This rulemaking is not expected exceed that threshold. See 
section V. for an assessment of anticipated costs, transfers, and 
benefits.

VIII. Executive Order 13132, Federalism

    The Department has (1) reviewed this rule in accordance with 
Executive Order 13132 regarding federalism and (2) determined that it 
does not have federalism implications. The rule would 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.

IX. Executive Order 13175, Indian Tribal Governments

    This rule would not have Tribal implications under Executive Order 
13175 that would require a Tribal summary impact statement. The rule 
would not have substantial direct effects on one or more Indian Tribes, 
on the relationship between the Federal Government and Indian Tribes, 
or on the distribution of power and responsibilities between the 
Federal Government and Indian Tribes.

Appendix A: Surveys Included in the Prevailing Wage Demonstration

----------------------------------------------------------------------------------------------------------------
                                  Publication
          Survey year                date             State           Metro/rural        Construction type(s)
----------------------------------------------------------------------------------------------------------------
                                                Surveys Included
----------------------------------------------------------------------------------------------------------------
2018..........................      12/25/2020  Utah.............  Metro...........  Heavy.

[[Page 57722]]

 
2017..........................      12/14/2018  Nevada...........  Both............  Highway.
2017..........................      12/25/2020  New York.........  Rural...........  Building.
2017..........................      12/25/2020  North Dakota.....  Both............  Heavy.
2017..........................        2/7/2020  Oklahoma.........  Metro...........  Residential.
2017..........................        2/7/2020  Pennsylvania.....  East Metro......  Residential.
2017..........................       1/24/2020  Vermont..........  Both............  Heavy, highway.\a\
2016..........................      12/14/2018  Connecticut......  Metro \b\.......  Building.
2016..........................      12/14/2018  New Mexico.......  Metro...........  Building and heavy.
2016..........................       9/29/2017  New York.........  4 metro counties  Building.
2016..........................        2/7/2020  North Carolina...  Both............  Residential.
2016..........................       12/8/2017  South Carolina...  Metro \c\.......  Residential.
2015..........................       10/6/2017  Alabama..........  Both \d\........  Building and heavy.
2016..........................        2/7/2020  Alabama..........  Both............  Highway.
2015..........................       4/21/2017  Arkansas.........  Both............  Building and heavy.
2015..........................       9/28/2018  Minnesota........  Both............  Building.
2015..........................       7/28/2017  Mississippi......  Both............  Building and heavy.
2015..........................       9/29/2017  New Hampshire....  Both............  Building and heavy.
2014..........................      12/16/2016  Florida..........  Metro \c\.......  Building.
----------------------------------------------------------------------------------------------------------------
\a\ Building component not sufficient.
\b\ Only one rural county so excluded.
\c\ Rural component of survey was not sufficient.
\d\ Excludes heavy rural which were not sufficient.

    This includes most surveys with published rates that began in 
2015 or later. They include all four construction types, metro and 
rural counties, and a variety of geographic regions. Two surveys 
were excluded because they did not meet sufficiency standards (2016 
Alaska residential and 2015 Maryland highway). A few surveys were 
excluded due to anomalies that could not be reconciled. These 
include:

 2016 Kansas highway
 2016 Virginia highway

Appendix B: Current DOL Wage Determination Protocols

    Sufficiency requirement: For a classification to have sufficient 
responses there generally must be data on at least six workers from 
at least three contractors. Additionally, if data is received for 
either exactly six workers or exactly three contractors, then no 
more than 60 percent of the total can be employed by any one 
contractor. Exceptions to these criteria are allowed under limited 
circumstances. Examples include surveys conducted in rural counties, 
or residential and heavy surveys with limited construction activity, 
or for highly specialized classifications. In these circumstances, 
the rule can be three workers and two contractors.
    Aggregation: If the classification is not sufficient at the 
county level, data are aggregated to the surrounding-counties group 
level, an intermediate grouping level, and a Statewide level (metro 
or rural), respectively. For building and residential construction, 
at each level of aggregation (as well as at the county level) WHD 
first attempts to calculate a prevailing rate using data only for 
projects not subject to Davis-Bacon labor standards; if such data 
are insufficient to calculate a prevailing rate, then data for 
projects subject to Davis-Bacon labor standards is also included.
    Majority rate: If more than 50 percent of workers are paid the 
exact same hourly rate, then that rate prevails. If not, the 
Department calculates a weighted average. If a majority of workers 
are not paid the same wage rate, but all of the data reflects the 
payment of collectively bargained rates, then a union weighted 
average rate is calculated.
    Prevailing fringe benefits: Before a fringe benefit is 
applicable, it must prevail. The first step is to determine if more 
than 50 percent of the workers in the reported classification 
receive a fringe benefit. If more than 50 percent of the workers in 
a single classification are paid any fringe benefits, then fringe 
benefits prevail. If fringe benefits prevail in a classification 
and:
     more than 50 percent of the workers receiving fringe 
benefits are paid the same total fringe benefit rate, then that 
total fringe benefit rate prevails.
     more than 50 percent of the workers receiving benefits 
are not paid at the same total rate, then the average rate of fringe 
benefits weighted by the number of workers who received fringe 
benefits prevails. If more than 50 percent are not paid the same 
total rate, but 100 percent of the data are union, then a union 
weighted average is calculated.
    However, if 50 percent or less of the workers in a single 
classification are paid a fringe benefit, then fringe benefits will 
not prevail, and a fringe benefit rate of $0.00 will be published 
for that classification.

List of Subjects

29 CFR Part 1

    Administrative practice and procedure, Construction industry, 
Government contracts, Government procurement, Law enforcement, 
Reporting and recordkeeping requirements, Wages.

29 CFR Part 3

    Administrative practice and procedure, Construction industry, 
Government contracts, Government procurement, Law enforcement, 
Penalties, Reporting and recordkeeping requirements, Wages.

29 CFR Part 5

    Administrative practice and procedure, Construction industry, 
Government contracts, Government procurement, Law enforcement, 
Penalties, Reporting and recordkeeping requirements, Wages.

    For reasons stated in the preamble, the Wage and Hour Division, 
Department of Labor, amends 29 CFR subtitle A as follows:

PART 1--PROCEDURES FOR PREDETERMINATION OF WAGE RATES

0
1. The authority citation for part 1 is revised to read as follows:

    Authority:  5 U.S.C. 301; Reorganization Plan No. 14 of 1950, 5 
U.S.C. appendix; 40 U.S.C. 3141 et seq.; 40 U.S.C. 3145; 40 U.S.C. 
3148; Secretary of Labor's Order 01-2014, 79 FR 77527; and the laws 
referenced by 29 CFR 5.1.


0
2. Amend Sec.  1.1 by revising paragraphs (a) and (b) to read as 
follows:


Sec.  1.1  Purpose and scope.

    (a) The procedural rules in this part apply under the Davis-Bacon 
Act (46 Stat. 1494, as amended; 40 U.S.C. 3141 et seq.), and any laws 
now existing or subsequently enacted, which require the payment of 
minimum wages, including fringe benefits, to laborers and mechanics 
engaged in construction activity under contracts entered into or 
financed by or with the assistance of agencies of the United States or 
the District of Columbia, based on

[[Page 57723]]

determinations by the Secretary of Labor of the wage rates and fringe 
benefits prevailing for the corresponding classes of laborers and 
mechanics employed on projects similar to the contract work in the 
local areas where such work is to be performed.
    (1) A listing of laws requiring the payment of wages at rates 
predetermined by the Secretary of Labor under the Davis-Bacon Act can 
be found at www.dol.gov/agencies/whd/government-contracts or its 
successor website.
    (2) Functions of the Secretary of Labor under these statutes and 
under Reorganization Plan No. 14 of 1950 (15 FR 3176, effective May 24, 
1950, reprinted as amended in 5 U.S.C. app. 1 and in 64 Stat. 1267), 
except for functions assigned to the Office of Administrative Law 
Judges (see part 6 of this subtitle) and appellate functions assigned 
to the Administrative Review Board (see part 7 of this subtitle) or 
reserved by the Secretary of Labor (see Secretary's Order 01-2020 (Feb. 
21, 2020)), have been delegated to the Administrator of the Wage and 
Hour Division and authorized representatives.
    (b) The regulations in this part set forth the procedures for 
making and applying such determinations of prevailing wage rates and 
fringe benefits pursuant to the Davis-Bacon Act and any laws now 
existing or subsequently enacted providing for determinations of such 
wages by the Secretary of Labor in accordance with the provisions of 
the Davis-Bacon Act.
* * * * *

0
3. Revise Sec.  1.2 to read as follows:


Sec.  1.2  Definitions.

    Administrator. The term ``Administrator'' means the Administrator 
of the Wage and Hour Division, U.S. Department of Labor, or authorized 
representative.
    Agency. The term ``agency'' means any Federal, State, or local 
agency or instrumentality, or other similar entity, that enters into a 
contract or provides assistance through loan, grant, loan guarantee or 
insurance, or otherwise, to a project subject to the Davis-Bacon labor 
standards, as defined in Sec.  5.2 of this subtitle.
    (1) Federal agency. The term ``Federal agency'' means an agency or 
instrumentality of the United States or the District of Columbia, as 
defined in this section, that enters into a contract or provides 
assistance through loan, grant, loan guarantee or insurance, or 
otherwise, to a project subject to the Davis-Bacon labor standards.
    (2) [Reserved]
    Area. The term ``area'' means the city, town, village, county or 
other civil subdivision of the State in which the work is to be 
performed.
    (1) For highway projects, the area may be State department of 
transportation highway districts or other similar State geographic 
subdivisions.
    (2) Where a project requires work in multiple counties, the area 
may include all counties in which the work will be performed.
    Department of Labor-approved website for wage determinations (DOL-
approved website). The term ``Department of Labor-approved website for 
wage determinations'' means the government website for both Davis-Bacon 
Act and Service Contract Act wage determinations. In addition, the DOL-
approved website provides compliance assistance information. The term 
will also apply to any other website or electronic means that the 
Department of Labor may approve for these purposes.
    Employed. Every person performing the duties of a laborer or 
mechanic in the construction, prosecution, completion, or repair of a 
public building or public work, or building or work financed in whole 
or in part by assistance from the United States through loan, grant, 
loan guarantee or insurance, or otherwise, is employed regardless of 
any contractual relationship alleged to exist between the contractor 
and such person.
    Prevailing wage. The term ``prevailing wage'' means:
    (1) The wage paid to the majority (more than 50 percent) of the 
laborers or mechanics in the classification on similar projects in the 
area during the period in question;
    (2) If the same wage is not paid to a majority of those employed in 
the classification, the prevailing wage will be the wage paid to the 
greatest number, provided that such greatest number constitutes at 
least 30 percent of those employed; or
    (3) If no wage rate is paid to 30 percent or more of those so 
employed, the prevailing wage will be the average of the wages paid to 
those employed in the classification, weighted by the total employed in 
the classification.
    Type of construction (or construction type). The term ``type of 
construction (or construction type)'' means the general category of 
construction, as established by the Administrator, for the publication 
of general wage determinations. Types of construction may include, but 
are not limited to, building, residential, heavy, and highway. As used 
in this part, the terms ``type of construction'' and ``construction 
type'' are synonymous and interchangeable.
    United States or the District of Columbia. The term ``United States 
or the District of Columbia'' means the United States, the District of 
Columbia, and all executive departments, independent establishments, 
administrative agencies, and instrumentalities of the United States and 
of the District of Columbia, and any corporation for which all or 
substantially all of the stock of which is beneficially owned by the 
United States, by the District of Columbia, or any of the foregoing 
departments, establishments, agencies, and instrumentalities.

0
4. Revise Sec.  1.3 to read as follows:


Sec.  1.3  Obtaining and compiling wage rate information.

    For the purpose of making wage determinations, the Administrator 
will conduct a continuing program for the obtaining and compiling of 
wage rate information. In determining the prevailing wages at the time 
of issuance of a wage determination, the Administrator will be guided 
by the definition of prevailing wage in Sec.  1.2 and will consider the 
types of information listed in this section.
    (a) The Administrator will encourage the voluntary submission of 
wage rate data by contractors, contractors' associations, labor 
organizations, public officials and other interested parties, 
reflecting wage rates paid to laborers and mechanics on various types 
of construction in the area. The Administrator may also obtain data 
from agencies on wage rates paid on construction projects under their 
jurisdiction. The information submitted should reflect the wage rates 
paid to workers employed in a particular classification in an area, the 
type or types of construction on which such rate or rates are paid, and 
whether or not such wage rates were paid on Federal or federally 
assisted projects subject to Davis-Bacon prevailing wage requirements.
    (b) The following types of information may be considered in making 
wage rate determinations:
    (1) Statements showing wage rates paid on projects, including the 
names and addresses of contractors, including subcontractors; the 
locations, approximate costs, dates of construction and types of 
projects, as well as whether or not the projects are Federal or 
federally assisted projects subject to Davis-Bacon prevailing wage 
requirements; and the number of workers employed in each classification

[[Page 57724]]

on each project and the respective wage rates paid such workers.
    (2) Signed collective bargaining agreements, for which the 
Administrator may request that the parties to such agreements submit 
statements certifying to their scope and application.
    (3) Wage rates determined for public construction by State and 
local officials pursuant to State and local prevailing wage 
legislation.
    (4) Wage rate data submitted to the Department of Labor by 
contracting agencies pursuant to Sec.  5.5(a)(1)(iii) of this subtitle.
    (5) For Federal-aid highway projects under 23 U.S.C. 113, 
information obtained from the highway department(s) of the State(s) in 
which the project is to be performed. For such projects, the 
Administrator must consult the relevant State highway department and 
give due regard to the information thus obtained.
    (6) Any other information pertinent to the determination of 
prevailing wage rates.
    (c) The Administrator may initially obtain or supplement such 
information obtained on a voluntary basis by such means, including the 
holding of hearings, and from any sources determined to be necessary. 
All information of the types described in paragraph (b) of this 
section, pertinent to the determination of the wages prevailing at the 
time of issuance of the wage determination, will be evaluated in light 
of the definition of prevailing wage in Sec.  1.2.
    (d) In compiling wage rate data for building and residential wage 
determinations, the Administrator will not use data from Federal or 
federally assisted projects subject to Davis-Bacon prevailing wage 
requirements unless it is determined that there is insufficient wage 
data to determine the prevailing wages in the absence of such data. 
Data from Federal or federally assisted projects will be used in 
compiling wage rate data for heavy and highway wage determinations.
    (e) In determining the prevailing wage, the Administrator may treat 
variable wage rates paid by a contractor or contractors to workers 
within the same classification as the same wage where the pay rates are 
functionally equivalent, as explained by one or more collective 
bargaining agreements or written policies otherwise maintained by a 
contractor or contractors.
    (f) If the Administrator determines that there is insufficient wage 
survey data to determine the prevailing wage for a classification for 
which conformance requests are regularly submitted pursuant to Sec.  
5.5(a)(1)(iii) of this subtitle, the Administrator may list the 
classification and wage and fringe benefit rates for the classification 
on the wage determination, provided that:
    (1) The work performed by the classification is not performed by a 
classification in the wage determination;
    (2) The classification is used in the area by the construction 
industry; and
    (3) The wage rate for the classification bears a reasonable 
relationship to the wage rates contained in the wage determination.
    (g) Under the circumstances described in paragraph (h) of this 
section, the Administrator may make a wage determination by adopting, 
with or without modification, one or more prevailing wage rates 
determined for public construction by State and/or local officials. 
Provided that the conditions in paragraph (h) are met, the 
Administrator may do so even if the methods and criteria used by State 
or local officials differ in some respects from those that the 
Administrator would otherwise use under the Davis-Bacon Act and the 
regulations in this part. Such differences may include, but are not 
limited to, a definition of prevailing wage under a State or local 
prevailing wage law or regulation that differs from the definition in 
Sec.  1.2, a geographic area or scope that differs from the standards 
in Sec.  1.7, and/or the restrictions on data use in paragraph (d) of 
this section.
    (h) The Administrator may adopt a State or local wage rate as 
described in paragraph (g) of this section if the Administrator, after 
reviewing the rate and the processes used to derive the rate, 
determines that:
    (1) The State or local government sets wage rates, and collects 
relevant data, using a survey or other process that is open to full 
participation by all interested parties;
    (2) The wage rate reflects both a basic hourly rate of pay as well 
as any prevailing fringe benefits, each of which can be calculated 
separately;
    (3) The State or local government classifies laborers and mechanics 
in a manner that is recognized within the field of construction; and
    (4) The State or local government's criteria for setting prevailing 
wage rates are substantially similar to those the Administrator uses in 
making wage determinations under this part. This determination will be 
based on the totality of the circumstances, including, but not limited 
to, the State or local government's definition of prevailing wage; the 
types of fringe benefits it accepts; the information it solicits from 
interested parties; its classification of construction projects, 
laborers, and mechanics; and its method for determining the appropriate 
geographic area(s).
    (i) In order to adopt wage rates of a State or local government 
entity pursuant to paragraphs (g) and (h) of this section, the 
Administrator must obtain the wage rates and any relevant supporting 
documentation and data from the State or local government entity. Such 
information may be submitted via email to 
[email protected], via mail to U.S. Department of Labor, 
Wage and Hour Division, Branch of Wage Surveys, 200 Constitution Avenue 
NW, Washington, DC 20210, or through other means directed by the 
Administrator.
    (j) Nothing in paragraphs (g), (h), and (i) of this section 
precludes the Administrator from otherwise considering State or local 
prevailing wage rates, consistent with paragraph (b)(3) of this 
section, or from giving due regard to information obtained from State 
highway departments, consistent with paragraph (b)(4) of this section, 
as part of the Administrator's process of making prevailing wage 
determinations under this part.

0
5. Revise Sec.  1.4 to read as follows:


Sec.  1.4  Report of agency construction programs.

    On an annual basis, each Federal agency using wage determinations 
under the Davis-Bacon Act or any of the laws referenced by Sec.  5.1 of 
this subtitle, must furnish the Administrator with a report that 
contains a general outline of its proposed construction programs for 
the upcoming 3 fiscal years based on information in the Federal 
agency's possession at the time it furnishes its report. This report 
must include a list of proposed projects (including those for which 
options to extend the contract term of an existing construction 
contract are expected during the period covered by the report); the 
estimated start date of construction; the anticipated type or types of 
construction; the estimated cost of construction; the location or 
locations of construction; and any other project-specific information 
that the Administrator requests. The report must also include 
notification of any significant changes to previously reported 
construction programs, such as the delay or cancellation of previously 
reported projects. Reports must be submitted no later than April 10 of 
each year by email to [email protected], and must include the 
name, telephone number, and email address of the official responsible 
for coordinating the submission.

0
6. Revise Sec.  1.5 to read as follows:

[[Page 57725]]

Sec.  1.5  Publication of general wage determinations and procedure for 
requesting project wage determinations.

    (a) General wage determinations. A ``general wage determination'' 
contains, among other information, a list of wage and fringe benefit 
rates determined to be prevailing for various classifications of 
laborers or mechanics for specified type(s) of construction in a given 
area. The Department of Labor publishes ``general wage determinations'' 
under the Davis-Bacon Act on the DOL-approved website.
    (b) Project wage determinations. (1) A ``project wage 
determination'' is specific to a particular project. An agency may 
request a ``project wage determination'' for an individual project 
under any of the following circumstances:
    (i) The project involves work in more than one county and will 
employ workers who may work in more than one county;
    (ii) There is no general wage determination in effect for the 
relevant area and type(s) of construction for an upcoming project, or
    (iii) All or virtually all of the work on a contract will be 
performed by a classification that is not listed in the general wage 
determination that would otherwise apply, and contract award (or bid 
opening, in contracts entered into using sealed bidding procedures) has 
not yet taken place.
    (2) To request a project wage determination, the agency must submit 
Standard Form (SF) 308, Request for Wage Determination and Response to 
Request, to the Department of Labor, either by mailing the form to U.S. 
Department of Labor, Wage and Hour Division, Branch of Construction 
Wage Determinations, Washington, DC 20210, or by submitting the form 
through other means directed by the Administrator.
    (3) In completing Form SF-308, the agency must include the 
following information:
    (i) A sufficiently detailed description of the work to indicate the 
type(s) of construction involved, as well as any additional description 
or separate attachment, if necessary, for identification of the type(s) 
of work to be performed. If the project involves multiple types of 
construction, the requesting agency must attach information indicating 
the expected cost breakdown by type of construction.
    (ii) The location (city, county, state, zip code) or locations in 
which the proposed project is located.
    (iii) The classifications needed for the project. The agency must 
identify only those classifications that will be needed in the 
performance of the work. Inserting a note such as ``entire schedule'' 
or ``all applicable classifications'' is not sufficient. Additional 
classifications needed that are not on the form may be typed in the 
blank spaces or on a separate list and attached to the form.
    (iv) Any other information requested in Form SF-308.
    (4) A request for a project wage determination must be accompanied 
by any pertinent wage information that may be available. When the 
requesting agency is a State highway department under the Federal-Aid 
Highway Acts as codified in 23 U.S.C. 113, such agency must also 
include its recommendations as to the wages which are prevailing for 
each classification of laborers and mechanics on similar construction 
in the area.
    (5) The time required for processing requests for project wage 
determinations varies according to the facts and circumstances in each 
case. An agency should anticipate that such processing by the 
Department of Labor will take at least 30 days.

0
7. Revise Sec.  1.6 to read as follows:


Sec.  1.6  Use and effectiveness of wage determinations.

    (a) Application, validity, and expiration of wage determinations--
(1) Application of incorporated wage determinations. Once a wage 
determination is incorporated into a contract (or once construction has 
started when there is no contract award), the wage determination 
generally applies for the duration of the contract or project, except 
as specified in this section.
    (2) General wage determinations. (i) ``General wage 
determinations'' published on the DOL-approved website contain no 
expiration date. Once issued, a general wage determination remains 
valid until revised, superseded, or canceled.
    (ii) If there is a current general wage determination applicable to 
a project, an agency may use it without notifying the Administrator, 
Provided that questions concerning its use are referred to the 
Administrator in accordance with paragraph (b) of this section.
    (iii) When a wage determination is revised, superseded, or 
canceled, it becomes inactive. Inactive wage determinations may be 
accessed on the DOL-approved website for informational purposes only. 
Contracting officers may not use such an inactive wage determination in 
a contract action unless the inactive wage determination is the 
appropriate wage determination that must be incorporated to give 
retroactive effect to the post-award incorporation of a contract clause 
under Sec.  5.6(a)(1)(ii) of this subtitle or a wage determination 
under paragraph (f) of this section. Under such circumstances, the 
agency must provide prior notice to the Administrator of its intent to 
incorporate an inactive wage determination and may not incorporate it 
if the Administrator instructs otherwise.
    (3) Project wage determinations. (i) ``Project wage 
determinations'' initially issued will be effective for 180 calendar 
days from the date of such determinations. If a project wage 
determination is not incorporated into a contract (or, if there is no 
contract award, if construction has not started) in the period of its 
effectiveness it is void.
    (ii) Accordingly, if it appears that a project wage determination 
may expire between bid opening and contract award (or between initial 
endorsement under the National Housing Act or the execution of an 
agreement to enter into a housing assistance payments contract under 
section 8 of the U.S. Housing Act of 1937, and the start of 
construction) the agency must request a new project wage determination 
sufficiently in advance of the bid opening to assure receipt prior 
thereto.
    (iii) However, when due to unavoidable circumstances a project wage 
determination expires before award but after bid opening (or before the 
start of construction, but after initial endorsement under the National 
Housing Act, or before the start of construction but after the 
execution of an agreement to enter into a housing assistance payments 
contract under section 8 of the U.S. Housing Act of 1937), the head of 
the agency or the agency head's designee may request the Administrator 
to extend the expiration date of the project wage determination in the 
bid specifications instead of issuing a new project wage determination. 
Such request must be supported by a written finding, which must include 
a brief statement of factual support, that the extension of the 
expiration date of the project wage determination is necessary and 
proper in the public interest to prevent injustice or undue hardship or 
to avoid serious impairment in the conduct of Government business. The 
Administrator will either grant or deny the request for an extension 
after consideration of all of the circumstances, including an 
examination to determine if the previously issued rates remain 
prevailing. If the request for extension is denied, the Administrator 
will proceed to issue a new wage determination for the project.

[[Page 57726]]

    (b) Identifying and incorporating appropriate wage determinations. 
(1) Contracting agencies are responsible for making the initial 
determination of the appropriate wage determination(s) for a project 
and for ensuring that the appropriate wage determination(s) are 
incorporated in bid solicitations and contract specifications and that 
inapplicable wage determinations are not incorporated. When a contract 
involves construction in more than one area, and no multi-county 
project wage determination has been obtained, the solicitation and 
contract must incorporate the applicable wage determination for each 
area. When a contract involves more than one type of construction, the 
solicitation and contract must incorporate the applicable wage 
determination for each type of construction involved that is 
anticipated to be substantial. The contracting agency is responsible 
for designating the specific work to which each incorporated wage 
determination applies.
    (2) The contractor or subcontractor has an affirmative obligation 
to ensure that its pay practices are in compliance with the Davis-Bacon 
Act labor standards.
    (3) Any question regarding application of wage rate schedules or 
wage determinations must be referred to the Administrator for 
resolution. The Administrator should consider any relevant factors when 
resolving such questions, including, but not limited to, relevant area 
practice information.
    (c) Revisions to wage determinations. (1) General and project wage 
determinations may be revised from time to time to keep them current. A 
revised wage determination replaces the previous wage determination. 
``Revisions,'' as used in this section, refers both to modifications of 
some or all of the rates in a wage determination, such as periodic 
updates to reflect current rates, and to instances where a wage 
determination is re-issued entirely, such as after a new wage survey is 
conducted. Revisions include adjustments to non-collectively bargained 
prevailing wage and fringe benefit rates on general wage 
determinations, with the adjustments based on U.S. Bureau of Labor 
Statistics Employment Cost Index (ECI) data or its successor data. Such 
rates may be adjusted based on ECI data no more frequently than once 
every 3 years, and no sooner than 3 years after the date of the rate's 
publication. Such periodic revisions to wage determinations are 
distinguished from the circumstances described in paragraphs (d), (e), 
and (f) of this section.
    (2)(i) Whether a revised wage determination is effective with 
respect to a particular contract or project generally depends on the 
date on which the revised wage determination is issued. The date on 
which a revised wage determination is ``issued,'' as used in this 
section, means the date that a revised general wage determination is 
published on the DOL-approved website or the date that the contracting 
agency receives actual written notice of a revised project wage 
determination.
    (ii) If a revised wage determination is issued before contract 
award (or the start of construction when there is no award), it is 
effective with respect to the project, except as follows:
    (A) For contracts entered into pursuant to sealed bidding 
procedures, a revised wage determination issued at least 10 calendar 
days before the opening of bids is effective with respect to the 
solicitation and contract. If a revised wage determination is issued 
less than 10 calendar days before the opening of bids, it is effective 
with respect to the solicitation and contract unless the agency finds 
that there is not a reasonable time still available before bid opening 
to notify bidders of the revision and a report of the finding is 
inserted in the contract file. A copy of such report must be made 
available to the Administrator upon request. No such report is required 
if the revision is issued after bid opening.
    (B) In the case of projects assisted under the National Housing 
Act, a revised wage determination is effective with respect to the 
project if it is issued prior to the beginning of construction or the 
date the mortgage is initially endorsed, whichever occurs first.
    (C) In the case of projects to receive housing assistance payments 
under section 8 of the U.S. Housing Act of 1937, a revised wage 
determination is effective with respect to the project if it is issued 
prior to the beginning of construction or the date the agreement to 
enter into a housing assistance payments contract is signed, whichever 
occurs first.
    (D) If, in the case of a contract entered into pursuant to sealed 
bidding procedures under paragraph (c)(2)(ii)(A) of this section the 
contract has not been awarded within 90 days after bid opening, or if, 
in the case of projects assisted under the National Housing Act or 
receiving housing assistance payments section 8 of the U.S. Housing Act 
of 1937 under paragraph (c)(2)(ii)(B) or (C) of this section, 
construction has not begun within 90 days after initial endorsement or 
the signing of the agreement to enter into a housing assistance 
payments contract, any revised general wage determination issued prior 
to award of the contract or the beginning of construction, as 
appropriate, is effective with respect to that contract unless the head 
of the agency or the agency head's designee requests and obtains an 
extension of the 90-day period from the Administrator. Such request 
must be supported by a written finding, which includes a brief 
statement of the factual support, that the extension is necessary and 
proper in the public interest to prevent injustice or undue hardship or 
to avoid serious impairment in the conduct of Government business. The 
Administrator will either grant or deny the request for an extension 
after consideration of all the circumstances.
    (iii) If a revised wage determination is issued after contract 
award (or after the beginning of construction where there is no 
contract award), it is not effective with respect to that project, 
except under the following circumstances:
    (A) Where a contract or order is changed to include additional, 
substantial construction, alteration, and/or repair work not within the 
scope of work of the original contract or order, or to require the 
contractor to perform work for an additional time period not originally 
obligated, including where an option to extend the term of a contract 
is exercised, the contracting agency must include the most recent 
revision of any wage determination(s) at the time the contract is 
changed or the option is exercised. This does not apply where the 
contractor is simply given additional time to complete its original 
commitment or where the additional construction, alteration, and/or 
repair work in the modification is merely incidental.
    (B) Some contracts call for construction, alteration, and/or repair 
work over a period of time that is not tied to the completion of any 
particular project. Examples of such contracts include, but are not 
limited to, indefinite-delivery-indefinite-quantity construction 
contracts to perform any necessary repairs to a Federal facility over a 
period of time; long-term operations-and-maintenance contracts that may 
include construction, alteration, and/or repair work covered by Davis-
Bacon labor standards; or schedule contracts or blanket purchase 
agreements in which a contractor agrees to provide certain construction 
work at agreed-upon prices to Federal agencies. These types of 
contracts often involve a general commitment to perform necessary 
construction as the need arises, but do not necessarily specify the 
exact construction to be performed. For the types of contracts 
described here,

[[Page 57727]]

the contracting agency must incorporate into the contract the most 
recent revision(s) of any applicable wage determination(s) on each 
anniversary date of the contract's award (or each anniversary date of 
the beginning of construction when there is no award) unless the agency 
has sought and received prior written approval from the Department for 
an alternative process. The Department may grant such an exception when 
it is necessary and proper in the public interest or to prevent 
injustice and undue hardship. Such revised wage determination(s) will 
apply to any construction work that begins or is obligated under such a 
contract during the 12 months following that anniversary date until 
such construction work is completed, even if the completion of that 
work extends beyond the twelve-month period. Where such contracts have 
task orders, purchase orders, or other similar contract instruments 
awarded under the master contract, the master contract must specify 
that the applicable updated wage determination must be included in such 
task orders, purchase orders, or other similar contract instrument, and 
the ordering agency must so incorporate the applicable updated wage 
determinations into their orders. Once the applicable updated wage 
determination revision has been incorporated into such task orders, 
purchase orders, or other similar contract instruments, that wage 
determination revision remains applicable for the duration of such 
order, unless the order is changed to include additional, substantial 
construction, alteration, and/or repair work not within the scope of 
work, when the wage determination must be updated as set forth in 
paragraph (c)(2)(iii)(A) of this section, or the order itself includes 
the exercise of options. Where such orders do include the exercise of 
options, updated applicable wage determination revision, as 
incorporated into the master contract must be included when an option 
is exercised on such an order.
    (C) For contracts to which both paragraphs (c)(2)(iii)(A) and (B) 
of this section apply, updated wage determinations must be incorporated 
pursuant to the requirements of both paragraphs. For example, if a 
contract calls for construction, alteration, and/or repair work over a 
period of time that is not tied to the completion of any particular 
project and also has an option provision to extend the contract's term, 
the most recent revision(s) of any applicable wage determination(s) 
must be incorporated any time an option is exercised, as described in 
paragraph (c)(2)(iii)(A) of this section, and on the contract 
anniversary date, as described in paragraph (c)(2)(iii)(B) of this 
section. However, when a contract has been changed as described in 
paragraph (c)(2)(iii)(A) of this section, including by the exercise of 
an option, the date of that modification will be considered the 
contract anniversary date for the purpose of annually updating the wage 
determination(s) in accordance with paragraph (c)(2)(iii)(B) of this 
section for that year and any subsequent years of contract performance.
    (d) Corrections for clerical errors. Upon the Administrator's own 
initiative or at the request of an agency, the Administrator may 
correct any wage determination, without regard to paragraph (a) or (c) 
of this section, whenever the Administrator finds that it contains 
clerical errors. Such corrections must be included in any 
solicitations, bidding documents, or ongoing contracts containing the 
wage determination in question, and such inclusion, and application of 
the correction(s), must be retroactive to the start of construction if 
construction has begun.
    (e) Pre-award determinations that a wage determination may not be 
used. A wage determination may not be used for a contract, without 
regard to whether bid opening (or initial endorsement or the signing of 
a housing assistance payments contract) has occurred, if, prior to the 
award of a contract (or the start of construction under the National 
Housing Act, under section 8 of the U.S. Housing Act of 1937, or where 
there is no contract award), the Administrator provides written notice 
that:
    (1) The wrong wage determination or the wrong schedule was included 
in the bidding documents or solicitation; or
    (2) A wage determination included in the bidding documents or 
solicitation was withdrawn by the Department of Labor as a result of a 
decision by the Administrative Review Board.
    (f) Post-award determinations and procedures. (1) If a contract 
subject to the labor standards provisions of the laws referenced by 
Sec.  5.1 of this subtitle is entered into without the correct wage 
determination(s), the agency must, upon the request of the 
Administrator or upon its own initiative, incorporate the correct wage 
determination into the contract or require its incorporation. Where the 
agency is not entering directly into such a contract but instead is 
providing Federal financial assistance, the agency must ensure that the 
recipient or sub-recipient of the Federal assistance similarly 
incorporates the correct wage determination(s) into its contracts.
    (2) The Administrator may require the agency to incorporate a wage 
determination after contract award or after the beginning of 
construction if the agency has failed to incorporate a wage 
determination in a contract required to contain prevailing wage rates 
determined in accordance with the Davis-Bacon Act or has used a wage 
determination which by its terms or the provisions of this part clearly 
does not apply to the contract. Further, the Administrator may require 
the application of the correct wage determination to a contract after 
contract award or after the beginning of construction when it is found 
that the wrong wage determination has been incorporated in the contract 
because of an inaccurate description of the project or its location in 
the agency's request for the wage determination.
    (3) Under any of the circumstances described in paragraphs (f)(1) 
and (2) of this section, the agency must either terminate and resolicit 
the contract with the correct wage determination or incorporate the 
correct wage determination into the contract (or ensure it is so 
incorporated) through supplemental agreement, change order, or any 
other authority that may be needed. The method of incorporation of the 
correct wage determination, and adjustment in contract price, where 
appropriate, should be in accordance with applicable law. Additionally, 
the following requirements apply:
    (i) Unless the Administrator directs otherwise, the incorporation 
of the correct wage determination(s) must be retroactive to the date of 
contract award or start of construction if there is no award.
    (ii) If incorporation occurs as the result of a request from the 
Administrator, the incorporation must take place within 30 days of the 
date of that request, unless the agency has obtained an extension from 
the Administrator.
    (iii) Before the agency requires incorporation upon its own 
initiative, it must provide notice to the Administrator of the proposed 
action.
    (iv) The contractor must be compensated for any increases in wages 
resulting from incorporation of a missing wage determination.
    (v) If a recipient or sub-recipient of Federal assistance under any 
of the applicable laws referenced by Sec.  5.1 of this subtitle refuses 
to incorporate the wage determination as required, the agency must make 
no further payment, advance, grant, loan, or guarantee of funds in 
connection with the contract

[[Page 57728]]

until the recipient incorporates the required wage determination into 
its contract, and must promptly refer the dispute to the Administrator 
for further proceedings under Sec.  5.13 of this subtitle.
    (vi) Before terminating a contract pursuant to this section, the 
agency must withhold or cross-withhold sufficient funds to remedy any 
back-wage liability resulting from the failure to incorporate the 
correct wage determination or otherwise identify and obligate 
sufficient funds through a termination settlement agreement, bond, or 
other satisfactory mechanism.
    (4) Under any of the above circumstances, notwithstanding the 
requirement to incorporate the correct wage determination(s) within 30 
days, the correct wage determination(s) will be effective by operation 
of law, retroactive to the date of award or the beginning of 
construction (under the National Housing Act, under section 8 of the 
U.S. Housing Act of 1937, or where there is no contract award), in 
accordance with Sec.  5.5(e) of this subtitle.
    (g) Approval of Davis-Bacon Related Act Federal funding or 
assistance after contract award. If Federal funding or assistance under 
a statute requiring payment of wages determined in accordance with the 
Davis-Bacon Act is not approved prior to contract award (or the 
beginning of construction where there is no contract award), the 
applicable wage determination must be incorporated based upon the wages 
and fringe benefits found to be prevailing on the date of award or the 
beginning of construction (under the National Housing Act, under 
section 8 of the U.S. Housing Act of 1937, or where there is no 
contract award), as appropriate, and must be incorporated in the 
contract specifications retroactively to that date, Provided that upon 
the request of the head of the Federal agency providing the Federal 
funding or assistance, in individual cases the Administrator may direct 
incorporation of the wage determination to be effective on the date of 
approval of Federal funds or assistance whenever the Administrator 
finds that it is necessary and proper in the public interest to prevent 
injustice or undue hardship, Provided further that the Administrator 
finds no evidence of intent to apply for Federal funding or assistance 
prior to contract award or the start of construction, as appropriate.

0
8. Revise Sec.  1.7 to read as follows:


Sec.  1.7  Scope of consideration.

    (a) In making a wage determination, the ``area'' from which wage 
data will be drawn will normally be the county unless sufficient 
current wage data (data on wages paid on current projects or, where 
necessary, projects under construction no more than 1 year prior to the 
beginning of the survey or the request for a wage determination, as 
appropriate) is unavailable to make a wage determination.
    (b) If sufficient current wage data is not available from projects 
within the county to make a wage determination, wages paid on similar 
construction in surrounding counties may be considered.
    (c) If sufficient current wage data is not available in surrounding 
counties, the Administrator may consider wage data from similar 
construction in comparable counties or groups of counties in the State, 
and, if necessary, overall statewide data.
    (d) If sufficient current statewide wage data is not available, 
wages paid on projects completed more than 1 year prior to the 
beginning of the survey or the request for a wage determination, as 
appropriate, may be considered.
    (e) The use of ``helpers and apprentices'' is permitted in 
accordance with part 5 of this subtitle.

0
9. Revise Sec.  1.8 to read as follows:


Sec.  1.8  Reconsideration by the Administrator.

    (a) Any interested party may seek reconsideration of a wage 
determination issued under this part or of a decision of the 
Administrator regarding application of a wage determination.
    (b) Such a request for reconsideration must be in writing, 
accompanied by a full statement of the interested party's views and any 
supporting wage data or other pertinent information. Requests must be 
submitted via email to [email protected]; by mail to 
Administrator, Wage and Hour Division, U.S. Department of Labor, 200 
Constitution Ave., NW, Washington, DC 20210; or through other means 
directed by the Administrator. The Administrator will respond within 30 
days of receipt thereof, or will notify the requestor within the 30-day 
period that additional time is necessary.
    (c) If the decision for which reconsideration is sought was made by 
an authorized representative of the Administrator of the Wage and Hour 
Division, the interested party seeking reconsideration may request 
further reconsideration by the Administrator of the Wage and Hour 
Division. Such a request must be submitted within 30 days from the date 
the decision is issued; this time may be extended for good cause at the 
discretion of the Administrator upon a request by the interested party. 
The procedures in paragraph (b) of this section apply to any such 
reconsideration requests.

0
10. Add Sec.  1.10 to read as follows:


Sec.  1.10  Severability.

    The provisions of this part are separate and severable and operate 
independently from one another. If any provision of this part is held 
to be invalid or unenforceable by its terms, or as applied to any 
person or circumstance, or stayed pending further agency action, the 
provision is to be construed so as to continue to give the maximum 
effect to the provision permitted by law, unless such holding is one of 
utter invalidity or unenforceability, in which event the provision is 
severable from this part and will not affect the remaining provisions.

Appendix A to Part 1--[Removed]

0
11. Remove appendix A to part 1.

Appendix B to Part 1--[Removed]

0
12. Remove appendix B to part 1.

PART 3--CONTRACTORS AND SUBCONTRACTORS ON PUBLIC BUILDING OR PUBLIC 
WORK FINANCED IN WHOLE OR IN PART BY LOANS OR GRANTS FROM THE 
UNITED STATES

0
13. The authority citation for part 3 continues to read as follows:

    Authority:  R.S. 161, 48 Stat. 848, Reorg. Plan No. 14 of 1950, 
64 Stat. 1267; 5 U.S.C. 301; 40 U.S.C. 3145; Secretary's Order 01-
2014 (Dec. 19, 2014), 79 FR 77527 (Dec. 24, 2014).


0
14. Revise Sec.  3.1 to read as follows:


Sec.  3.1  Purpose and scope.

    This part prescribes ``anti-kickback'' regulations under section 2 
of the Act of June 13, 1934, as amended (40 U.S.C. 3145), popularly 
known as the Copeland Act. This part applies to any contract which is 
subject to Federal wage standards and which is for the construction, 
prosecution, completion, or repair of public buildings, public works or 
buildings or works financed in whole or in part by loans or grants from 
the United States. The part is intended to aid in the enforcement of 
the minimum wage provisions of the Davis-Bacon Act and the various 
statutes dealing with federally assisted construction that contain 
similar minimum wage provisions, including those provisions which are 
not subject to Reorganization Plan No. 14 of 1950 (e.g., the College 
Housing Act of 1950, the Federal Water Pollution Control Act, and the 
Housing Act of 1959), and in the enforcement of the overtime provisions 
of the Contract Work Hours and Safety

[[Page 57729]]

Standards Act whenever they are applicable to construction work. The 
part details the obligation of contractors and subcontractors relative 
to the weekly submission of statements regarding the wages paid on work 
covered thereby; sets forth the circumstances and procedures governing 
the making of payroll deductions from the wages of those employed on 
such work; and delineates the methods of payment permissible on such 
work.

0
15. Revise Sec.  3.2 to read as follows:


 Sec.  3.2   Definitions.

    As used in the regulations in this part:
    Affiliated person. The term ``affiliated person'' includes a 
spouse, child, parent, or other close relative of the contractor or 
subcontractor; a partner or officer of the contractor or subcontractor; 
a corporation closely connected with the contractor or subcontractor as 
parent, subsidiary, or otherwise, and an officer or agent of such 
corporation.
    Agency. The term ``agency'' means any Federal, State, or local 
government agency or instrumentality, or other similar entity, that 
enters into a contract or provides assistance through loan, grant, loan 
guarantee or insurance, or otherwise, for a project subject to the 
Davis-Bacon labor standards, as defined in Sec.  5.2 of this subtitle.
    (1) Federal agency. The term ``Federal agency'' means an agency or 
instrumentality of the United States or the District of Columbia, as 
defined in this section, that enters into a contract or provides 
assistance through loan, grant, loan guarantee or insurance, or 
otherwise, to a project subject to the Davis-Bacon labor standards.
    (2) [Reserved]
    Building or work. The term ``building or work'' generally includes 
construction activity of all types, as distinguished from 
manufacturing, furnishing of materials, or servicing and maintenance 
work. The term includes, without limitation, buildings, structures, and 
improvements of all types, such as bridges, dams, solar panels, wind 
turbines, broadband installation, installation of electric car 
chargers, plants, highways, parkways, streets, subways, tunnels, 
sewers, mains, powerlines, pumping stations, heavy generators, 
railways, airports, terminals, docks, piers, wharves, ways, 
lighthouses, buoys, jetties, breakwaters, levees, and canals; dredging, 
shoring, rehabilitation and reactivation of plants, scaffolding, 
drilling, blasting, excavating, clearing, and landscaping. The term 
``building or work'' also includes a portion of a building or work, or 
the installation (where appropriate) of equipment or components into a 
building or work.
    (1) Building or work financed in whole or in part by loans or 
grants from the United States. The term ``building or work financed in 
whole or in part by loans or grants from the United States'' includes 
any building or work for which construction, prosecution, completion, 
or repair, as defined in this section, payment or part payment is made 
directly or indirectly from funds provided by loans or grants by a 
Federal agency. The term includes any building or work for which the 
Federal assistance granted is in the form of loan guarantees or 
insurance.
    (2) [Reserved]
    Construction, prosecution, completion, or repair. The term 
``construction, prosecution, completion, or repair'' mean all types of 
work done on a particular building or work at the site thereof as 
specified in Sec.  5.2 of this subtitle, including, without limitation, 
altering, remodeling, painting and decorating, installation on the site 
of the work of items fabricated offsite, covered transportation as 
reflected in Sec.  5.2, demolition and/or removal as reflected in Sec.  
5.2, and the manufacturing or furnishing of materials, articles, 
supplies, or equipment on the site of the building or work, performed 
by laborers and mechanics at the site.
    Employed (and wages). Every person paid by a contractor or 
subcontractor in any manner for their labor in the construction, 
prosecution, completion, or repair of a public building or public work 
or building or work financed in whole or in part by assistance from the 
United States through loan, grant, loan guarantee or insurance, or 
otherwise, is ``employed'' and receiving ``wages'', regardless of any 
contractual relationship alleged to exist between the contractor and 
such person.
    Public building (or public work). The term ``public building (or 
public work)'' includes a building or work the construction, 
prosecution, completion, or repair of which, as defined in this 
section, is carried on directly by authority of or with funds of a 
Federal agency to serve the general public regardless of whether title 
thereof is in a Federal agency. The construction, prosecution, 
completion, or repair of a portion of a building or work, or the 
installation (where appropriate) of equipment or components into a 
building or work, may still be considered a public building or work, 
even where the entire building or work is not owned, leased by, or to 
be used by the Federal agency, as long as the construction, 
prosecution, completion, or repair of that portion of the building or 
work, or the installation (where appropriate) of equipment or 
components into that building or work, is carried on by authority of or 
with funds of a Federal agency to serve the interest of the general 
public.
    United States or the District of Columbia. The term ``United States 
or the District of Columbia'' means the United States, the District of 
Columbia, and all executive departments, independent establishments, 
administrative agencies, and instrumentalities of the United States and 
of the District of Columbia, and any corporation for which all or 
substantially all of the stock of which is beneficially owned by the 
United States, by the District of Columbia, or any of the foregoing 
departments, establishments, agencies, and instrumentalities.

0
16. Revise Sec.  3.3 to read as follows:


Sec.  3.3  Certified payrolls.

    (a) [Reserved]
    (b) Each contractor or subcontractor engaged in the construction, 
prosecution, completion, or repair of any public building or public 
work, or building or work financed in whole or in part by loans or 
grants from the United States, each week must provide a copy of its 
weekly payroll for all laborers and mechanics engaged on work covered 
by this part and part 5 of this chapter during the preceding weekly 
payroll period, accompanied by a statement of compliance certifying the 
accuracy of the weekly payroll information. This statement must be 
executed by the contractor or subcontractor or by an authorized officer 
or employee of the contractor or subcontractor who supervises the 
payment of wages, and must be on the back of Form WH-347, ``Payroll 
(For Contractors Optional Use)'' or on any form with identical wording. 
Copies of WH-347 may be obtained from the contracting or sponsoring 
agency or from the Wage and Hour Division website at https://www.dol.gov/agencies/whd/government-contracts/construction/forms or its 
successor site. The signature by the contractor, subcontractor, or the 
authorized officer or employee must be an original handwritten 
signature or a legally valid electronic signature.
    (c) The requirements of this section do not apply to any contract 
of $2,000 or less.
    (d) Upon a written finding by the head of a Federal agency, the 
Secretary of Labor may provide reasonable limitations, variations, 
tolerances, and exemptions from the requirements of

[[Page 57730]]

this section subject to such conditions as the Secretary of Labor may 
specify.

0
17. Revise Sec.  3.4 to read as follows:


Sec.  3.4  Submission of certified payroll and the preservation and 
inspection of weekly payroll records.

    (a) Certified payroll. Each certified payroll required under Sec.  
3.3 must be delivered by the contractor or subcontractor, within 7 days 
after the regular payment date of the payroll period, to a 
representative at the site of the building or work of the agency 
contracting for or financing the work, or, if there is no 
representative of the agency at the site of the building or work, the 
statement must be delivered by mail or by any other means normally 
assuring delivery by the contractor or subcontractor, within that 7 day 
time period, to the agency contracting for or financing the building or 
work. After the certified payrolls have been reviewed in accordance 
with the contracting or sponsoring agency's procedures, such certified 
payrolls must be preserved by the agency for a period of 3 years after 
all the work on the prime contract is completed and must be produced 
for inspection, copying, and transcription by the Department of Labor 
upon request. The certified payrolls must also be transmitted together 
with a report of any violation, in accordance with applicable 
procedures prescribed by the United States Department of Labor.
    (b) Recordkeeping. Each contractor or subcontractor must preserve 
the regular payroll records for a period of 3 years after all the work 
on the prime contract is completed. The regular payroll records must 
set out accurately and completely the name; Social Security number; 
last known address, telephone number, and email address of each laborer 
and mechanic; each worker's correct classification(s) of work actually 
performed; hourly rates of wages paid (including rates of contributions 
or costs anticipated for bona fide fringe benefits or cash equivalents 
thereof); daily and weekly number of hours actually worked in total and 
on each covered contract; deductions made; and actual wages paid. The 
contractor or subcontractor must make such regular payroll records, as 
well as copies of the certified payrolls provided to the contracting or 
sponsoring agency, available at all times for inspection, copying, and 
transcription by the contracting officer or their authorized 
representative, and by authorized representatives of the Department of 
Labor.

0
18. Revise Sec.  3.5 to read as follows:


Sec.  3.5  Payroll deductions permissible without application to or 
approval of the Secretary of Labor.

    Deductions made under the circumstances or in the situations 
described in the paragraphs of this section may be made without 
application to and approval of the Secretary of Labor:
    (a) Any deduction made in compliance with the requirements of 
Federal, State, or local law, such as Federal or State withholding 
income taxes and Federal social security taxes.
    (b) Any deduction of sums previously paid to the laborer or 
mechanic as a bona fide prepayment of wages when such prepayment is 
made without discount or interest. A bona fide prepayment of wages is 
considered to have been made only when cash or its equivalent has been 
advanced to the person employed in such manner as to give him complete 
freedom of disposition of the advanced funds.
    (c) Any deduction of amounts required by court process to be paid 
to another, unless the deduction is in favor of the contractor, 
subcontractor, or any affiliated person, or when collusion or 
collaboration exists.
    (d) Any deduction constituting a contribution on behalf of the 
laborer or mechanic employed to funds established by the contractor or 
representatives of the laborers or mechanics, or both, for the purpose 
of providing either from principal or income, or both, medical or 
hospital care, pensions or annuities on retirement, death benefits, 
compensation for injuries, illness, accidents, sickness, or disability, 
or for insurance to provide any of the foregoing, or unemployment 
benefits, vacation pay, savings accounts, or similar payments for the 
benefit of the laborers or mechanics, their families and dependents: 
Provided, however, That the following standards are met:
    (1) The deduction is not otherwise prohibited by law;
    (2) It is either:
    (i) Voluntarily consented to by the laborer or mechanic in writing 
and in advance of the period in which the work is to be done and such 
consent is not a condition either for the obtaining of or for the 
continuation of employment; or
    (ii) Provided for in a bona fide collective bargaining agreement 
between the contractor or subcontractor and representatives of its 
laborers or mechanics;
    (3) No profit or other benefit is otherwise obtained, directly or 
indirectly, by the contractor or subcontractor or any affiliated person 
in the form of commission, dividend, or otherwise; and
    (4) The deductions must serve the convenience and interest of the 
laborer or mechanic.
    (e) Any deduction requested by the laborer or mechanic to enable 
him or her to repay loans to or to purchase shares in credit unions 
organized and operated in accordance with Federal and State credit 
union statutes.
    (f) Any deduction voluntarily authorized by the laborer or mechanic 
for the making of contributions to governmental or quasi-governmental 
agencies, such as the American Red Cross.
    (g) Any deduction voluntarily authorized by the laborer or mechanic 
for the making of contributions to charitable organizations as defined 
by 26 U.S.C. 501(c)(3).
    (h) Any deductions to pay regular union initiation fees and 
membership dues, not including fines or special assessments: Provided, 
however, That a collective bargaining agreement between the contractor 
or subcontractor and representatives of its laborers or mechanics 
provides for such deductions and the deductions are not otherwise 
prohibited by law.
    (i) Any deduction not more than for the ``reasonable cost'' of 
board, lodging, or other facilities meeting the requirements of section 
3(m) of the Fair Labor Standards Act of 1938, as amended, and 29 CFR 
part 531. When such a deduction is made the additional records required 
under 29 CFR 516.25(a) must be kept.
    (j) Any deduction for the cost of safety equipment of nominal value 
purchased by the laborer or mechanic as their own property for their 
personal protection in their work, such as safety shoes, safety 
glasses, safety gloves, and hard hats, if such equipment is not 
required by law to be furnished by the contractor, if such deduction 
does not violate the Fair Labor Standards Act or any other law, if the 
cost on which the deduction is based does not exceed the actual cost to 
the contractor where the equipment is purchased from the contractor and 
does not include any direct or indirect monetary return to the 
contractor where the equipment is purchased from a third person, and if 
the deduction is either:
    (1) Voluntarily consented to by the laborer or mechanic in writing 
and in advance of the period in which the work is to be done and such 
consent is not a condition either for the obtaining of employment or 
its continuance; or
    (2) Provided for in a bona fide collective bargaining agreement 
between the contractor or subcontractor and

[[Page 57731]]

representatives of its laborers and mechanics.

0
19. Revise Sec.  3.7 to read as follows:


Sec.  3.7  Applications for the approval of the Secretary of Labor.

    Any application for the making of payroll deductions under Sec.  
3.6 must comply with the requirements prescribed in the following 
paragraphs of this section:
    (a) The application must be in writing and addressed to the 
Secretary of Labor. The application must be submitted by email to 
[email protected], by mail to the United States Department of 
Labor, Wage and Hour Division, Director, Division of Government 
Contracts Enforcement, 200 Constitution Ave., NW, Room S-3502, 
Washington, DC 20210, or by any other means normally assuring delivery.
    (b) The application need not identify the contract or contracts 
under which the work in question is to be performed. Permission will be 
given for deductions on all current and future contracts of the 
applicant for a period of 1 year. A renewal of permission to make such 
payroll deduction will be granted upon the submission of an application 
which makes reference to the original application, recites the date of 
the Secretary of Labor's approval of such deductions, states 
affirmatively that there is continued compliance with the standards set 
forth in the provisions of Sec.  3.6, and specifies any conditions 
which have changed in regard to the payroll deductions.
    (c) The application must state affirmatively that there is 
compliance with the standards set forth in the provisions of Sec.  3.6. 
The affirmation must be accompanied by a full statement of the facts 
indicating such compliance.
    (d) The application must include a description of the proposed 
deduction, the purpose of the deduction, and the classes of laborers or 
mechanics from whose wages the proposed deduction would be made.
    (e) The application must state the name and business of any third 
person to whom any funds obtained from the proposed deductions are to 
be transmitted and the affiliation of such person, if any, with the 
applicant.

0
20. Revise Sec.  3.8 to read as follows:


Sec.  3.8  Action by the Secretary of Labor upon applications.

    The Secretary of Labor will decide whether or not the requested 
deduction is permissible under provisions of Sec.  3.6; and will notify 
the applicant in writing of the decision.

0
21. Revise Sec.  3.11 to read as follows:


Sec.  3.11  Regulations part of contract.

    All contracts made with respect to the construction, prosecution, 
completion, or repair of any public building or public work or building 
or work financed in whole or in part by loans or grants from the United 
States covered by the regulations in this part must expressly bind the 
contractor or subcontractor to comply with such of the regulations in 
this part as may be applicable. In this regard, see Sec.  5.5(a) of 
this subtitle. However, these requirements will be considered to be 
effective by operation of law, whether or not they are incorporated 
into such contracts, as set forth in Sec.  5.5(e) of this subtitle.

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)

0
22. The authority citation for part 5 is revised to read as follows:

    Authority:  5 U.S.C. 301; Reorganization Plan No. 14 of 1950, 5 
U.S.C. appendix; 28 U.S.C. 2461 note; 40 U.S.C. 3141 et seq.; 40 
U.S.C. 3145; 40 U.S.C. 3148; 40 U.S.C. 3701 et seq.; Secretary's 
Order No. 01-2014, 79 FR 77527; and the laws referenced by Sec.  
5.1(a).


0
23. Revise Sec.  5.1 to read as follows:


Sec.  5.1  Purpose and scope.

    (a) The regulations contained in this part are promulgated under 
the authority conferred upon the Secretary of Labor by Reorganization 
Plan No. 14 of 1950 (64 Stat. 1267, as amended, 5 U.S.C. appendix) and 
the Copeland Act (48 Stat. 948; 18 U.S.C. 874; 40 U.S.C. 3145) in order 
to coordinate the administration and enforcement of labor standards 
provisions contained in the Davis-Bacon Act (46 Stat. 1494, as amended; 
40 U.S.C. 3141 et seq.) and its related statutes (``Related Acts'').
    (1) A listing of laws requiring Davis-Bacon labor standards 
provisions can be found at www.dol.gov/agencies/whd/government-contracts or its successor website.
    (2) [Reserved]
    (b) Part 1 of this subtitle contains the Department's procedural 
rules governing requests for wage determinations and the issuance and 
use of such wage determinations under the Davis-Bacon Act and its 
Related Acts.

0
24. Revise Sec.  5.2 to read as follows:


Sec.  5.2  Definitions.

    Administrator. The term ``Administrator'' means the Administrator 
of the Wage and Hour Division, U.S. Department of Labor, or authorized 
representative.
    Agency. The term ``agency'' means any Federal, State, or local 
government agency or instrumentality, or other similar entity, that 
enters into a contract or provides assistance through loan, grant, loan 
guarantee or insurance, or otherwise, to a project subject to the 
Davis-Bacon labor standards, as defined in this section.
    (1) Federal agency. The term ``Federal agency'' means an agency or 
instrumentality of the United States or the District of Columbia, as 
defined in this section, that enters into a contract or provides 
assistance through loan, grant, loan guarantee or insurance, or 
otherwise, to a project subject to the Davis-Bacon labor standards.
    (2) [Reserved]
    Agency Head. The term ``Agency Head'' means the principal official 
of an agency and includes those persons duly authorized to act on 
behalf of the Agency Head.
    Apprentice and helper. The terms ``apprentice'' and ``helper'' are 
defined as follows:
    (1) ``Apprentice'' means:
    (i) A person employed and individually registered in a bona fide 
apprenticeship program registered with the U.S. Department of Labor, 
Employment and Training Administration, Office of Apprenticeship, or 
with a State Apprenticeship Agency recognized by the Office of 
Apprenticeship; or
    (ii) A person in the first 90 days of probationary employment as an 
apprentice in such an apprenticeship program, who is not individually 
registered in the program, but who has been certified by the Office of 
Apprenticeship or a State Apprenticeship Agency (where appropriate) to 
be eligible for probationary employment as an apprentice;
    (2) These provisions do not apply to apprentices and trainees 
employed on projects subject to 23 U.S.C. 113 who are enrolled in 
programs which have been certified by the Secretary of Transportation 
in accordance with 23 U.S.C. 113(c).
    (3) A distinct classification of helper will be issued in wage 
determinations applicable to work performed on construction projects 
covered by the labor standards provisions of the Davis-Bacon and 
Related Acts only where:
    (i) The duties of the helper are clearly defined and distinct from 
those of any

[[Page 57732]]

other classification on the wage determination;
    (ii) The use of such helpers is an established prevailing practice 
in the area; and
    (iii) The helper is not employed as a trainee in an informal 
training program. A ``helper'' classification will be added to wage 
determinations pursuant to Sec.  5.5(a)(1)(iii)(A) only where, in 
addition, the work to be performed by the helper is not performed by a 
classification in the wage determination.
    Building or work. The term ``building or work'' generally includes 
construction activities of all types, as distinguished from 
manufacturing, furnishing of materials, or servicing and maintenance 
work. The term includes, without limitation, buildings, structures, and 
improvements of all types, such as bridges, dams, solar panels, wind 
turbines, broadband installation, installation of electric car 
chargers, plants, highways, parkways, streets, subways, tunnels, 
sewers, mains, power lines, pumping stations, heavy generators, 
railways, airports, terminals, docks, piers, wharves, ways, 
lighthouses, buoys, jetties, breakwaters, levees, canals, dredging, 
shoring, rehabilitation and reactivation of plants, scaffolding, 
drilling, blasting, excavating, clearing, and landscaping. The term 
``building or work'' also includes a portion of a building or work, or 
the installation (where appropriate) of equipment or components into a 
building or work.
    Construction, prosecution, completion, or repair. The term 
``construction, prosecution, completion, or repair'' means the 
following:
    (1) These terms include all types of work done--
    (i) On a particular building or work at the site of the work, as 
defined in this section, by laborers and mechanics employed by a 
contractor or subcontractor, or
    (ii) In the construction or development of a project under a 
development statute.
    (2) These terms include, without limitation (except as specified in 
this definition):
    (i) Altering, remodeling, installation (where appropriate) on the 
site of the work of items fabricated offsite;
    (ii) Painting and decorating;
    (iii) Manufacturing or furnishing of materials, articles, supplies 
or equipment, but only if such work is done by laborers or mechanics
    (A) Employed by a contractor or subcontractor, as defined in this 
section, on the site of the work, as defined in this section, or
    (B) In the construction or development of a project under a 
development statute;
    (iv) ``Covered transportation,'' defined as any of the following 
activities:
    (A) Transportation that takes place entirely within a location 
meeting the definition of ``site of the work'' in this section;
    (B) Transportation of one or more ``significant portion(s)'' of the 
building or work between a ``secondary construction site'' as defined 
in this section and a ``primary construction site'' as defined in this 
section;
    (C) Transportation between an ``adjacent or virtually adjacent 
dedicated support site'' as defined in this section and a ``primary 
construction site'' or ``secondary construction site'' as defined in 
this section;
    (D) ``Onsite activities essential or incidental to offsite 
transportation,'' defined as activities conducted by a truck driver or 
truck driver's assistant on the site of the work that are essential or 
incidental to the transportation of materials or supplies to or from 
the site of the work, such as loading, unloading, or waiting for 
materials to be loaded or unloaded, but only where the driver or 
driver's assistant's time spent on the site of the work is not de 
minimis; and
    (E) Any transportation and related activities, whether on or off 
the site of the work, by laborers and mechanics employed in the 
construction or development of the project under a development statute.
    (v) Demolition and/or removal, under any of the following 
circumstances:
    (A) Where the demolition and/or removal activities themselves 
constitute construction, alteration, and/or repair of an existing 
building or work. Examples of such activities include the removal of 
asbestos, paint, components, systems, or parts from a facility that 
will not be demolished; as well as contracts for hazardous waste 
removal, land recycling, or reclamation that involve substantial earth 
moving, removal of contaminated soil, re-contouring surfaces, and/or 
habitat restoration.
    (B) Where subsequent construction covered in whole or in part by 
the labor standards in this part is contemplated at the site of the 
demolition or removal, either as part of the same contract or as part 
of a future contract. In determining whether covered construction is 
contemplated within the meaning of this provision, relevant factors 
include, but are not limited to, the existence of engineering or 
architectural plans or surveys of the site; the allocation of, or an 
application for, Federal funds; contract negotiations or bid 
solicitations; the stated intent of the relevant government officials; 
and the disposition of the site after demolition.
    (C) Where otherwise required by statute.
    (3) Except for transportation that constitutes ``covered 
transportation'' as defined in this section, construction, prosecution, 
completion, or repair does not include the transportation of materials 
or supplies to or from the site of the work.
    Contract. The term ``contract'' means any prime contract which is 
subject wholly or in part to the labor standards provisions of any of 
the laws referenced by Sec.  5.1 and any subcontract of any tier 
thereunder, let under the prime contract. With the exception of work 
performed under a development statute, the terms contract and 
subcontract do not include agreements with employers that meet the 
definition of a material supplier under this section.
    Contracting officer. The term ``contracting officer'' means the 
individual, a duly appointed successor, or authorized representative 
who is designated and authorized to enter into contracts on behalf of 
an agency, sponsor, owner, applicant, or other similar entity.
    Contractor. The term ``contractor'' means any individual or other 
legal entity that enters into or is awarded a contract that is subject 
wholly or in part to the labor standards provisions of any of the laws 
referenced by Sec.  5.1, including any prime contract or subcontract of 
any tier under a covered prime contract. In addition, the term 
contractor includes any surety that is completing performance for a 
defaulted contractor pursuant to a performance bond. The U.S. 
Government, its agencies, and instrumentalities are not contractors, 
subcontractors, employers or joint employers for purposes of the labor 
standards provisions of any of the laws referenced by Sec.  5.1. A 
State or local government is not regarded as a contractor or 
subcontractor under statutes providing loans, grants, or other Federal 
assistance in situations where construction is performed by its own 
employees. However, under development statutes or other statutes 
requiring payment of prevailing wages to all laborers and mechanics 
employed on the assisted project, such as the U.S. Housing Act of 1937, 
State and local recipients of Federal-aid must pay these workers 
according to Davis-Bacon labor standards. The term ``contractor'' does 
not include an entity that is a material supplier, except if the entity 
is performing work under a development statute.
    Davis-Bacon labor standards. The term ``Davis-Bacon labor 
standards'' as

[[Page 57733]]

used in this part means the requirements of the Davis-Bacon Act, the 
Contract Work Hours and Safety Standards Act (other than those relating 
to safety and health), the Copeland Act, and the prevailing wage 
provisions of the other statutes referenced in Sec.  5.1, and the 
regulations in this part and in parts 1 and 3 of this subtitle.
    Development statute. The term ``development statute'' includes 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 any other Davis-Bacon Related Act that requires payment of 
prevailing wages under the Davis-Bacon labor standards to all laborers 
and mechanics employed in the development of a project and for which 
the Administrator determines that the statute's language and/or 
legislative history reflected clear congressional intent to apply a 
coverage standard different from the Davis-Bacon Act itself.
    Employed. Every person performing the duties of a laborer or 
mechanic in the construction, prosecution, completion, or repair of a 
public building or public work, or building or work financed in whole 
or in part by assistance from the United States through loan, grant, 
loan guarantee or insurance, or otherwise, is ``employed'' regardless 
of any contractual relationship alleged to exist between the contractor 
and such person.
    Laborer or mechanic. The term ``laborer or mechanic'' includes at 
least those workers whose duties are manual or physical in nature 
(including those workers who use tools or who are performing the work 
of a trade), as distinguished from mental or managerial. The term 
``laborer'' or ``mechanic'' includes apprentices, helpers, and, in the 
case of contracts subject to the Contract Work Hours and Safety 
Standards Act, watchpersons or guards. The term does not apply to 
workers whose duties are primarily administrative, executive, or 
clerical, rather than manual. Persons employed in a bona fide 
executive, administrative, or professional capacity as defined in 29 
CFR part 541 are not deemed to be laborers or mechanics. Forepersons 
who devote more than 20 percent of their time during a workweek to 
mechanic or laborer duties, and who do not meet the criteria of part 
541, are laborers and mechanics for the time so spent.
    Material supplier. The term ``material supplier'' is defined as 
follows:
    (1) A material supplier is an entity meeting all of the following 
criteria:
    (i) Its only obligations for work on the contract or project are 
the delivery of materials, articles, supplies, or equipment, which may 
include pickup of the same in addition to, but not exclusive of, 
delivery, and which may also include activities incidental to such 
delivery and pickup, such as loading, unloading, or waiting for 
materials to be loaded or unloaded; and
    (ii) Its facility or facilities that manufactures the materials, 
articles, supplies, or equipment used for the contract or project:
    (A) Is not located on, or does not itself constitute, the project 
or contract's primary construction site or secondary construction site 
as defined in this section; and
    (B) Either was established before opening of bids on the contract 
or project, or is not dedicated exclusively, or nearly so, to the 
performance of the contract or project.
    (2) If an entity, in addition to being engaged in the activities 
specified in paragraph (1)(i) of this definition, also engages in other 
construction, prosecution, completion, or repair work at the site of 
the work, it is not a material supplier.
    Prime contractor. The term ``prime contractor'' means any person or 
entity that enters into a contract with an agency. For the purposes of 
the labor standards provisions of any of the laws referenced by Sec.  
5.1, the term prime contractor also includes the controlling 
shareholders or members of any entity holding a prime contract, the 
joint venturers or partners in any joint venture or partnership holding 
a prime contract, and any contractor (e.g., a general contractor) that 
has been delegated the responsibility for overseeing all or 
substantially all of the construction anticipated by the prime 
contract. For the purposes of the provisions in Sec. Sec.  5.5 and 5.9, 
any such related entities holding different prime contracts are 
considered to be the same prime contractor.
    Public building or public work. The term ``public building or 
public work'' includes a building or work, the construction, 
prosecution, completion, or repair of which, as defined in this 
section, is carried on directly by authority of or with funds of a 
Federal agency to serve the interest of the general public regardless 
of whether title thereof is in a Federal agency. The construction, 
prosecution, completion, or repair of a portion of a building or work, 
or the installation (where appropriate) of equipment or components into 
a building or work, may still be considered a public building or work, 
even where the entire building or work is not owned, leased by, or to 
be used by a Federal agency, as long as the construction, prosecution, 
completion, or repair of that portion of the building or work, or the 
installation (where appropriate) of equipment or components into that 
building or work, is carried on by authority of or with funds of a 
Federal agency to serve the interest of the general public.
    Secretary. The term ``Secretary'' includes the Secretary of Labor, 
and their authorized representative.
    Site of the work. The term ``site of the work'' is defined as 
follows:
    (1) ``Site of the work'' includes all of the following:
    (i) The primary construction site(s), defined as the physical place 
or places where the building or work called for in the contract will 
remain.
    (ii) Any secondary construction site(s), defined as any other 
site(s) where a significant portion of the building or work is 
constructed, provided that such construction is for specific use in 
that building or work and does not simply reflect the manufacture or 
construction of a product made available to the general public, and 
provided further that the site is either established specifically for 
the performance of the contract or project, or is dedicated 
exclusively, or nearly so, to the performance of the contract or 
project for a specific period of time. A ``significant portion'' of a 
building or work means one or more entire portion(s) or module(s) of 
the building or work, such as a completed room or structure, with 
minimal construction work remaining other than the installation and/or 
final assembly of the portions or modules at the place where the 
building or work will remain. A ``significant portion'' does not 
include materials or prefabricated component parts such as 
prefabricated housing components. A ``specific period of time'' means a 
period of weeks, months, or more, and does not include circumstances 
where a site at which multiple projects are in progress is shifted 
exclusively or nearly so to a single project for a few hours or days in 
order to meet a deadline.
    (iii) Any adjacent or virtually adjacent dedicated support sites, 
defined as:
    (A) Job headquarters, tool yards, batch plants, borrow pits, and 
similar facilities of a contractor or subcontractor that are dedicated 
exclusively, or nearly so, to performance of the contract or project, 
and adjacent or virtually adjacent to either a primary construction 
site or a secondary construction site, and
    (B) Locations adjacent or virtually adjacent to a primary 
construction site at which workers perform activities associated with 
directing vehicular or

[[Page 57734]]

pedestrian traffic around or away from the primary construction site.
    (2) With the exception of locations that are on, or that themselves 
constitute, primary or secondary construction sites as defined in 
paragraphs (1)(i) and (ii) of this definition, site of the work does 
not include:
    (i) 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; or
    (ii) Fabrication plants, batch plants, borrow pits, job 
headquarters, tool yards, etc., of a material supplier, which are 
established by a material supplier for the project before opening of 
bids and not on the primary construction site or a secondary 
construction site, even where the operations for a period of time may 
be dedicated exclusively, or nearly so, to the performance of a 
contract.
    Subcontractor. The term ``subcontractor'' means any contractor that 
agrees to perform or be responsible for the performance of any part of 
a contract that is subject wholly or in part to the labor standards 
provisions of any of the laws referenced in Sec.  5.1. The term 
subcontractor includes subcontractors of any tier.
    United States or the District of Columbia. The term ``United States 
or the District of Columbia'' means the United States, the District of 
Columbia, and all executive departments, independent establishments, 
administrative agencies, and instrumentalities of the United States and 
of the District of Columbia, including non-appropriated fund 
instrumentalities and any corporation for which all or substantially 
all of its stock is beneficially owned by the United States or by the 
foregoing departments, establishments, agencies, or instrumentalities.
    Wages. The term ``wages'' means the basic hourly rate of pay; any 
contribution irrevocably made by a contractor or subcontractor to a 
trustee or to a third person pursuant to a bona fide fringe benefit 
fund, plan, or program; and the rate of costs to the contractor or 
subcontractor which may be reasonably anticipated in providing bona 
fide fringe benefits to laborers and mechanics pursuant to an 
enforceable commitment to carry out a financially responsible plan or 
program, which was communicated in writing to the laborers and 
mechanics affected. The fringe benefits enumerated in the Davis-Bacon 
Act include medical or hospital care, pensions on retirement or death, 
compensation for injuries or illness resulting from occupational 
activity, or insurance to provide any of the foregoing; unemployment 
benefits; life insurance, disability insurance, sickness insurance, or 
accident insurance; vacation or holiday pay; defraying costs of 
apprenticeship or other similar programs; or other bona fide fringe 
benefits. Fringe benefits do not include benefits required by other 
Federal, State, or local law.
    Wage determination. The term ``wage determination'' includes the 
original decision and any subsequent decisions revising, modifying, 
superseding, correcting, or otherwise changing the provisions of the 
original decision. The application of the wage determination must be in 
accordance with the provisions of Sec.  1.6 of this subtitle.

0
25. Amend Sec.  5.5 by:
0
a. Revising paragraphs (a) introductory text and (a)(1) through (4), 
(6), and (10);
0
b. Adding paragraph (a)(11);
0
c. Revising paragraphs (b) introductory text and (b)(2) through (4);
0
d. Adding paragraph (b)(5);
0
e. Revising paragraph (c); and
0
f. Adding paragraphs (d) and (e).
    The revisions and additions read as follows:


Sec.  5.5  Contract provisions and related matters.

    (a) Required contract clauses. The Agency head will cause or 
require the contracting officer to require the contracting officer to 
insert in full, or (for contracts covered by the Federal Acquisition 
Regulation (48 CFR chapter 1)) by reference, in any contract in excess 
of $2,000 which is entered into for the actual construction, alteration 
and/or repair, including painting and decorating, of a public building 
or public work, or building or work financed in whole or in part from 
Federal funds or in accordance with guarantees of a Federal agency or 
financed from funds obtained by pledge of any contract of a Federal 
agency to make a loan, grant or annual contribution (except where a 
different meaning is expressly indicated), and which is subject to the 
labor standards provisions of any of the laws referenced by Sec.  5.1, 
the following clauses (or any modifications thereof to meet the 
particular needs of the agency, Provided, That such modifications are 
first approved by the Department of Labor):
    (1) Minimum wages--(i) Wage rates and fringe benefits. All laborers 
and mechanics employed or working upon the site of the work (or 
otherwise working in construction or development of the project under a 
development statute), will be paid unconditionally and not less often 
than once a week, and without subsequent deduction or rebate on any 
account (except such payroll deductions as are permitted by regulations 
issued by the Secretary of Labor under the Copeland Act (29 CFR part 
3)), the full amount of basic hourly wages and bona fide fringe 
benefits (or cash equivalents thereof) due at time of payment computed 
at rates not less than those contained in the wage determination of the 
Secretary of Labor which is attached hereto and made a part hereof, 
regardless of any contractual relationship which may be alleged to 
exist between the contractor and such laborers and mechanics. As 
provided in paragraphs (d) and (e) of this section, the appropriate 
wage determinations are effective by operation of law even if they have 
not been attached to the contract. Contributions made or costs 
reasonably anticipated for bona fide fringe benefits under the Davis-
Bacon Act (40 U.S.C. 3141(2)(B)) on behalf of laborers or mechanics are 
considered wages paid to such laborers or mechanics, subject to the 
provisions of paragraph (a)(1)(v) of this section; also, regular 
contributions made or costs incurred for more than a weekly period (but 
not less often than quarterly) under plans, funds, or programs which 
cover the particular weekly period, are deemed to be constructively 
made or incurred during such weekly period. Such laborers and mechanics 
must be paid the appropriate wage rate and fringe benefits on the wage 
determination for the classification(s) of work actually performed, 
without regard to skill, except as provided in paragraph (a)(4) of this 
section. Laborers or mechanics performing work in more than one 
classification may be compensated at the rate specified for each 
classification for the time actually worked therein: Provided, That the 
employer's payroll records accurately set forth the time spent in each 
classification in which work is performed. The wage determination 
(including any additional classifications and wage rates conformed 
under paragraph (a)(1)(iii) of this section) and the Davis-Bacon poster 
(WH-1321) must be posted at all times by the contractor and its 
subcontractors at the site of the work in a prominent and accessible 
place where it can be easily seen by the workers.
    (ii) Frequently recurring classifications. (A) In addition to wage 
and fringe benefit rates that have been

[[Page 57735]]

determined to be prevailing under the procedures set forth in 29 CFR 
part 1, a wage determination may contain, pursuant to Sec.  1.3(f), 
wage and fringe benefit rates for classifications of laborers and 
mechanics for which conformance requests are regularly submitted 
pursuant to paragraph (a)(1)(iii) of this section, provided that:
    (1) The work performed by the classification is not performed by a 
classification in the wage determination for which a prevailing wage 
rate has been determined;
    (2) The classification is used in the area by the construction 
industry; and
    (3) The wage rate for the classification bears a reasonable 
relationship to the prevailing wage rates contained in the wage 
determination.
    (B) The Administrator will establish wage rates for such 
classifications in accordance with paragraph (a)(1)(iii)(A)(3) of this 
section. Work performed in such a classification must be paid at no 
less than the wage and fringe benefit rate listed on the wage 
determination for such classification.
    (iii) Conformance. (A) The contracting officer must require that 
any class of laborers or mechanics, including helpers, which is not 
listed in the wage determination and which is to be employed under the 
contract be classified in conformance with the wage determination. 
Conformance of an additional classification and wage rate and fringe 
benefits is appropriate only when the following criteria have been met:
    (1) The work to be performed by the classification requested is not 
performed by a classification in the wage determination; and
    (2) The classification is used in the area by the construction 
industry; and
    (3) The proposed wage rate, including any bona fide fringe 
benefits, bears a reasonable relationship to the wage rates contained 
in the wage determination.
    (B) The conformance process may not be used to split, subdivide, or 
otherwise avoid application of classifications listed in the wage 
determination.
    (C) If the contractor and the laborers and mechanics to be employed 
in the classification (if known), or their representatives, and the 
contracting officer agree on the classification and wage rate 
(including the amount designated for fringe benefits where 
appropriate), a report of the action taken will be sent by the 
contracting officer by email to [email protected]. The 
Administrator, or an authorized representative, will approve, modify, 
or disapprove every additional classification action within 30 days of 
receipt and so advise the contracting officer or will notify the 
contracting officer within the 30-day period that additional time is 
necessary.
    (D) In the event the contractor, the laborers or mechanics to be 
employed in the classification or their representatives, and the 
contracting officer do not agree on the proposed classification and 
wage rate (including the amount designated for fringe benefits, where 
appropriate), the contracting officer will, by email to 
[email protected], refer the questions, including the views of all 
interested parties and the recommendation of the contracting officer, 
to the Administrator for determination. The Administrator, or an 
authorized representative, will issue a determination within 30 days of 
receipt and so advise the contracting officer or will notify the 
contracting officer within the 30-day period that additional time is 
necessary.
    (E) The contracting officer must promptly notify the contractor of 
the action taken by the Wage and Hour Division under paragraphs 
(a)(1)(iii)(C) and (D) of this section. The contractor must furnish a 
written copy of such determination to each affected worker or it must 
be posted as a part of the wage determination. The wage rate (including 
fringe benefits where appropriate) determined pursuant to paragraph 
(a)(1)(iii)(C) or (D) of this section must be paid to all workers 
performing work in the classification under this contract from the 
first day on which work is performed in the classification.
    (iv) Fringe benefits not expressed as an hourly rate. Whenever the 
minimum wage rate prescribed in the contract for a class of laborers or 
mechanics includes a fringe benefit which is not expressed as an hourly 
rate, the contractor may either pay the benefit as stated in the wage 
determination or may pay another bona fide fringe benefit or an hourly 
cash equivalent thereof.
    (v) Unfunded plans. If the contractor does not make payments to a 
trustee or other third person, the contractor may consider as part of 
the wages of any laborer or mechanic the amount of any costs reasonably 
anticipated in providing bona fide fringe benefits under a plan or 
program, Provided, That the Secretary of Labor has found, upon the 
written request of the contractor, in accordance with the criteria set 
forth in Sec.  5.28, that the applicable standards of the Davis-Bacon 
Act have been met. The Secretary of Labor may require the contractor to 
set aside in a separate account assets for the meeting of obligations 
under the plan or program.
    (vi) Interest. In the event of a failure to pay all or part of the 
wages required by the contract, the contractor will be required to pay 
interest on any underpayment of wages.
    (2) Withholding--(i) Withholding requirements. The [write in name 
of Federal agency or the recipient of Federal assistance] may, upon its 
own action, or must, upon written request of an authorized 
representative of the Department of Labor, withhold or cause to be 
withheld from the contractor so much of the accrued payments or 
advances as may be considered necessary to satisfy the liabilities of 
the prime contractor or any subcontractor for the full amount of wages 
and monetary relief, including interest, required by the clauses set 
forth in paragraph (a) of this section for violations of this contract, 
or to satisfy any such liabilities required by any other Federal 
contract, or federally assisted contract subject to Davis-Bacon labor 
standards, that is held by the same prime contractor (as defined in 
Sec.  5.2). The necessary funds may be withheld from the contractor 
under this contract, any other Federal contract with the same prime 
contractor, or any other federally assisted contract that is subject to 
Davis-Bacon labor standards requirements and is held by the same prime 
contractor, regardless of whether the other contract was awarded or 
assisted by the same agency, and such funds may be used to satisfy the 
contractor liability for which the funds were withheld. In the event of 
a contractor's failure to pay any laborer or mechanic, including any 
apprentice or helper working on the site of the work (or otherwise 
working in construction or development of the project under a 
development statute) all or part of the wages required by the contract, 
or upon the contractor's failure to submit the required records as 
discussed in paragraph (a)(3)(iv) of this section, the [Agency] may on 
its own initiative and after written notice to the contractor, sponsor, 
applicant, owner, or other entity, as the case may be, take such action 
as may be necessary to cause the suspension of any further payment, 
advance, or guarantee of funds until such violations have ceased.
    (ii) Priority to withheld funds. The Department has priority to 
funds withheld or to be withheld in accordance with paragraph (a)(2)(i) 
or (b)(3)(i) of this section, or both, over claims to those funds by:
    (A) A contractor's surety(ies), including without limitation 
performance bond sureties and payment bond sureties;
    (B) A contracting agency for its reprocurement costs;

[[Page 57736]]

    (C) A trustee(s) (either a court-appointed trustee or a U.S. 
trustee, or both) in bankruptcy of a contractor, or a contractor's 
bankruptcy estate;
    (D) A contractor's assignee(s);
    (E) A contractor's successor(s); or
    (F) A claim asserted under the Prompt Payment Act, 31 U.S.C. 3901-
3907.
    (3) Records and certified payrolls--(i) Basic record requirements--
(A) Length of record retention. All regular payrolls and other basic 
records must be maintained by the contractor and any subcontractor 
during the course of the work and preserved for all laborers and 
mechanics working at the site of the work (or otherwise working in 
construction or development of the project under a development statute) 
for a period of at least 3 years after all the work on the prime 
contract is completed.
    (B) Information required. Such records must contain the name; 
Social Security number; last known address, telephone number, and email 
address of each such worker; each worker's correct classification(s) of 
work actually performed; hourly rates of wages paid (including rates of 
contributions or costs anticipated for bona fide fringe benefits or 
cash equivalents thereof of the types described in 40 U.S.C. 3141(2)(B) 
of the Davis-Bacon Act); daily and weekly number of hours actually 
worked in total and on each covered contract; deductions made; and 
actual wages paid.
    (C) Additional records relating to fringe benefits. Whenever the 
Secretary of Labor has found under paragraph (a)(1)(v) of this section 
that the wages of any laborer or mechanic include the amount of any 
costs reasonably anticipated in providing benefits under a plan or 
program described in 40 U.S.C. 3141(2)(B) of the Davis-Bacon Act, the 
contractor must maintain records which show that the commitment to 
provide such benefits is enforceable, that the plan or program is 
financially responsible, and that the plan or program has been 
communicated in writing to the laborers or mechanics affected, and 
records which show the costs anticipated or the actual cost incurred in 
providing such benefits.
    (D) Additional records relating to apprenticeship. Contractors with 
apprentices working under approved programs must maintain written 
evidence of the registration of apprenticeship programs, the 
registration of the apprentices, and the ratios and wage rates 
prescribed in the applicable programs.
    (ii) Certified payroll requirements--(A) Frequency and method of 
submission. The contractor or subcontractor must submit weekly, for 
each week in which any DBA- or Related Acts-covered work is performed, 
certified payrolls to the [write in name of appropriate Federal agency] 
if the agency is a party to the contract, but if the agency is not such 
a party, the contractor will submit the certified payrolls to the 
applicant, sponsor, owner, or other entity, as the case may be, that 
maintains such records, for transmission to the [write in name of 
agency]. The prime contractor is responsible for the submission of all 
certified payrolls by all subcontractors. A contracting agency or prime 
contractor may permit or require contractors to submit certified 
payrolls through an electronic system, as long as the electronic system 
requires a legally valid electronic signature; the system allows the 
contractor, the contracting agency, and the Department of Labor to 
access the certified payrolls upon request for at least 3 years after 
the work on the prime contract has been completed; and the contracting 
agency or prime contractor permits other methods of submission in 
situations where the contractor is unable or limited in its ability to 
use or access the electronic system.
    (B) Information required. The certified payrolls submitted must set 
out accurately and completely all of the information required to be 
maintained under paragraph (a)(3)(i)(B) of this section, except that 
full Social Security numbers and last known addresses, telephone 
numbers, and email addresses must not be included on weekly 
transmittals. Instead, the certified payrolls need only include an 
individually identifying number for each worker (e.g., the last four 
digits of the worker's Social Security number). The required weekly 
certified payroll information may be submitted using Optional Form WH-
347 or in any other format desired. Optional Form WH-347 is available 
for this purpose from the Wage and Hour Division website at https://www.dol.gov/sites/dolgov/files/WHD/legacy/files/wh347/.pdf or its 
successor website. It is not a violation of this section for a prime 
contractor to require a subcontractor to provide full Social Security 
numbers and last known addresses, telephone numbers, and email 
addresses to the prime contractor for its own records, without weekly 
submission by the subcontractor to the sponsoring government agency (or 
the applicant, sponsor, owner, or other entity, as the case may be, 
that maintains such records).
    (C) Statement of Compliance. Each certified payroll submitted must 
be accompanied by a ``Statement of Compliance,'' signed by the 
contractor or subcontractor, or the contractor's or subcontractor's 
agent who pays or supervises the payment of the persons working on the 
contract, and must certify the following:
    (1) That the certified payroll for the payroll period contains the 
information required to be provided under paragraph (a)(3)(ii) of this 
section, the appropriate information and basic records are being 
maintained under paragraph (a)(3)(i) of this section, and such 
information and records are correct and complete;
    (2) That each laborer or mechanic (including each helper and 
apprentice) working on the contract during the payroll period has been 
paid the full weekly wages earned, without rebate, either directly or 
indirectly, and that no deductions have been made either directly or 
indirectly from the full wages earned, other than permissible 
deductions as set forth in 29 CFR part 3; and
    (3) That each laborer or mechanic has been paid not less than the 
applicable wage rates and fringe benefits or cash equivalents for the 
classification(s) of work actually performed, as specified in the 
applicable wage determination incorporated into the contract.
    (D) Use of Optional Form WH-347. The weekly submission of a 
properly executed certification set forth on the reverse side of 
Optional Form WH-347 will satisfy the requirement for submission of the 
``Statement of Compliance'' required by paragraph (a)(3)(ii)(C) of this 
section.
    (E) Signature. The signature by the contractor, subcontractor, or 
the contractor's or subcontractor's agent must be an original 
handwritten signature or a legally valid electronic signature.
    (F) Falsification. The falsification of any of the above 
certifications may subject the contractor or subcontractor to civil or 
criminal prosecution under 18 U.S.C. 1001 and 31 U.S.C. 3729.
    (G) Length of certified payroll retention. The contractor or 
subcontractor must preserve all certified payrolls during the course of 
the work and for a period of 3 years after all the work on the prime 
contract is completed.
    (iii) Contracts, subcontracts, and related documents. The 
contractor or subcontractor must maintain this contract or subcontract 
and related documents including, without limitation, bids, proposals, 
amendments, modifications, and extensions. The contractor or 
subcontractor must preserve these contracts, subcontracts, and related

[[Page 57737]]

documents during the course of the work and for a period of 3 years 
after all the work on the prime contract is completed.
    (iv) Required disclosures and access--(A) Required record 
disclosures and access to workers. The contractor or subcontractor must 
make the records required under paragraphs (a)(3)(i) through (iii) of 
this section, and any other documents that the [write the name of the 
agency] or the Department of Labor deems necessary to determine 
compliance with the labor standards provisions of any of the applicable 
statutes referenced by Sec.  5.1, available for inspection, copying, or 
transcription by authorized representatives of the [write the name of 
the agency] or the Department of Labor, and must permit such 
representatives to interview workers during working hours on the job.
    (B) Sanctions for non-compliance with records and worker access 
requirements. If the contractor or subcontractor fails to submit the 
required records or to make them available, or refuses to permit worker 
interviews during working hours on the job, the Federal agency may, 
after written notice to the contractor, sponsor, applicant, owner, or 
other entity, as the case may be, that maintains such records or that 
employs such workers, take such action as may be necessary to cause the 
suspension of any further payment, advance, or guarantee of funds. 
Furthermore, failure to submit the required records upon request or to 
make such records available, or to permit worker interviews during 
working hours on the job, may be grounds for debarment action pursuant 
to Sec.  5.12. In addition, any contractor or other person that fails 
to submit the required records or make those records available to WHD 
within the time WHD requests that the records be produced will be 
precluded from introducing as evidence in an administrative proceeding 
under 29 CFR part 6 any of the required records that were not provided 
or made available to WHD. WHD will take into consideration a reasonable 
request from the contractor or person for an extension of the time for 
submission of records. WHD will determine the reasonableness of the 
request and may consider, among other things, the location of the 
records and the volume of production.
    (C) Required information disclosures. Contractors and 
subcontractors must maintain the full Social Security number and last 
known address, telephone number, and email address of each covered 
worker, and must provide them upon request to the [write in name of 
appropriate Federal agency] if the agency is a party to the contract, 
or to the Wage and Hour Division of the Department of Labor. If the 
Federal agency is not such a party to the contract, the contractor, 
subcontractor, or both, must, upon request, provide the full Social 
Security number and last known address, telephone number, and email 
address of each covered worker to the applicant, sponsor, owner, or 
other entity, as the case may be, that maintains such records, for 
transmission to the [write in name of agency], the contractor, or the 
Wage and Hour Division of the Department of Labor for purposes of an 
investigation or other compliance action.
    (4) Apprentices and equal employment opportunity--(i) Apprentices--
(A) Rate of pay. Apprentices will be permitted to work at less than the 
predetermined rate for the work they perform when they are employed 
pursuant to and individually registered in a bona fide apprenticeship 
program registered with the U.S. Department of Labor, Employment and 
Training Administration, Office of Apprenticeship (OA), or with a State 
Apprenticeship Agency recognized by the OA. A person who is not 
individually registered in the program, but who has been certified by 
the OA or a State Apprenticeship Agency (where appropriate) to be 
eligible for probationary employment as an apprentice, will be 
permitted to work at less than the predetermined rate for the work they 
perform in the first 90 days of probationary employment as an 
apprentice in such a program. In the event the OA or a State 
Apprenticeship Agency recognized by the OA withdraws approval of an 
apprenticeship program, the contractor will no longer be permitted to 
use apprentices at less than the applicable predetermined rate for the 
work performed until an acceptable program is approved.
    (B) Fringe benefits. Apprentices must be paid fringe benefits in 
accordance with the provisions of the apprenticeship program. If the 
apprenticeship program does not specify fringe benefits, apprentices 
must be paid the full amount of fringe benefits listed on the wage 
determination for the applicable classification. If the Administrator 
determines that a different practice prevails for the applicable 
apprentice classification, fringe benefits must be paid in accordance 
with that determination.
    (C) Apprenticeship ratio. The allowable ratio of apprentices to 
journeyworkers on the job site in any craft classification must not be 
greater than the ratio permitted to the contractor as to the entire 
work force under the registered program or the ratio applicable to the 
locality of the project pursuant to paragraph (a)(4)(i)(D) of this 
section. Any worker listed on a payroll at an apprentice wage rate, who 
is not registered or otherwise employed as stated in paragraph 
(a)(4)(i)(A) of this section, must be paid not less than the applicable 
wage rate on the wage determination for the classification of work 
actually performed. In addition, any apprentice performing work on the 
job site in excess of the ratio permitted under this section must be 
paid not less than the applicable wage rate on the wage determination 
for the work actually performed.
    (D) Reciprocity of ratios and wage rates. Where a contractor is 
performing construction on a project in a locality other than the 
locality in which its program is registered, the ratios and wage rates 
(expressed in percentages of the journeyworker's hourly rate) 
applicable within the locality in which the construction is being 
performed must be observed. If there is no applicable ratio or wage 
rate for the locality of the project, the ratio and wage rate specified 
in the contractor's registered program must be observed.
    (ii) Equal employment opportunity. The use of apprentices and 
journeyworkers under this part must be in conformity with the equal 
employment opportunity requirements of Executive Order 11246, as 
amended, and 29 CFR part 30.
* * * * *
    (6) Subcontracts. The contractor or subcontractor must insert in 
any subcontracts the clauses contained in paragraphs (a)(1) through 
(11) of this section, along with the applicable wage determination(s) 
and such other clauses or contract modifications as the [write in the 
name of the Federal agency] may by appropriate instructions require, 
and a clause requiring the subcontractors to include these clauses and 
wage determination(s) in any lower tier subcontracts. The prime 
contractor is responsible for the compliance by any subcontractor or 
lower tier subcontractor with all the contract clauses in this section. 
In the event of any violations of these clauses, the prime contractor 
and any subcontractor(s) responsible will be liable for any unpaid 
wages and monetary relief, including interest from the date of the 
underpayment or loss, due to any workers of lower-tier

[[Page 57738]]

subcontractors, and may be subject to debarment, as appropriate.
* * * * *
    (10) Certification of eligibility. (i) By entering into this 
contract, the contractor certifies that neither it nor any person or 
firm who has an interest in the contractor's firm is a person or firm 
ineligible to be awarded Government contracts by virtue of 40 U.S.C. 
3144(b) or Sec.  5.12(a).
    (ii) No part of this contract shall be subcontracted to any person 
or firm ineligible for award of a Government contract by virtue of 40 
U.S.C. 3144(b) or Sec.  5.12(a).
    (iii) The penalty for making false statements is prescribed in the 
U.S. Code, Title 18 Crimes and Criminal Procedure, 18 U.S.C. 1001.
    (11) Anti-retaliation. It is unlawful for any person to discharge, 
demote, intimidate, threaten, restrain, coerce, blacklist, harass, or 
in any other manner discriminate against, or to cause any person to 
discharge, demote, intimidate, threaten, restrain, coerce, blacklist, 
harass, or in any other manner discriminate against, any worker or job 
applicant for:
    (i) Notifying any contractor of any conduct which the worker 
reasonably believes constitutes a violation of the DBA, Related Acts, 
this part, or 29 CFR part 1 or 3;
    (ii) Filing any complaint, initiating or causing to be initiated 
any proceeding, or otherwise asserting or seeking to assert on behalf 
of themselves or others any right or protection under the DBA, Related 
Acts, this part, or 29 CFR part 1 or 3;
    (iii) Cooperating in any investigation or other compliance action, 
or testifying in any proceeding under the DBA, Related Acts, this part, 
or 29 CFR part 1 or 3; or
    (iv) Informing any other person about their rights under the DBA, 
Related Acts, this part, or 29 CFR part 1 or 3.
    (b) Contract Work Hours and Safety Standards Act (CWHSSA). The 
Agency Head must cause or require the contracting officer to insert the 
following clauses set forth in paragraphs (b)(1) through (5) of this 
section in full, or (for contracts covered by the Federal Acquisition 
Regulation) by reference, in any contract in an amount in excess of 
$100,000 and subject to the overtime provisions of the Contract Work 
Hours and Safety Standards Act. These clauses must be inserted in 
addition to the clauses required by paragraph (a) of this section or 29 
CFR 4.6. As used in this paragraph (b), the terms ``laborers and 
mechanics'' include watchpersons and guards.
* * * * *
    (2) Violation; liability for unpaid wages; liquidated damages. In 
the event of any violation of the clause set forth in paragraph (b)(1) 
of this section the contractor and any subcontractor responsible 
therefor shall be liable for the unpaid wages and interest from the 
date of the underpayment. In addition, such contractor and 
subcontractor shall be liable to the United States (in the case of work 
done under contract for the District of Columbia or a territory, to 
such District or to such territory), for liquidated damages. Such 
liquidated damages shall be computed with respect to each individual 
laborer or mechanic, including watchpersons and guards, employed in 
violation of the clause set forth in paragraph (b)(1) of this section, 
in the sum of $31 for each calendar day on which such individual was 
required or permitted to work in excess of the standard workweek of 
forty hours without payment of the overtime wages required by the 
clause set forth in paragraph (b)(1).
    (3) Withholding for unpaid wages and liquidated damages--(i) 
Withholding process. The [write in the name of the Federal agency or 
the recipient of Federal assistance] may, upon its own action, or must, 
upon written request of an authorized representative of the Department 
of Labor, withhold or cause to be withheld from the contractor so much 
of the accrued payments or advances as may be considered necessary to 
satisfy the liabilities of the prime contractor or any subcontractor 
for any unpaid wages; monetary relief, including interest; and 
liquidated damages required by the clauses set forth in this paragraph 
(b) on this contract, any other Federal contract with the same prime 
contractor, or any other federally assisted contract subject to the 
Contract Work Hours and Safety Standards Act that is held by the same 
prime contractor (as defined in Sec.  5.2). The necessary funds may be 
withheld from the contractor under this contract, any other Federal 
contract with the same prime contractor, or any other federally 
assisted contract that is subject to the Contract Work Hours and Safety 
Standards Act and is held by the same prime contractor, regardless of 
whether the other contract was awarded or assisted by the same agency, 
and such funds may be used to satisfy the contractor liability for 
which the funds were withheld.
    (ii) Priority to withheld funds. The Department has priority to 
funds withheld or to be withheld in accordance with paragraph (a)(2)(i) 
or (b)(3)(i) of this section, or both, over claims to those funds by:
    (A) A contractor's surety(ies), including without limitation 
performance bond sureties and payment bond sureties;
    (B) A contracting agency for its reprocurement costs;
    (C) A trustee(s) (either a court-appointed trustee or a U.S. 
trustee, or both) in bankruptcy of a contractor, or a contractor's 
bankruptcy estate;
    (D) A contractor's assignee(s);
    (E) A contractor's successor(s); or
    (F) A claim asserted under the Prompt Payment Act, 31 U.S.C. 3901-
3907.
    (4) Subcontracts. The contractor or subcontractor must insert in 
any subcontracts the clauses set forth in paragraphs (b)(1) through (5) 
of this section and a clause requiring the subcontractors to include 
these clauses in any lower tier subcontracts. The prime contractor is 
responsible for compliance by any subcontractor or lower tier 
subcontractor with the clauses set forth in paragraphs (b)(1) through 
(5). In the event of any violations of these clauses, the prime 
contractor and any subcontractor(s) responsible will be liable for any 
unpaid wages and monetary relief, including interest from the date of 
the underpayment or loss, due to any workers of lower-tier 
subcontractors, and associated liquidated damages and may be subject to 
debarment, as appropriate.
    (5) Anti-retaliation. It is unlawful for any person to discharge, 
demote, intimidate, threaten, restrain, coerce, blacklist, harass, or 
in any other manner discriminate against, or to cause any person to 
discharge, demote, intimidate, threaten, restrain, coerce, blacklist, 
harass, or in any other manner discriminate against, any worker or job 
applicant for:
    (i) Notifying any contractor of any conduct which the worker 
reasonably believes constitutes a violation of the Contract Work Hours 
and Safety Standards Act (CWHSSA) or its implementing regulations in 
this part;
    (ii) Filing any complaint, initiating or causing to be initiated 
any proceeding, or otherwise asserting or seeking to assert on behalf 
of themselves or others any right or protection under CWHSSA or this 
part;
    (iii) Cooperating in any investigation or other compliance action, 
or testifying in any proceeding under CWHSSA or this part; or
    (iv) Informing any other person about their rights under CWHSSA or 
this part.
    (c) CWHSSA required records clause. In addition to the clauses 
contained in paragraph (b) of this section, in any contract subject 
only to the Contract Work Hours and Safety Standards Act

[[Page 57739]]

and not to any of the other laws referenced by Sec.  5.1, the Agency 
Head must cause or require the contracting officer to insert a clause 
requiring that the contractor or subcontractor must maintain regular 
payrolls and other basic records during the course of the work and must 
preserve them for a period of 3 years after all the work on the prime 
contract is completed for all laborers and mechanics, including guards 
and watchpersons, working on the contract. Such records must contain 
the name; last known address, telephone number, and email address; and 
social security number of each such worker; each worker's correct 
classification(s) of work actually performed; hourly rates of wages 
paid; daily and weekly number of hours actually worked; deductions 
made; and actual wages paid. Further, the Agency Head must cause or 
require the contracting officer to insert in any such contract a clause 
providing that the records to be maintained under this paragraph must 
be made available by the contractor or subcontractor for inspection, 
copying, or transcription by authorized representatives of the (write 
the name of agency) and the Department of Labor, and the contractor or 
subcontractor will permit such representatives to interview workers 
during working hours on the job.
    (d) Incorporation of contract clauses and wage determinations by 
reference. Although agencies are required to insert the contract 
clauses set forth in this section, along with appropriate wage 
determinations, in full into covered contracts, and contractors and 
subcontractors are required to insert them in any lower-tier 
subcontracts, the incorporation by reference of the required contract 
clauses and appropriate wage determinations will be given the same 
force and effect as if they were inserted in full text.
    (e) Incorporation by operation of law. The contract clauses set 
forth in this section (or their equivalent under the Federal 
Acquisition Regulation), along with the correct wage determinations, 
will be considered to be a part of every prime contract required by the 
applicable statutes referenced by Sec.  5.1 to include such clauses, 
and will be effective by operation of law, whether or not they are 
included or incorporated by reference into such contract, unless the 
Administrator grants a variance, tolerance, or exemption from the 
application of this paragraph. Where the clauses and applicable wage 
determinations are effective by operation of law under this paragraph, 
the prime contractor must be compensated for any resulting increase in 
wages in accordance with applicable law.

0
26. Revise Sec.  5.6 to read as follows:


Sec.  5.6  Enforcement.

    (a) Agency responsibilities. (1)(i) The Federal agency has the 
initial responsibility to ascertain whether the clauses required by 
Sec.  5.5 and the appropriate wage determination(s) have been 
incorporated into the contracts subject to the labor standards 
provisions of the laws referenced by Sec.  5.1. Additionally, a Federal 
agency that provides Federal financial assistance that is subject to 
the labor standards provisions of the Act must promulgate the necessary 
regulations or procedures to require the recipient or sub-recipient of 
the Federal assistance to insert in its contracts the provisions of 
Sec.  5.5. No payment, advance, grant, loan, or guarantee of funds will 
be approved by the Federal agency unless it ensures that the clauses 
required by Sec.  5.5 and the appropriate wage determination(s) are 
incorporated into such contracts. Furthermore, no payment, advance, 
grant, loan, or guarantee of funds will be approved by the Federal 
agency after the beginning of construction unless there is on file with 
the Federal agency a certification by the contractor that the 
contractor and its subcontractors have complied with the provisions of 
Sec.  5.5 or unless there is on file with the Federal agency a 
certification by the contractor that there is a substantial dispute 
with respect to the required provisions.
    (ii) If a contract subject to the labor standards provisions of the 
applicable statutes referenced by Sec.  5.1 is entered into without the 
incorporation of the clauses required by Sec.  5.5, the agency must, 
upon the request of the Administrator or upon its own initiative, 
either terminate and resolicit the contract with the required contract 
clauses, or incorporate the required clauses into the contract (or 
ensure they are so incorporated) through supplemental agreement, change 
order, or any and all authority that may be needed. Where an agency has 
not entered directly into such a contract but instead has provided 
Federal financial assistance, the agency must ensure that the recipient 
or sub-recipient of the Federal assistance similarly incorporates the 
clauses required into its contracts. The method of incorporation of the 
correct wage determination, and adjustment in contract price, where 
appropriate, should be in accordance with applicable law. Additionally, 
the following requirements apply:
    (A) Unless the Administrator directs otherwise, the incorporation 
of the clauses required by Sec.  5.5 must be retroactive to the date of 
contract award or start of construction if there is no award.
    (B) If this incorporation occurs as the result of a request from 
the Administrator, the incorporation must take place within 30 days of 
the date of that request, unless the agency has obtained an extension 
from the Administrator.
    (C) The contractor must be compensated for any increases in wages 
resulting from incorporation of a missing contract clause.
    (D) If the recipient refuses to incorporate the clauses as 
required, the agency must make no further payment, advance, grant, 
loan, or guarantee of funds in connection with the contract until the 
recipient incorporates the required clauses into its contract, and must 
promptly refer the dispute to the Administrator for further proceedings 
under Sec.  5.13.
    (E) Before terminating a contract pursuant to this section, the 
agency must withhold or cross-withhold sufficient funds to remedy any 
back wage liability resulting from the failure to incorporate the 
correct wage determination or otherwise identify and obligate 
sufficient funds through a termination settlement agreement, bond, or 
other satisfactory mechanism.
    (F) Notwithstanding the requirement to incorporate the contract 
clauses and correct wage determination within 30 days, the contract 
clauses and correct wage determination will be effective by operation 
of law, retroactive to the beginning of construction, in accordance 
with Sec.  5.5(e).
    (2)(i) Certified payrolls submitted pursuant to Sec.  5.5(a)(3)(ii) 
must be preserved by the Federal agency for a period of 3 years after 
all the work on the prime contract is completed, and must be produced 
at the request of the Department of Labor at any time during the 3-year 
period, regardless of whether the Department of Labor has initiated an 
investigation or other compliance action.
    (ii) In situations where the Federal agency does not itself 
maintain certified payrolls required to be submitted pursuant to Sec.  
5.5(a)(3)(ii), upon the request of the Department of Labor the Federal 
agency must ensure that such certified payrolls are provided to the 
Department of Labor. Such certified payrolls may be provided by the 
applicant, sponsor, owner, or other entity, as the case may be, 
directly to the Department of Labor, or to the Federal agency which, in 
turn, must provide those records to the Department of Labor.

[[Page 57740]]

    (3) The Federal agency will cause such investigations to be made as 
may be necessary to assure compliance with the labor standards clauses 
required by Sec.  5.5 and the applicable statutes referenced in Sec.  
5.1. Investigations will be made of all contracts with such frequency 
as may be necessary to assure compliance. Such investigations will 
include interviews with workers, which must be taken in confidence, and 
examinations of certified payrolls, regular payrolls, and other basic 
records required to be maintained under Sec.  5.5(a)(3). In making such 
examinations, particular care must be taken to determine the 
correctness of classification(s) of work actually performed, and to 
determine whether there is a disproportionate amount of work by 
laborers and of apprentices registered in approved programs. Such 
investigations must also include evidence of fringe benefit plans and 
payments thereunder. Federal agencies must give priority to complaints 
of alleged violations.
    (4) In accordance with normal operating procedures, the contracting 
agency may be furnished various investigatory material from the 
investigation files of the Department of Labor. None of the material, 
other than computations of back wages, liquidated damages, and monetary 
relief for violations of Sec.  5.5(a)(11) or (b)(5), and the summary of 
back wages due, may be disclosed in any manner to anyone other than 
Federal officials charged with administering the contract or program 
providing Federal assistance to the contract, without requesting the 
permission and views of the Department of Labor.
    (b) Department of Labor investigations and other compliance 
actions. (1) The Administrator will investigate and conduct other 
compliance actions as deemed necessary in order to obtain compliance 
with the labor standards provisions of the applicable statutes 
referenced by Sec.  5.1, or to affirm or reject the recommendations by 
the Agency Head with respect to labor standards matters arising under 
the statutes referenced by Sec.  5.1.
    (2) Federal agencies, contractors, subcontractors, sponsors, 
applicants, owners, or other entities, as the case may be, must 
cooperate with any authorized representative of the Department of Labor 
in the inspection of records, in interviews with workers, and in all 
other aspects of the investigations or other compliance actions.
    (3) The findings of such an investigation or other compliance 
action, including amounts found due, may not be altered or reduced 
without the approval of the Department of Labor.
    (4) Where the underpayments disclosed by such an investigation or 
other compliance action total $1,000 or more, where there is reason to 
believe that the contractor or subcontractor has disregarded its 
obligations to workers or subcontractors, or where liquidated damages 
may be assessed under CWHSSA, the Department of Labor will furnish the 
Federal agency an enforcement report detailing the labor standards 
violations disclosed by the investigation or other compliance action 
and any action taken by the contractor or subcontractor to correct the 
violations, including any payment of back wages or any other relief 
provided workers or remedial actions taken for violations of Sec.  
5.5(a)(11) or (b)(5). In other circumstances, the Department of Labor 
will furnish the Federal agency a notification summarizing the findings 
of the investigation or other compliance action.
    (c) Confidentiality requirements. It is the policy of the 
Department of Labor to protect from disclosure the identity of its 
confidential sources and to prevent an unwarranted invasion of personal 
privacy. Accordingly, the identity of a worker or other informant who 
makes a written or oral statement as a complaint or in the course of an 
investigation or other compliance action, as well as portions of the 
statement which would tend to reveal the identity of the informant, 
will not be disclosed in any manner to anyone other than Federal 
officials without the prior consent of the informant. Disclosure of 
such statements is also governed by the provisions of the ``Freedom of 
Information Act'' (5 U.S.C. 552, see part 70 of this subtitle) and the 
``Privacy Act of 1974'' (5 U.S.C. 552a, see part 71 of this subtitle).

0
27. Amend Sec.  5.7 by revising paragraph (a) to read as follows:


Sec.  5.7  Reports to the Secretary of Labor.

    (a) Enforcement reports. (1) Where underpayments by a contractor or 
subcontractor total less than $1,000, where there is no reason to 
believe that the contractor or subcontractor has disregarded its 
obligations to workers or subcontractors, and where restitution has 
been effected and future compliance assured, the Federal agency need 
not submit its investigative findings and recommendations to the 
Administrator, unless the investigation or other compliance action was 
made at the request of the Department of Labor. In the latter case, the 
Federal agency will submit a factual summary report detailing any 
violations including any data on the amount of restitution paid, the 
number of workers who received restitution, liquidated damages assessed 
under the Contract Work Hours and Safety Standards Act, corrective 
measures taken (such as ``letters of notice'' or remedial action taken 
for violations of Sec.  5.5(a)(11) or (b)(5)), and any information that 
may be necessary to review any recommendations for an appropriate 
adjustment in liquidated damages under Sec.  5.8.
    (2) Where underpayments by a contractor or subcontractor total 
$1,000 or more, or where there is reason to believe that the contractor 
or subcontractor has disregarded its obligations to workers or 
subcontractors, the Federal agency will furnish within 60 days after 
completion of its investigation, a detailed enforcement report to the 
Administrator.
* * * * *

0
28. Revise Sec.  5.9 to read as follows:


Sec.  5.9  Suspension of funds.

    (a) Suspension and withholding. In the event of failure or refusal 
of the contractor or any subcontractor to comply with the applicable 
statutes referenced by Sec.  5.1 and the labor standards clauses 
contained in Sec.  5.5, whether incorporated into the contract 
physically, by reference, or by operation of law, the Federal agency 
(and any other agency), may, upon its own action, or must, upon written 
request of an authorized representative of the Department of Labor, 
take such action as may be necessary to cause the suspension of the 
payment, advance, or guarantee of funds until such time as the 
violations are discontinued and/or until sufficient funds are withheld 
as may be considered necessary to compensate workers for the full 
amount of wages and monetary relief to which they are entitled, and to 
cover any liquidated damages and pre-judgment or post-judgment interest 
which may be due.
    (b) Cross-withholding. To satisfy a contractor's liability for back 
wages on a contract, in addition to the suspension and withholding of 
funds from the contract(s) under which the violation(s) occurred, the 
necessary funds also may be withheld under any other Federal contract 
with the same prime contractor, or any other federally assisted 
contract that is subject to Davis-Bacon labor standards and/or the 
Contract Work Hours and Safety Standards Act and is held by the same 
prime contractor, regardless of whether the other contract was awarded 
or assisted by the same agency.
    (c) Cross-withholding from different legal entities. Cross-
withholding of

[[Page 57741]]

funds may be requested from contracts held by other entities that may 
be considered to be the same prime contractor as that term is defined 
in Sec.  5.2. Such cross-withholding is appropriate where the separate 
legal entities have independently consented to it by entering into 
contracts containing the withholding provisions at Sec.  5.5(a)(2) and 
(b)(3). Cross-withholding from a contract held by a different legal 
entity is not appropriate unless the withholding provisions were 
incorporated in full or by reference in that different legal entity's 
contract. Absent exceptional circumstances, cross-withholding is not 
permitted from a contract held by a different legal entity where the 
Davis-Bacon labor standards were incorporated only by operation of law 
into that contract.

0
29. Revise Sec.  5.10 to read as follows:


Sec.  5.10  Restitution, criminal action.

    (a) In cases other than those forwarded to the Attorney General of 
the United States under paragraph (b) of this section where violations 
of the labor standards clauses contained in Sec.  5.5 and the 
applicable statutes referenced by Sec.  5.1 result in underpayment of 
wages to workers or monetary damages caused by violations of Sec.  
5.5(a)(11) or (b)(5), the Federal agency or an authorized 
representative of the Department of Labor will request that restitution 
be made to such workers or on their behalf to plans, funds, or programs 
for any type of bona fide fringe benefits within the meaning of 40 
U.S.C. 3141(2)(B), including interest from the date of the underpayment 
or loss. Interest on any back wages or monetary relief provided for in 
this part will be calculated using the percentage established for the 
underpayment of taxes under 26 U.S.C. 6621 and will be compounded 
daily.
    (b) In cases where the Agency Head or the Administrator finds 
substantial evidence that such violations are willful and in violation 
of a criminal statute, the matter will be forwarded to the Attorney 
General of the United States for prosecution if the facts warrant. In 
all such cases the Administrator will be informed simultaneously of the 
action taken.


0
30. Revise Sec.  5.11 to read as follows:


Sec.  5.11  Disputes concerning payment of wages.

    (a) This section sets forth the procedure for resolution of 
disputes of fact or law concerning payment of prevailing wage rates, 
overtime pay, proper classification, or monetary relief for violations 
of Sec.  5.5(a)(11) or (b)(5). The procedures in this section may be 
initiated upon the Administrator's own motion, upon referral of the 
dispute by a Federal agency pursuant to Sec.  5.5(a)(9), or upon 
request of the contractor or subcontractor.
    (b)(1) In the event of a dispute described in paragraph (a) of this 
section in which it appears that relevant facts are at issue, the 
Administrator will notify the affected contractor and subcontractor, if 
any, by registered or certified mail to the last known address or by 
any other means normally assuring delivery, of the investigation 
findings. If the Administrator determines that there is reasonable 
cause to believe that either the contractor, the subcontractor, or 
both, should also be subject to debarment under the Davis-Bacon Act or 
any of the other applicable statutes referenced by Sec.  5.1, the 
notification will so indicate.
    (2) A contractor or subcontractor desiring a hearing concerning the 
Administrator's investigation findings must request such a hearing by 
letter or by any other means normally assuring delivery, sent within 30 
days of the date of the Administrator's notification. The request must 
set forth those findings which are in dispute and the reasons therefor, 
including any affirmative defenses.
    (3) Upon receipt of a timely request for a hearing, the 
Administrator will refer the case to the Chief Administrative Law Judge 
by Order of Reference, with an attached copy of the notification from 
the Administrator and the response of the contractor or subcontractor, 
for designation of an Administrative Law Judge to conduct such hearings 
as may be necessary to resolve the disputed matters. The hearings will 
be conducted in accordance with the procedures set forth in part 6 of 
this subtitle.
    (c)(1) In the event of a dispute described in paragraph (a) of this 
section in which it appears that there are no relevant facts at issue, 
and where there is not at that time reasonable cause to institute 
debarment proceedings under Sec.  5.12, the Administrator will notify 
the contractor and subcontractor, if any, by registered or certified 
mail to the last known address or by any other means normally assuring 
delivery, of the investigation findings, and will issue a ruling on any 
issues of law known to be in dispute.
    (2)(i) If the contractor or subcontractor disagrees with the 
factual findings of the Administrator or believes that there are 
relevant facts in dispute, the contractor or subcontractor must advise 
the Administrator by letter or by any other means normally assuring 
delivery, sent within 30 days of the date of the Administrator's 
notification. In the response, the contractor or subcontractor must 
explain in detail the facts alleged to be in dispute and attach any 
supporting documentation.
    (ii) Upon receipt of a response under paragraph (c)(2)(i) of this 
section alleging the existence of a factual dispute, the Administrator 
will examine the information submitted. If the Administrator determines 
that there is a relevant issue of fact, the Administrator will refer 
the case to the Chief Administrative Law Judge in accordance with 
paragraph (b)(3) of this section. If the Administrator determines that 
there is no relevant issue of fact, the Administrator will so rule and 
advise the contractor and subcontractor, if any, accordingly.
    (3) If the contractor or subcontractor desires review of the ruling 
issued by the Administrator under paragraph (c)(1) or (2) of this 
section, the contractor or subcontractor must file a petition for 
review thereof with the Administrative Review Board within 30 days of 
the date of the ruling, with a copy thereof to the Administrator. The 
petition for review must be filed in accordance with part 7 of this 
subtitle.
    (d) If a timely response to the Administrator's findings or ruling 
is not made or a timely petition for review is not filed, the 
Administrator's findings or ruling will be final, except that with 
respect to debarment under the Davis-Bacon Act, the Administrator will 
advise the Comptroller General of the Administrator's recommendation in 
accordance with Sec.  5.12(a)(2). If a timely response or petition for 
review is filed, the findings or ruling of the Administrator will be 
inoperative unless and until the decision is upheld by the 
Administrative Law Judge or the Administrative Review Board.


0
31. Revise Sec.  5.12 to read as follows:


Sec.  5.12  Debarment proceedings.

    (a) Debarment standard and ineligible list. (1) Whenever any 
contractor or subcontractor is found by the Secretary of Labor to have 
disregarded their obligations to workers or subcontractors under the 
Davis-Bacon Act, any of the other applicable statutes referenced by 
Sec.  5.1, this part, or part 3 of this subtitle, such contractor or 
subcontractor and their responsible officers, if any, and any firm, 
corporation, partnership, or association in which such contractor, 
subcontractor, or responsible officer has an interest will be 
ineligible for a period of 3 years to be awarded any contract or 
subcontract of the United States or the District of Columbia and any 
contract or subcontract subject to the labor

[[Page 57742]]

standards provisions of any of the statutes referenced by Sec.  5.1.
    (2) In cases arising under contracts covered by the Davis-Bacon 
Act, the Administrator will transmit to the Comptroller General the 
name(s) of the contractors or subcontractors and their responsible 
officers, if any, and any firms, corporations, partnerships, or 
associations in which the contractors, subcontractors, or responsible 
officers are known to have an interest, who have been found to have 
disregarded their obligations to workers or subcontractors, and the 
recommendation of the Secretary of Labor or authorized representative 
regarding debarment. In cases arising under contracts covered by any of 
the applicable statutes referenced by Sec.  5.1 other than the Davis-
Bacon Act, the Administrator determines the name(s) of the contractors 
or subcontractors and their responsible officers, if any, and any 
firms, corporations, partnerships, or associations in which the 
contractors, subcontractors, or responsible officers are known to have 
an interest, to be debarred. The names of such ineligible persons or 
firms will be published on SAM or its successor website, and an 
ineligible person or firm will be ineligible for a period of 3 years 
from the date of publication of their name on the ineligible list, to 
be awarded any contract or subcontract of the United States or the 
District of Columbia and any contract or subcontract subject to the 
labor standards provisions of any of the statutes referenced by Sec.  
5.1.
    (b) Procedure. (1) In addition to cases under which debarment 
action is initiated pursuant to Sec.  5.11, whenever as a result of an 
investigation conducted by the Federal agency or the Department of 
Labor, and where the Administrator finds reasonable cause to believe 
that a contractor or subcontractor has committed violations which 
constitute a disregard of its obligations to workers or subcontractors 
under the Davis-Bacon Act, the labor standards provisions of any of the 
other applicable statutes referenced by Sec.  5.1, this part, or part 3 
of this subtitle, the Administrator will notify by registered or 
certified mail to the last known address or by any other means normally 
assuring delivery, the contractor or subcontractor and responsible 
officers, if any, and any firms, corporations, partnerships, or 
associations in which the contractors, subcontractors, or responsible 
officers are known to have an interest of the finding.
    (i) The Administrator will afford such contractor, subcontractor, 
responsible officer, and any other parties notified an opportunity for 
a hearing as to whether debarment action should be taken under 
paragraph (a) of this section. The Administrator will furnish to those 
notified a summary of the investigative findings.
    (ii) If the contractor, subcontractor, responsible officer, or any 
other parties notified wish to request a hearing as to whether 
debarment action should be taken, such a request must be made by letter 
or by any other means normally assuring delivery, sent within 30 days 
of the date of the notification from the Administrator, and must set 
forth any findings which are in dispute and the basis for such disputed 
findings, including any affirmative defenses to be raised.
    (iii) Upon timely receipt of such request for a hearing, the 
Administrator will refer the case to the Chief Administrative Law Judge 
by Order of Reference, with an attached copy of the notification from 
the Administrator and the responses of the contractor, subcontractor, 
responsible officers, or any other parties notified, for designation of 
an Administrative Law Judge to conduct such hearings as may be 
necessary to determine the matters in dispute.
    (iv) In considering debarment under any of the statutes referenced 
by Sec.  5.1 other than the Davis-Bacon Act, the Administrative Law 
Judge will issue an order concerning whether the contractor, 
subcontractor, responsible officer, or any other party notified is to 
be debarred in accordance with paragraph (a) of this section. In 
considering debarment under the Davis-Bacon Act, the Administrative Law 
Judge will issue a recommendation as to whether the contractor, 
subcontractor, responsible officers, or any other party notified should 
be debarred under 40 U.S.C. 3144(b).
    (2) Hearings under this section will be conducted in accordance 
with part 6 of this subtitle. If no hearing is requested within 30 days 
of the date of the notification from the Administrator, the 
Administrator's findings will be final, except with respect to 
recommendations regarding debarment under the Davis-Bacon Act, as set 
forth in paragraph (a)(2) of this section.
    (c) Interests of debarred parties. (1) A finding as to whether 
persons or firms whose names appear on the ineligible list have an 
interest under 40 U.S.C. 3144(b) or paragraph (a) of this section in 
any other firm, corporation, partnership, or association, may be made 
through investigation, hearing, or otherwise.
    (2)(i) The Administrator, on their own motion or after receipt of a 
request for a determination pursuant to paragraph (c)(3) of this 
section, may make a finding on the issue of interest.
    (ii) If the Administrator determines that there may be an interest 
but finds that there is insufficient evidence to render a final ruling 
thereon, the Administrator may refer the issue to the Chief 
Administrative Law Judge in accordance with paragraph (c)(4) of this 
section.
    (iii) If the Administrator finds that no interest exists, or that 
there is not sufficient information to warrant the initiation of an 
investigation, the requesting party, if any, will be so notified and no 
further action taken.
    (iv)(A) If the Administrator finds that an interest exists, the 
person or firm affected will be notified of the Administrator's finding 
(by certified mail to the last known address or by any other means 
normally assuring delivery), which will include the reasons therefore, 
and such person or firm will be afforded an opportunity to request that 
a hearing be held to decide the issue.
    (B) Such person or firm will have 20 days from the date of the 
Administrator's ruling to request a hearing. A person or firm desiring 
a hearing must request it by letter or by any other means normally 
assuring delivery, sent within 20 days of the date of the 
Administrator's notification. A detailed statement of the reasons why 
the Administrator's ruling is in error, including facts alleged to be 
in dispute, if any, must be submitted with the request for a hearing.
    (C) If no hearing is requested within the time mentioned in 
paragraph (c)(2)(iv)(B) of this section, the Administrator's finding 
will be final and the Administrator will notify the Comptroller General 
in cases arising under the DBA. If a hearing is requested, the ruling 
of the Administrator will be inoperative unless and until the 
Administrative Law Judge or the Administrative Review Board issues an 
order that there is an interest.
    (3)(i) A request for a determination of interest may be made by any 
interested party, including contractors or prospective contractors and 
associations of contractors, representatives of workers, and interested 
agencies. Such a request must be submitted in writing to the 
Administrator, Wage and Hour Division, U.S. Department of Labor, 200 
Constitution Avenue NW, Washington, DC 20210.
    (ii) The request must include a statement setting forth in detail 
why the petitioner believes that a person or firm whose name appears on 
the ineligible list has an interest in any firm, corporation, 
partnership, or association

[[Page 57743]]

that is seeking or has been awarded a contract or subcontract of the 
United States or the District of Columbia, or a contract or subcontract 
that is subject to the labor standards provisions of any of the 
statutes referenced by Sec.  5.1. No particular form is prescribed for 
the submission of a request under this section.
    (4) The Administrator, on their own motion under paragraph 
(c)(2)(ii) of this section or upon a request for hearing where the 
Administrator determines that relevant facts are in dispute, will by 
order refer the issue to the Chief Administrative Law Judge, for 
designation of an Administrative Law Judge who will conduct such 
hearings as may be necessary to render a decision solely on the issue 
of interest. Such proceedings must be conducted in accordance with the 
procedures set forth in part 6 of this subtitle.
    (5) If the person or firm affected requests a hearing and the 
Administrator determines that relevant facts are not in dispute, the 
Administrator will refer the issue and the record compiled thereon to 
the Administrative Review Board to render a decision solely on the 
issue of interest. Such proceeding must be conducted in accordance with 
the procedures set forth in part 7 of this subtitle.


0
32. Revise Sec.  5.13 to read as follows:


Sec.  5.13  Rulings and interpretations.

    (a) All questions relating to the application and interpretation of 
wage determinations (including the classifications therein) issued 
pursuant to part 1 of this subtitle, of the rules contained in this 
part and in parts 1 and 3 of this subtitle, and of the labor standards 
provisions of any of the laws referenced in Sec.  5.1 must be referred 
to the Administrator for appropriate ruling or interpretation. These 
rulings and interpretations are authoritative and those under the 
Davis-Bacon Act may be relied upon as provided for in section 10 of the 
Portal-to-Portal Act of 1947 (29 U.S.C. 259). Requests for such rulings 
and interpretations should be submitted via email to 
[email protected]; by mail to Administrator, Wage and Hour 
Division, U.S. Department of Labor, 200 Constitution Ave., NW, 
Washington, DC 20210; or through other means directed by the 
Administrator.
    (b) If any such ruling or interpretation is made by an authorized 
representative of the Administrator of the Wage and Hour Division, any 
interested party may seek reconsideration of the ruling or 
interpretation by the Administrator of the Wage and Hour Division. The 
procedures and time limits set out in Sec.  1.8 of this subtitle apply 
to any such request for reconsideration.


0
33. Amend Sec.  5.15 by revising paragraphs (c)(4) and (d)(1) to read 
as follows:


Sec.  5.15  Limitations, variations, tolerances, and exemptions under 
the Contract Work Hours and Safety Standards Act.

* * * * *
    (c) * * *
    (4)(i) Time spent in an organized program of related, supplemental 
instruction by laborers or mechanics employed under bona fide 
apprenticeship programs may be excluded from working time if the 
criteria prescribed in paragraphs (c)(4)(ii) and (iii) of this section 
are met.
    (ii) The apprentice comes within the definition contained in Sec.  
5.2.
    (iii) The time in question does not involve productive work or 
performance of the apprentice's regular duties.
    (d) * * *
    (1) In the event of failure or refusal of the contractor or any 
subcontractor to comply with overtime pay requirements of the Contract 
Work Hours and Safety Standards Act, if the funds withheld by Federal 
agencies for the violations are not sufficient to pay fully the unpaid 
wages and any back pay or other monetary relief due laborers and 
mechanics, with interest, and the liquidated damages due the United 
States, the available funds will be used first to compensate the 
laborers and mechanics for the wages to which they are entitled (or an 
equitable portion thereof when the funds are not adequate for this 
purpose); and the balance, if any, will be used for the payment of 
liquidated damages.
* * * * *


Sec.  5.16  [Removed and Reserved]

0
34. Remove and reserve Sec.  5.16.


Sec.  5.17  [Removed and Reserved]

0
35. Remove and reserve Sec.  5.17.

0
36. Add Sec.  5.18 to subpart A to read as follows:


Sec.  5.18  Remedies for retaliation.

    (a) Administrator request to remedy violation. When the 
Administrator finds that any person has discriminated in any way 
against any worker or job applicant in violation of Sec.  5.5(a)(11) or 
(b)(5), or caused any person to discriminate in any way against any 
worker or job applicant in violation of Sec.  5.5(a)(11) or (b)(5), the 
Administrator will notify the person, any contractors for whom the 
person worked or on whose behalf the person acted, and any upper tier 
contractors, as well as the relevant contracting agency(ies) of the 
discrimination and request that the person and any contractors for whom 
the person worked or on whose behalf the person acted remedy the 
violation.
    (b) Administrator directive to remedy violation and provide make-
whole relief. If the person and any contractors for whom the person 
worked or on whose behalf the person acted do not remedy the violation, 
the Administrator in the notification of violation findings issued 
under Sec.  5.11 or Sec.  5.12 will direct the person and any 
contractors for whom the person worked or on whose behalf the person 
acted to provide appropriate make-whole relief to affected worker(s) 
and job applicant(s) or take appropriate remedial action, or both, to 
correct the violation, and will specify the particular relief and 
remedial actions to be taken.
    (c) Examples of available make-whole relief and remedial actions. 
Such relief and remedial actions may include, but are not limited to, 
employment, reinstatement, front pay in lieu of reinstatement, and 
promotion, together with back pay and interest; compensatory damages; 
restoration of the terms, conditions, and privileges of the worker's 
employment or former employment; the expungement of warnings, 
reprimands, or derogatory references; the provision of a neutral 
employment reference; and the posting of a notice to workers that the 
contractor or subcontractor agrees to comply with the Davis-Bacon Act 
and Related Acts anti-retaliation requirements.


0
37. Revise Sec.  5.20 to read as follows:


Sec.  5.20  Scope and significance of this subpart.

    The 1964 amendments (Pub. L. 88-349) to the Davis-Bacon Act 
require, among other things, that the prevailing wage determined for 
Federal and federally assisted construction include the basic hourly 
rate of pay and the amount contributed by the contractor or 
subcontractor for certain fringe benefits (or the cost to them of such 
benefits). The purpose of this subpart is to explain the provisions of 
these amendments and make available in one place official 
interpretations of the fringe benefits provisions of the Davis-Bacon 
Act. These interpretations will guide the Department of Labor in 
carrying out its responsibilities under these provisions. These 
interpretations are intended also to provide guidance to contractors 
and their associations; laborers and mechanics and their organizations; 
and local, State, and Federal agencies. The interpretations contained 
in this subpart are authoritative and may be relied upon as provided 
for in section 10 of the Portal-to-Portal Act of 1947 (29 U.S.C.

[[Page 57744]]

259). The omission to discuss a particular problem in this subpart or 
in interpretations supplementing it should not be taken to indicate the 
adoption of any position by the Secretary of Labor with respect to such 
problem or to constitute an administrative interpretation, practice, or 
enforcement policy. Questions on matters not fully covered by this 
subpart may be referred to the Secretary for interpretation as provided 
in Sec.  5.13.

0
38. Revise Sec.  5.22 to read as follows:


Sec.  5.22  Effect of the Davis-Bacon fringe benefits provisions.

    The Davis-Bacon Act and the prevailing wage provisions of the 
statutes referenced in Sec.  1.1 of this subtitle confer upon the 
Secretary of Labor the authority to predetermine, as minimum wages, 
those wage rates found to be prevailing for corresponding classes of 
laborers and mechanics employed on projects of a character similar to 
the contract work in the area in which the work is to be performed. See 
the definitions of the terms ``prevailing wage'' and ``area'' in Sec.  
1.2 of this subtitle. The fringe benefits amendments enlarge the scope 
of this authority by including certain bona fide fringe benefits within 
the meaning of the terms ``wages'', ``scale of wages'', ``wage rates'', 
``minimum wages'', and ``prevailing wages'', as used in the Davis-Bacon 
Act.


0
39. Revise Sec.  5.23 to read as follows:


Sec.  5.23  The statutory provisions.

    Pursuant to the Davis-Bacon Act, as amended and codified at 40 
U.S.C. 3141(2), the term ``prevailing wages'' and similar terms include 
the basic hourly rate of pay and, for the listed fringe benefits and 
other bona fide fringe benefits not required by other law, the 
contributions irrevocably made by a contractor or subcontractor to a 
trustee or third party pursuant to a bona fide fringe benefit fund, 
plan, or program, and the costs to the contractor or subcontractor that 
may be reasonably anticipated in providing bona fide fringe benefits 
pursuant to an enforceable commitment to carry out a financially 
responsible plan or program, which was communicated in writing to the 
affected laborers and mechanics. Section 5.29 discusses specific fringe 
benefits that may be considered to be bona fide.


0
40. Amend Sec.  5.25 by adding paragraph (c) to read as follows:


Sec.  5.25  Rate of contribution or cost for fringe benefits.

* * * * *
    (c) Except as provided in this section, contractors must 
``annualize'' all contributions to fringe benefit plans (or the 
reasonably anticipated costs of an unfunded benefit plan) to determine 
the hourly equivalent for which they may take credit against their 
fringe benefit obligation. The ``annualization'' principle reflects 
that DBRA credit for contributions made to bona fide fringe benefit 
plans (or the reasonably anticipated costs of an unfunded benefit plan) 
is allowed based on the effective rate of contributions or costs 
incurred for total hours worked during the year (or a shorter time 
period) by a laborer or mechanic.
    (1) Method of computation. To annualize the cost of providing a 
fringe benefit, a contractor must divide the total cost of the fringe 
benefit contribution (or the reasonably anticipated costs of an 
unfunded benefit plan) by the total number of hours worked on both 
private (non-DBRA) work and work covered by the Davis-Bacon Act and/or 
Davis-Bacon Related Acts (DBRA-covered work) during the time period to 
which the cost is attributable to determine the rate of contribution 
per hour. If the amount of contribution varies per worker, credit must 
be determined separately for the amount contributed on behalf of each 
worker.
    (2) Exception requests. Contractors, plans, and other interested 
parties may request an exception from the annualization requirement by 
submitting a request to the WHD Administrator. A request for an 
exception may be granted only if each of the requirements of paragraph 
(c)(3) of this section is satisfied. Contributions to defined 
contribution pension plans (DCPPs) are excepted from the annualization 
requirement, and exception requests therefore are not required in 
connection with DCPPs, provided that each of the requirements of 
paragraph (c)(3) is satisfied and the DCPP provides for immediate 
participation and essentially immediate vesting (i.e., the benefit 
vests within the first 500 hours worked). Requests must be submitted in 
writing to the Division of Government Contracts Enforcement by email to 
[email protected] or by mail to Director, Division of Government 
Contracts Enforcement, Wage and Hour Division, U.S. Department of 
Labor, 200 Constitution Ave. NW, Room S-3502, Washington, DC 20210.
    (3) Exception requirements. Contributions to a bona fide fringe 
benefit plan (or the reasonably anticipated costs of an unfunded 
benefit plan) are excepted from the annualization requirement if all of 
the following criteria are satisfied:
    (i) The benefit provided is not continuous in nature. A benefit is 
not continuous in nature when it is not available to a participant 
without penalty throughout the year or other time period to which the 
cost of the benefit is attributable; and
    (ii) The benefit does not compensate both private work and DBRA-
covered work. A benefit does not compensate both private and DBRA-
covered work if any benefits attributable to periods of private work 
are wholly paid for by compensation for private work.


0
41. Revise Sec.  5.26 to read as follows:


Sec.  5.26  ``* * * contribution irrevocably made * * * to a trustee or 
to a third person''.

    (a) Requirements. The following requirements apply to any fringe 
benefit contributions made to a trustee or to a third person pursuant 
to a fund, plan, or program:
    (1) Such contributions must be made irrevocably;
    (2) The trustee or third person may not be affiliated with the 
contractor or subcontractor;
    (3) A trustee must adhere to any fiduciary responsibilities 
applicable under law; and
    (4) The trust or fund must not permit the contractor or 
subcontractor to recapture any of the contributions paid in or any way 
divert the funds to its own use or benefit.
    (b) Excess payments. Notwithstanding the above, a contractor or 
subcontractor may recover sums which it had paid to a trustee or third 
person in excess of the contributions actually called for by the plan, 
such as excess payments made in error or in order to cover the 
estimated cost of contributions at a time when the exact amount of the 
necessary contributions is not yet known. For example, a benefit plan 
may provide for definite insurance benefits for employees in the event 
of contingencies such as death, sickness, or accident, with the cost of 
such definite benefits borne by the contractor or subcontractor. In 
such a case, if the insurance company returns the amount that the 
contractor or subcontractor paid in excess of the amount required to 
provide the benefits, this will not be deemed a recapture or diversion 
by the employer of contributions made pursuant to the plan. (See Report 
of the Senate Committee on Labor and Public Welfare, S. Rep. No. 963, 
88th Cong., 2d Sess., p. 5.)


0
42. Revise Sec.  5.28 to read as follows:


Sec.  5.28  Unfunded plans.

    (a) The costs to a contractor or subcontractor which may be 
reasonably

[[Page 57745]]

anticipated in providing benefits of the types described in the Act, 
pursuant to an enforceable commitment to carry out a financially 
responsible plan or program, are considered fringe benefits within the 
meaning of the Act (see 40 U.S.C. 3141(2)(B)(ii)). The legislative 
history suggests that these provisions were intended to permit the 
consideration of fringe benefits meeting these requirements, among 
others, and which are provided from the general assets of a contractor 
or subcontractor. (Report of the House Committee on Education and 
Labor, H. Rep. No. 308, 88th Cong., 1st Sess., p. 4; see also S. Rep. 
No. 963, p. 6.)
    (b) Such a benefit plan or program, commonly referred to as an 
unfunded plan, may not constitute a fringe benefit within the meaning 
of the Act unless:
    (1) It could be reasonably anticipated to provide the benefits 
described in the Act;
    (2) It represents a commitment that can be legally enforced;
    (3) It is carried out under a financially responsible plan or 
program;
    (4) The plan or program providing the benefits has been 
communicated in writing to the laborers and mechanics affected; and
    (5) The contractor or subcontractor requests and receives approval 
of the plan or program from the Secretary, as described in paragraph 
(c) of this section.
    (c) To receive approval of an unfunded plan or program, a 
contractor or subcontractor must demonstrate in its request to the 
Secretary that the unfunded plan or program, and the benefits provided 
under such plan or program, are ``bona fide,'' meet the requirements 
set forth in paragraphs (b)(1) through (4) of this section, and are 
otherwise consistent with the Act. The request must include sufficient 
documentation to enable the Secretary to evaluate these criteria. 
Contractors and subcontractors may request approval of an unfunded plan 
or program by submitting a written request in one of the following 
manners:
    (1) By mail to the United States Department of Labor, Wage and Hour 
Division, Director, Division of Government Contracts Enforcement, 200 
Constitution Ave. NW, Room S-3502, Washington, DC 20210;
    (2) By email to [email protected] (or its successor email address); 
or
    (3) By any other means directed by the Administrator.
    (d) Unfunded plans or programs may not be used as a means of 
avoiding the Act's requirements. The words ``reasonably anticipated'' 
require that any unfunded plan or program be able to withstand a test 
of actuarial soundness. Moreover, as in the case of other fringe 
benefits payable under the Act, an unfunded plan or program must be 
``bona fide'' and not a mere simulation or sham for avoiding compliance 
with the Act. To prevent these provisions from being used to avoid 
compliance with the Act, the Secretary may direct a contractor or 
subcontractor to set aside in an account assets which, under sound 
actuarial principles, will be sufficient to meet future obligations 
under the plan. Such an account must be preserved for the purpose 
intended. (S. Rep. No. 963, p. 6.)

0
43. Amend Sec.  5.29 by revising paragraph (e) and adding paragraph (g) 
to read as follows:


Sec.  5.29  Specific fringe benefits.

* * * * *
    (e) Where the plan is not of the conventional type described in 
paragraph (d) of this section, the Secretary must examine the facts and 
circumstances to determine whether fringe benefits under the plan are 
``bona fide'' in accordance with requirements of the Act. This is 
particularly true with respect to unfunded plans discussed in Sec.  
5.28. Contractors or subcontractors seeking credit under the Act for 
costs incurred for such plans must request specific approval from the 
Secretary under Sec.  5.5(a)(1)(iv).
* * * * *
    (g) For a contractor or subcontractor to take credit for the costs 
of an apprenticeship program, the following requirements must be met:
    (1) The program, in addition to meeting all other relevant 
requirements for fringe benefits in this subpart, must be registered 
with the Department of Labor's Employment and Training Administration, 
Office of Apprenticeship (``OA''), or with a State Apprenticeship 
Agency recognized by the OA.
    (2) The contractor or subcontractor may only take credit for 
amounts reasonably related to the costs of the apprenticeship benefits 
actually provided to the contractor's employees, such as instruction, 
books, and tools or materials. It may not take credit for voluntary 
contributions beyond such costs. Amounts the employer is required to 
contribute by a collective bargaining agreement or by a bona fide 
apprenticeship plan will be presumed to be reasonably related to such 
costs in the absence of evidence to the contrary.
    (3) Costs incurred for the apprenticeship for one classification of 
laborer or mechanic may not be used to offset costs incurred for 
another classification.
    (4) In applying the annualization principle to compute the 
allowable fringe benefit credit pursuant to Sec.  5.25, the total 
number of working hours of employees to which the cost of an 
apprenticeship program is attributable is limited to the total number 
of hours worked by laborers and mechanics in the apprentice's 
classification. For example, if a contractor enrolls an employee in an 
apprenticeship program for carpenters, the permissible hourly Davis-
Bacon credit is determined by dividing the cost of the program by the 
total number of hours worked by the contractor's carpenters and 
carpenters' apprentices on covered and non-covered projects during the 
time period to which the cost is attributable, and such credit may only 
be applied against the contractor's prevailing wage obligations for all 
carpenters and carpenters' apprentices for each hour worked on the 
covered project.

0
44. Revise Sec.  5.30 to read as follows:


Sec.  5.30  Types of wage determinations.

    (a) When fringe benefits are prevailing for various classes of 
laborers and mechanics in the area of proposed construction, such 
benefits are includable in any Davis-Bacon wage determination. The 
examples contained in paragraph (c) of this section demonstrate how 
fringe benefits may be listed on wage determinations in such cases.
    (b) Wage determinations do not include fringe benefits for various 
classes of laborers and mechanics whenever such benefits do not prevail 
in the area of proposed construction. When this occurs, the wage 
determination will contain only the basic hourly rates of pay which are 
prevailing for the various classes of laborers and mechanics. An 
illustration of this situation is contained in paragraph (c) of this 
section.
    (c) The following illustrates examples of the situations discussed 
in paragraph (a) and (b) of this section:
BILLING CODE 4510-27-P

Figure 1 to Paragraph (c)

[[Page 57746]]

[GRAPHIC] [TIFF OMITTED] TR23AU23.002

BILLING CODE 4510-27-C

0
45. Revise Sec.  5.31 to read as follows:


Sec.  5.31  Meeting wage determination obligations.

    (a) A contractor or subcontractor performing work subject to a 
Davis-Bacon wage determination may discharge their minimum wage 
obligations for the payment of both straight time wages and fringe 
benefits by paying in cash, making payments or incurring costs for 
``bona fide'' fringe benefits of the types listed in the applicable 
wage determination or otherwise found prevailing by the Secretary of 
Labor, or by a combination thereof.
    (b) A contractor or subcontractor may discharge their obligations 
for the payment of the basic hourly rates and the fringe benefits where 
both are contained in a wage determination applicable to their laborers 
or mechanics in the following ways:
    (1) By paying not less than the basic hourly rate to the laborers 
or mechanics and by making contributions for ``bona fide'' fringe 
benefits in a total amount not less than the total of the fringe 
benefits required by the wage determination. For example, the 
obligations for ``Laborer: common or general'' in Sec.  5.30, figure 1 
to paragraph (c), will be met by the payment of a straight time hourly 
rate of not less than $21.93 and by contributions of not less than a 
total of $6.27 an hour for ``bona fide'' fringe benefits; or
    (2) By paying in cash directly to laborers or mechanics for the 
basic hourly rate and by making an additional cash payment in lieu of 
the required benefits. For example, where an employer does not make 
payments or incur costs for fringe benefits, they would meet their 
obligations for ``Laborer: common or general'' in Sec.  5.30,

[[Page 57747]]

figure 1 to paragraph (c), by paying directly to the laborers a 
straight time hourly rate of not less than $28.60 ($21.93 basic hourly 
rate plus $6.27 for fringe benefits); or
    (3) As stated in paragraph (a) of this section, the contractor or 
subcontractor may discharge their minimum wage obligations for the 
payment of straight time wages and fringe benefits by a combination of 
the methods illustrated in paragraphs (b)(1) and (2) of this section. 
Thus, for example, their obligations for ``Laborer: common or general'' 
may be met by an hourly rate, partly in cash and partly in payments or 
costs for fringe benefits which total not less than $28.60 ($21.93 
basic hourly rate plus $6.27 for fringe benefits).

0
46. Add Sec.  5.33 to read as follows:


Sec.  5.33  Administrative expenses of a contractor or subcontractor.

    (a) Creditable costs. The costs incurred by a contractor's 
insurance carrier, third-party trust fund, or other third-party 
administrator that are directly related to the administration and 
delivery of bona fide fringe benefits to the contractor's laborers and 
mechanics can be credited towards the contractor's obligations under a 
Davis-Bacon wage determination. Thus, for example, a contractor may 
take credit for the premiums it pays to an insurance carrier or the 
contributions it makes to a third-party trust fund that both 
administers and delivers bona fide fringe benefits under a plan, where 
the insurance carrier or third-party trust fund uses those monies to 
pay for bona fide fringe benefits and for the administration and 
delivery of such benefits, including evaluating benefit claims, 
deciding whether they should be paid, approving referrals to 
specialists, and other reasonable costs of administering the plan. 
Similarly, a contractor may also take credit for monies paid to a 
third-party administrator to perform tasks that are directly related to 
the administration and delivery of bona fide fringe benefits, including 
under an unfunded plan.
    (b) Noncreditable costs. A contractor's own administrative expenses 
incurred in connection with the provision of fringe benefits are 
considered business expenses of the firm and are therefore not 
creditable towards the contractor's prevailing wage obligations, 
including when the contractor pays a third party to perform such tasks 
in whole or in part. For example, a contractor may not take credit for 
the costs of office employees who perform tasks such as filling out 
medical insurance claim forms for submission to an insurance carrier, 
paying and tracking invoices from insurance carriers or plan 
administrators, updating the contractor's personnel records when 
workers are hired or separate from employment, sending lists of new 
hires and separations to insurance carriers or plan administrators, or 
sending out tax documents to the contractor's workers, nor can the 
contractor take credit for the cost of paying a third-party entity to 
perform these tasks. Additionally, recordkeeping costs associated with 
ensuring the contractor's compliance with the Davis-Bacon fringe 
benefit requirements, such as the cost of tracking the amount of a 
contractor's fringe benefit contributions or making sure contributions 
cover the fringe benefit amount claimed, are considered a contractor's 
own administrative expenses and are not considered directly related to 
the administration and delivery of bona fide fringe benefits. Thus, 
such costs are not creditable whether the contractor performs those 
tasks itself or whether it pays a third party a fee to perform those 
tasks.
    (c) Questions regarding administrative expenses. Any questions 
regarding whether a particular cost or expense is creditable towards a 
contractor's prevailing wage obligations should be referred to the 
Administrator for resolution prior to any such credit being claimed.

0
47. Add subpart C, consisting of Sec.  5.40, to read as follows:

Subpart C--Severability


Sec.  5.40  Severability.

    The provisions of this part are separate and severable and operate 
independently from one another. If any provision of this part is held 
to be invalid or unenforceable by its terms, or as applied to any 
person or circumstance, or stayed pending further agency action, the 
provision is to be construed so as to continue to give the maximum 
effect to the provision permitted by law, unless such holding is one of 
utter invalidity or unenforceability, in which event the provision is 
severable from this part and will not affect the remaining provisions.

Julie A. Su,
Acting Secretary, Department of Labor.
[FR Doc. 2023-17221 Filed 8-10-23; 4:15 pm]
 BILLING CODE 4510-27-P