The American Recovery and Reinvestment Act (ARRA) was signed by President Obama on February 17, 2009. Designed to stimulate the U.S. economy and create jobs, ARRA contains direct federal funding, tax incentives, grants, loans, loan guarantees and bond programs to assist various construction and infrastructure projects. In the All Agency Memoranda issued on May 29, 2009, and on May 5, 2010, the U.S. Department of Labor (DOL) provided guidance regarding the payment of Davis-Bacon "prevailing wages" for such construction work using ARRA money.
The Davis-Bacon Act (DBA) and some additional 60 Related Acts require contractors to pay a specified minimum wage rate determined by the DOL to be "prevailing" in a given community to laborers and mechanics working on federally funded or assisted construction projects with prime contracts in excess of $2,000.
ARRA Davis-Bacon Requirements ARRA requires the payment of DBA prevailing wages to "all laborers and mechanics employed by contractors and subcontractors on projects funded directly or assisted in whole or in part by and through the Federal Government pursuant to this Act." The DOL has broadly interpreted this language as also "encompassing any assistance provided for ARRA projects through grants, loans, guarantees, and insurance." Additionally, ARRA expressly requires DBA prevailing wage requirements be applied to projects financed with the following tax-favored bonds issued after ARRA enactment (i.e., February 17, 2009):
- New clean renewable energy bonds; Qualified energy conservation bonds;
- Qualified zone academy bonds;
- Qualified school construction bonds; and
- Recovery zone economic development bonds.
The end result, according to the DOL, is that while DBA enforcement efforts are currently focused on construction projects more directly funded by ARRA, agencies and contractors should be aware that if a project receives any ARRA money, barring some limited exceptions, that project may likely be subject to Davis-Bacon requirements. Thus, if you are working on a construction project funded by ARRA money (or you have any hint that you are), you need to be aware of your potential DBA responsibilities.
Public Agency or Contracting Entity Action Steps
According to the Memoranda, public agencies directly contracting for construction work using ARRA funds or contracting entities responsible for a project financed with the proceeds of one of the specified tax-favored bonds must ensure that DBA labor standards clauses and the appropriate wage determinations are included in bid solicitations and resulting contracts. Wage determinations, broken down by state, type of project, and category of workers (e.g., plumbers, electricians, cement masons, carpenters, etc.), are issued weekly by the DOL and can be found on the DOL's wage determination website.
Furthermore, according to the Memoranda, if a project was already under construction or if a construction contract had already been let prior to receiving approval of ARRA funds, contracting entities should insert the applicable wage determination(s) in relevant contracts effective as of the date the ARRA assistance is approved and/or notice of ARRA assistance is given for the project. If, however, an ongoing project already subject to Davis-Bacon standards begins to receive ARRA money, a new wage determination upon receipt of ARRA assistance is not needed unless such assistance is for new work not contemplated under the existing contract.
Contractor Action Steps
The majority of contractors who, as indirect recipients of ARRA federal assistance, are not contracting directly with the federal government, but rather through a state or local agency that is administering the federal program, often do not realize that the contracting agency is obligated to include the applicable prevailing wage determinations on bid solicitations and contracts or that work on those contracts is subject to Davis-Bacon prevailing wages. Thus, prior to bidding on any construction project, particularly one involving a public entity, contractors should inquire in writing and at pre-bid meetings whether any portion of the contemplated construction project will be funded in any amount using ARRA funds or ARRA tax-favored bonds, thus requiring compliance with the DBA. If this issue is not resolved prior to contracting, contractors may underbid the project and possibly lose money on the contract. If ARRA funds find their way into a project and Davis-Bacon wage requirements have not been accounted for, contractors are advised to seek an equitable adjustment change order to recover any additional costs actually incurred due to the imposition of ARRA and DBA standards.
If a construction project requires DBA compliance, contractors must:
- On a weekly basis pay all laborers and mechanics not less than the federal prevailing wages listed in the wage determinations included in the contract;
- Submit weekly certified payroll records to the contracting or administering agency;
- Post the applicable Davis-Bacon wage determinations with the Davis-Bacon poster (WH-1321) on the job site in a prominent and accessible place where they can be easily seen by the workers; and
- Include appropriate DBA labor standards clauses and wage determinations in subcontracts for ARRA-assisted projects.
If the DOL concludes that a contractor or subcontractor has paid its employees less than the prevailing wage for a DBA project, it can order the contractor to pay the back wages. The DOL also has authority to withhold contract funds to cover any back wages if the contractor does not immediately comply. Also, DBA violations may be grounds for contract termination, contractor liability for any resulting costs to the government and/or debarment from future contracts for a period of up to three years. Thus, it is critical that contractors and subcontractors inquire as to ARRA and the applicability of the DBA to any construction project upon which they might bid