# Updating the Davis-Bacon and Related Acts Regulations

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URL: https://www.frixlaw.com/law-library/documents/fr%3A2022-05346

## Record

- **Collection:** Federal Register
- **Document type:** Proposed Rule
- **Published:** March 18, 2022
- **Citation:** 87 FR 15698

## Text

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:

Notice of proposed rulemaking.

SUMMARY:

The Department of Labor (Department) proposes to amend 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. As the first comprehensive regulatory review in nearly 40 years, the Department believes that revisions to these regulations are needed to provide greater clarity and enhance their usefulness in the modern economy.

DATES:

Interested persons are invited to submit written comments on this notice of proposed rulemaking (NPRM) on or before May 17, 2022.

ADDRESSES:

You may submit comments, identified by Regulatory Information Number (RIN) 1235-AA40, by either of the following methods:

•
Electronic Comments:
Submit comments through the Federal eRulemaking Portal at
https://www.regulations.gov.
Follow the instructions for submitting comments.

•
Mail:
Address written submissions to: 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.

Instructions:
Response to this NPRM is voluntary. The Department requests that no business proprietary information, copyrighted information, or personally identifiable information be submitted in response to this NPRM. Commenters submitting file attachments on
https://www.regulations.gov
are advised that uploading text-recognized documents—
i.e.,
documents in a native file format or documents which have undergone optical character recognition (OCR)—enable staff at the Department to more easily search and retrieve specific content included in your comment for consideration.

Anyone who submits a comment (including duplicate comments) should understand and expect that the comment will become a matter of public record and will be posted without change to
https://www.regulations.gov,
including any personal information provided. The Wage and Hour Division (WHD) posts comments gathered and submitted by a third-party organization as a group under a single document ID number on
https://www.regulations.gov.
All comments must be received by 11:59 p.m. on May 17, 2022, for consideration in this rulemaking; comments received after the comment period closes will not be considered.

The Department strongly recommends that commenters submit their comments electronically via
https://www.regulations.gov
to ensure timely receipt prior to the close of the comment period, as the Department continues to experience delays in the receipt of mail. Please submit only one copy of your comments by only one method.

Docket:
For access to the docket to read background documents or comments, go to the Federal eRulemaking Portal at
https://www.regulations.gov.

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). Copies of this proposal may be obtained in alternative formats (Rich Text Format (RTF) or text format (txt), a thumb drive, an MP3 file, large print, braille, audiotape, compact disc, or other accessible format), upon request, by calling (202) 693-0675 (this is not a toll-free number). TTY/TDD callers may dial toll-free 1-877-889-5627 to obtain information or request materials in alternative formats.

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/agencies/whd/contact/local-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, the Department proposes 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.”
Universities Research Ass'n, Inc.
v.
Coutu,
450 U.S. 754, 773 (1981) (quoting H. Comm. on Educ. and 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

1
Available at:
https://www.justice.gov/sites/default/files/olc/opinions/1981/06/31/op-olc-v005-p0174_0.pdf.

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. 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. 5 U.S.C. app. 1, effective May 24, 1950, 15 FR 3176, 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.

2
The DBA and the Related Acts apply to both prime contracts and subcontracts of any tier thereunder. In this NPRM, 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.

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 labor standards significantly, adding numerous new Related Act statutes to which these regulations apply. The Davis-Bacon Act and now 71 active Related Acts
4

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.
5

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.
6

3

See
46 FR 41444 (NPRM); 47 FR 23644 (final rule); 48 FR 19532 (revised final rule).

4
The Department maintains a list of the Related Acts at [cite website address].

5
These estimates are discussed below in section V (Executive Order 12866, Regulatory Planning and Review et al.).

6

See
Executive Order 14008, Tackling the Climate Crisis at Home and Abroad, § 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/.

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), which contains a subsection 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 then in effect as inconsistent with the regulatory language that had resulted from the 1981-1982 rulemaking.
See Mistick Construction,
ARB No. 04-051, 2006 WL 861357, at *5-7 (Mar. 31, 2006).
7

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.

7
Decisions of the ARB from 1996 to the present are available on the Department's website at
https://www.dol.gov/agencies/arb/decisions.

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.
8

The report also identified dissatisfaction among regulated parties regarding the rigidity of the Department's county-based system for identifying prevailing rates,
9

and missing wage rates requiring an overuse of “conformances” for wage rates for specific job classifications.
10

A 2019 report from the Department's Office of the Inspector General (OIG) made similar findings regarding out-of-date wage determinations.
11

8

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/products/gao-11-152.

9

Id.
at 23-24.

10

Id.
at 32-33.

11

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) (OIG Report), at 10, available at:
https://www.oversight.gov/sites/default/files/oig-reports/04-19-001-Davis%20Bacon.pdf.

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 $213 million in back wages for over 84,000 workers.
12

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 contracting agency's struggle to rectify the situation led to a delay of 8 years before the workers were paid the wages they were owed.

12
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.

The Department now 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 this rulemaking, the Department proposes to update and modernize the regulations implementing the DBRA at 29 CFR parts 1, 3, and 5. In some of these revisions, the Department has 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 seeks 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. On all the proposed changes, the Department seeks comment and participation from the many stakeholders in the program.

The proposed rule includes several elements targeted at increasing the amount of information available for wage determinations and speeding up the determination process. In a proposal to amend § 1.3 of the regulations, the Department outlines a new methodology to expressly give the 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 would 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 proposal would 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 proposes changes, in § 1.2, to the definition of “prevailing wage,” and, in § 1.7, to the scope of data considered to identify the prevailing wage in a given area. To address the overuse of weighted average rates, the Department proposes to return to the definition of “prevailing wage” in § 1.2 that it used from 1935 to 1983.
13

Currently, a single 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 proposes to return 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 proposes to return 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 § 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.

13
The 1981-1982 rulemaking went into effect on April 29, 1983. 48 FR 19532.

Proposed revisions to §§ 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. The proposed revisions would create 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 should reduce the need for conformances for classifications for which conformances are often required.

The Department also proposes to revise § 1.6(c)(1) to provide a mechanism to regularly update certain non-collectively bargained prevailing wage rates based on the Bureau of Labor Statistics Employment Cost Index.
14

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.

14
Available at:
https://www.bls.gov/news.release/eci.toc.htm.

The Department also seeks to strengthen enforcement in several critical ways. The proposed rule seeks to address 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 proposes to designate the DBRA contract clauses in § 5.5(a) and (b), and applicable wage determinations, as effective by “operation of law” notwithstanding their mistaken omission from a contract. This proposal is an extension of the retroactive modification procedures that were put into effect in § 1.6 by the 1981-1982 rulemaking, and it promises to 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 proposes to include new anti-retaliation provisions in the Davis-Bacon contract clauses in new paragraphs at §§ 5.5(a)(11) (DBRA) and 5.5(b)(5) (Contract Work Hours and Safety Standards Act), and in a new section of part 5 at § 5.18. The new language is intended to ensure 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 proposes to clarify and strengthen the cross-withholding procedure for recovering back wages. The proposal does so by including new language in the withholding contract clauses at §§ 5.5(a)(2) (DBRA) and 5.5(b)(3) (Contract Work Hours and Safety Standards Act) to clarify that cross-withholding may be accomplished on contracts held by agencies other than the agency that awarded the contract. The proposal also seeks to create 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 proposed revisions include, as well, 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 of Labor 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 prohibited 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 the Contract Work Hours and Safety Standards Act, which, as amended, requires an overtime payment of additional half-time for hours worked over forty in the workweek by laborers and mechanics, including watchmen and guards, on Federal contracts or federally assisted contracts containing Federal prevailing wage standards.
See
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

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 of Labor. 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. 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 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.
15

15

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 (NPRM Part 1); 44 FR 77080 (NPRM part 5); 46 FR 4306 (final rule part 1); 46 FR 4380 (final rule part 5). That 1981 final rule, however, was delayed and subsequently replaced by the 1981-1982 rulemaking. The 1982 final rule was delayed by litigation and re-published with amendments in 1983. 48 FR 19532 (Apr. 29, 1983).

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), the Department has not engaged in a comprehensive review and revision since the 1981-1982 rulemaking.

B. Overview of the Davis-Bacon Program

The Wage and Hour Division (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 that is covered by the Related Acts to State and local governments and other funding recipients. The State and local governmental agencies and authorities 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,
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).
16

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.

16
The Manual of Operations is a 1986 guidance document that is still used internally for reference within WHD. The Prevailing Wage Resource Book 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 Federal Acquisition Regulation (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 Handbook 1344.1, Federal Labor Standards Requirements in Housing and Urban Development Programs (2013).
17

17
Available at:
https://www.hud.gov/sites/dfiles/OCHCO/documents/Work-Schedule-Request.pdf.

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 provides periodic guidance on this process, as well as other aspects of the DBRA program, to contracting agencies and other interested parties, particularly through All Agency Memoranda (AAMs) and ruling letters. In addition,

the Department maintains a guidance document, the Field Operations Handbook (FOH), to provide external and internal guidance for the regulated community and for WHD investigators and staff on contract administration and enforcement policies.
18

18
The Field Operations Handbook 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)(1), 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 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.
See
29 CFR 5.12.

Where WHD conducts an investigation and finds that violations have occurred, it will notify the affected prime contractor and subcontractors of the findings of the investigation—including any determination that workers are owed 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 Administrative Review Board (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 in Federal district court.
See
5 U.S.C. 702, 704.
19

19
In addition to reviewing liability determinations and debarment, the ARB and the courts also have jurisdiction 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.

III. Discussion of Proposed Rule

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 of Labor 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 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. 5 U.S.C. app. 1.

The Secretary has delegated authority to promulgate these regulations to the Administrator of the WHD 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 Proposed Rule

1. 29 CFR Part 1

The procedural rules providing for the payment of minimum wages, including fringe benefits, 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 making and applying such determinations of prevailing wage rates and fringe benefits.

i. Section 1.1 Purpose and Scope

The Department proposes technical revisions to § 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 proposes 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 proposes to revise § 1.1 to reflect the removal of Appendix A of part 1, as discussed further below. The Department also proposes to add new paragraph (a)(1) to reference the WHD website (
https://www.dol.gov/agencies/whd/
government-contracts) 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.

ii. Section 1.2 Definitions

(A) Prevailing Wage

The Department proposes to redefine the term “prevailing wage” in § 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.
20

This three-step 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 is referred to as the “30-percent rule.”

20
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.”
21

21

Administration of the Davis Bacon Act: Hearings before the Spec. Subcomm. of Lab. of the H. Comm. on Educ. and 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 rule.
See
47 FR 23644. The new process required only two steps: First identifying if there was a single 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 rule, 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.
22

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
5 Op. O.L.C. at 176-77.
23

22

See, e.g.,
Act of Mar. 23, 1941, ch. 26, 55 Stat. 53 (1941) (applying the Act to alternative contract types); Contract Work Hours and Safety Standards Act 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).

23

See
note 1,
supra.

In the 1982 final rule, when the Department eliminated the 30-percent rule, 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 the 30-percent rule was “inflationary” and gave “undue weight to collectively bargained rates.” 47 FR 23644-45.

Now, however, after reviewing the development of the Davis-Bacon Act program since the 1981-1982 rulemaking, the Department concludes that eliminating the 30-percent rule 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 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 CBAs that represented a predominant wage rate in the locality.
24

The Department 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.
25

24

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).

25

See Oversight Hearing on the Davis-Bacon Act, Before the Subcomm. on Lab. Standards of the H. Comm. on Educ. and 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 17 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 64 percent of the observed classification determinations in this recent time period.
26

26

See
below section V (Executive Order 12866, Regulatory Planning and Review et al.).

The Department believes that such an overuse of weighted averages is

inconsistent with both the text and the purpose of the Act. It 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 inconsistent 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.
27

27
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. Elec. Contractors Ass'n,
ARB No. 03-020, 2004 WL 1261216, at * 8 (May 28, 2004).

To address the increasing tension between the current methodology and the purpose and definition of “prevailing,” the Department proposes to return to the original three-step process. The Department expects that re-introducing the 30-percent rule will reduce the use of average rates roughly by half—from 63 percent to 31 percent. The data from the regulatory impact analysis included with this NPRM below in section V suggests that returning to the three-step process will continue to result in 36 percent of prevailing wage rates based on the majority rule, with the balance of 33 percent based on the 30-percent rule, and 31 percent based on the weighted average.

This estimated distribution illustrates why the Department is no longer persuaded, as it stated in the 1981 NPRM, that the majority rule is more appropriate than the three-step process (including the 30-percent rule) because the 30-percent rule “ignores the rate paid to up to 70 percent of the workers.”
See
46 FR 41444.
28

That characterization ignores that the first step in the three-step process is still to adopt the majority rate if there is one. Under both the three-step process and the current majority 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.

28
The 30-percent rule can only be characterized as “ignoring” rates because it is a rule that applies a mathematical “mode,” in which the only relevant value is the value of the number that appears most frequently—instead of a mean (average), in which the values of all the numbers are averaged together. Both the 30-percent rule and the majority rule are modal rules in which the values of the non-prevailing wage rates do not factor into the final analysis.

The difference between the majority and the three-step methodologies 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 is clearly more of a “prevailing” wage rate than an average.

The Department has also considered the other explanations it provided in 1982 for eliminating the 30-percent rule, including any possible upward pressure on wages or prices and a perceived “undue weight” given to collectively bargained rates. These explanations are no longer persuasive for two fundamental reasons. First, the concerns appear to be unrelated to the text of the statute, and, if anything, contrary to its legislative purpose. Second, the Department's estimates of the effects of a return to the 30-percent rule suggest that the concerns are misplaced.

The concerns about inflation at the time of the 1982 rule were based in part on a criticism of the Act itself.
29

A fundamental purpose of the Davis-Bacon Act was to limit low-bid contractors from depressing local wage rates.
See
5 U.S. O.L.C. at 176.
30

This purpose necessarily contemplates an increase in wage rates over what could otherwise be paid without the enactment of the statute. Moreover, the effect of maintaining such a prevailing rate can just as easily be seen as guarding against deflationary effects of the use of low-wage contractors—instead of resulting in inflation. 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. and Lab. (Comm. Print 1963) (1963 House Committee Report), at 2-3.

29
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).

30

See
note 1,
supra.

The 1982 final rule contained an economic analysis that suggested that the elimination of the 30-percent rule could save $120 million (in 1982 dollars) in construction costs per year through reduced contract costs. However, the Department does not believe that this 40-year old analysis is reliable or accurate.
31

For example, the 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. 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. Even if the Department were to rely on this analysis as an accurate measure of impact, such savings (adjusted to 2019 dollars) would only amount to approximately two-tenths of a percent of total estimated covered contract costs.

31
The Department has not attempted to assess the relative accuracy of this 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 Department also does not believe that the proposed reversion to the 30-percent rule would have any noticeable impact on overall national inflation numbers.
32

An 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. Under the 30-percent rule, some prevailing wage determinations may increase and others decrease, but the magnitude of these changes will, overall, be negligible. Additionally, recent research shows that wage increases, particularly at the lower end of the distribution, do not cause significant economy-wide price increases.
33

The Department thus does not believe that any limited net wage increase for the approximately 1.2 million covered workers (less than 1 percent of the total national workforce) will significantly increase prices or have any appreciable effect on the macro economy.

32
The 1979 GAO report about the DBA noted that “minimum wage rates [such as the Davis-Bacon Act prevailing wage requirements] tend to have an inflationary effect on . . . the national economy as a whole.” 1979 GAO Report, HRD-79-18 at 76, 83-84.

33

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.

Further, since the DBA legislates that minimum wages must be paid to workers on construction projects, the effect of such requirement is not a permissible basis for departing from the longstanding interpretation of the plain meaning of the term “prevailing.” 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, AFL-CIO
v.
Donovan,
543 F. Supp. 1282, 1290 (D.D.C. 1982). Congress has considered cost concerns, and enacted and expanded the DBA notwithstanding them.
Id.
at 1290-91; 1963 House Committee Report at 2-3; Reorganization Plan No. 14 of 1950, 5 U.S.C. app. 1.
34

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, the Department does not believe such reasoning now provides either a factual or legal basis to maintain the current majority rule.

34
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.” 5 U.S.C. app. 1.

The Department is also no longer persuaded that the 30-percent rule gives undue weight to collectively bargained rates. The underlying concern at the time was that identification of a single 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 plain meaning of the statutory term “prevailing,” which, as both the Department and OLC have concluded, refers to a predominant single wage rate, or a modal wage rate. The same weight is given to collectively bargained rates whether the Department chooses a 50-percent or 30-percent threshold. The Department accordingly now understands the concerns voiced at the time to be concerns about the potential outcome (of more wage determinations based on union rates) instead of concerns about any actual weight given to union 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”).

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. Specifically, in the V.D. illustration, Department estimates that the use of single wage rates that are not the product of collective bargaining agreements would increase from 12 percent to 36 percent of all wage rates—an overall increase of 24 percentage points. The use of single wage rates that are based on collective bargaining agreements will increase from 25 percent to 34 percent—an overall increase of 9 percentage points.
35

35

See
below section V (Executive Order 12866, Regulatory Planning and Review et al.). 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. This would be largely unchanged under the proposed reversion to the 3-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 collective bargaining agreements 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.

The Department has 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 meaning of the term “prevailing.”
Accord
47 FR 23645. The Department is therefore proposing to return to the three-step process and the 30-percent rule, and is not proposing as alternatives the use of either the median or mean as the primary or sole methods for making wage determinations.

(1) Former Subsection § 1.2(a)(2)

In a non-substantive change, the Department proposes to move the language currently at § 1.2(a)(2) that explains the interaction between the definition of prevailing wage and the sources of information in § 1.3. Under the proposed rule, that language (altered to update the cross-reference to the definition of prevailing wage) would now appear in § 1.3.

(2) Variable Rates That Are Functionally Equivalent

The Department also proposes to amend the regulations on compiling wage rate information at § 1.3 to allow for variable rates that are functionally equivalent to be counted together for the purpose of determining whether a single wage rate prevails under the proposed definition of “prevailing wage” in § 1.2. The Department generally followed this proposed approach until after the 2006 decision of the ARB in
Mistick Construction.
2006 WL 861357.

Historically, the Department has considered wage rates included in survey data 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 collective bargaining agreement (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 to be the “same wage” rate for purposes of calculating whether that wage rate prevailed under the majority rule that is discussed in the section above. 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 those rates as compensating workers for the burden of traveling or staying away from home and did not reflect 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. Wages for workers working under the same CBA could be reported differently on a survey based on 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. 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 the variable rates to use as the prevailing rate. In the case of rates that are variable because of an escalator-clause issue, it uses the most current rate under the collective bargaining agreement. Similarly, where the Department identified combinations of hourly and fringe rates as the “same,” the Department 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 § 1.2(a) in a way that has limited some of these practices.
See Mistick Constr.,
2006 WL 861357, at *5-7. The decision affirmed the Administrator's continued use of the escalator-clause rule, but found the use of the same combination of basic hourly and fringe rates did not amount to exactly the “same” wage and thus violated the use of the term “same wage” in § 1.2(a). The ARB also viewed the flexibility shown to collective bargaining agreements 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. The ARB held that the Administrator could not consider variable rates under a collective bargaining agreement to be the “same wage” under § 1.2(a) as written—and therefore, if there was no strictly “same wage” that would prevail under the majority rule, the Administrator would have to use the fallback weighted average on the wage determination.

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 above, however, both the Department and OLC have agreed that averages should generally only be used as a last resort. 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 (emphasis in original).
36

In discussing those cases, OLC quoted from the 1963 House Report summarizing extensive congressional oversight hearings of the Act. 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.
37

To the extent that an inflexible, “to the penny” approach to determining if wage data reflects the “same wage” promotes the use of average rates even when wage rate variations are exceedingly slight and are based on practices 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.

36

See
note 1,
supra.

37

See
1963 House Committee Report,
supra,
at 7-8.

For these reasons, and particularly because a mechanical, “to the penny” approach ultimately undermines rather than promotes the determination of actual prevailing wage rates, the Department believes that it is consistent with the language and purpose of the statute to treat slight variations in wages as the same rate in appropriate circumstances.

As reflected in
Mistick,
the existing regulation does not clearly authorize the use of functionally equivalent wages to determine the local prevailing wage.
See
2006 WL 861357, at *5-7. Accordingly, the Department proposes to amend § 1.3 to include a new paragraph at § 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.

Such flexibility would not be unlimited. Some variations within the same CBA clearly amount to different rates. For example, when a CBA authorizes the use of “market recovery rates” that are lower than the standard rate in order to win a bid, under certain circumstances those rates may not be appropriate to combine together with the CBA's standard rate as “functionally equivalent” because frequent use of such a rate could suggest (though does

not necessarily compel) a conclusion that the CBA's regular rate may not be prevailing in the area.

The Department welcomes comments on all aspects of this proposal regarding proposed changes to the definition of “prevailing wage” in § 1.2 and to the regulation governing the obtaining and compiling of wage rate information in § 1.3.

(B) Area

The core definition of “area” in § 1.2 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 rule's geography-based definition of area 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.”
38

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 71-4, 1971 WL 17609, at *3-4 (Dec. 7, 1971).
39

38

See, e.g.,
National Housing Act, 12 U.S.C. 1715c(a) (locality); Housing and Community Development Act of 1974, 42 U.S.C. 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. 113(a) (immediate locality).

39
The Wage Appeals Board (WAB) was the Department's administrative appellate entity from 1964 until 1996, when it was eliminated and the Administrative Review Board was created and provided jurisdiction over appeals from decisions of the Administrator and the Department's Administrative Law Judges (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.

The Department proposes to revise the definition of area to address projects that span multiple counties and to address highway projects specifically. 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 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,
1971 WL 17609.

Critics of this policy have pointed out that workers are very often hired and paid a single wage rate for a project, and—unless there are different city or county minimum wage laws—workers' pay rates often do 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 requiring different wage rates for the same workers on the same multi-county project is “illogical.”
See
2011 GAO Report at 24.
40

40

See
note 8,
supra.

While requiring different prevailing wage rates for work by the same worker on the same project may be consistent with the current regulations, the DBA and Related Act statutes themselves do not address multi-jurisdictional projects. Issuing and applying a single project wage determination for such projects is not inconsistent with the text of the DBA. Nor is it inconsistent 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.

Accordingly, the Department proposes adding language in the definition of “area” in § 1.2 that would 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. The Department solicits 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 such a project wage determination would be appropriate.

The Department's other proposed change to the definition of “area” in § 1.2 is to allow the use of State highway districts or similar transportation subdivisions as the relevant wage determination area for highway projects. Although there is significant variation between states, most states maintain civil subdivisions responsible for certain aspects of transportation planning, financing, and maintenance.
41

These districts tend to be organized within State departments of transportation or otherwise through State and County governments.

41

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:
https://www.financingtransportation.org/pdf/50_state_review_nov16.pdf.

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”).

In identifying the appropriate geographic area of a wage determination, the Federal-Aid Highway Act of 1956 (FAHA), one of the Related Acts, uses the term “immediate locality” instead of “civil subdivision.” 23 U.S.C. 113. However, 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 Department also notes that Congress, in enacting the FAHA, envisioned that the Federal aid would be provided in a manner that sought to complement and cooperate with State departments of transportation.
See Frank Bros.
v.
Wisconsin Dep't of Transp.,
409 F.3d 880, 887-89 (7th Cir. 2005). As State highway or transportation districts often plan, develop, and oversee federally financed highway projects, the provision of a single wage determination for each district would simplify the procedure for incorporating Federal financing into these projects.

As such, the Department proposes to authorize WHD to adopt State highway districts as the geographic area for determining prevailing wages on highway projects, where appropriate.

(C) Type of Construction (or Construction Type)

The Department proposes 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 provides 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 does 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 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 would provide additional clarity for these references, particularly for members of the regulated community who might be less familiar with the term.

(D) Other Definitions

The Department proposes 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 proposes to revise the definition of “agency” (and add a sub-definition of “Federal agency”) to mirror the definition proposed and discussed below in § 5.2. The Department also proposes to add to § 1.2 new defined terms also proposed in parts 3 and 5, including “employed”, “type of construction (or construction type),” and “United States or the District of Columbia.” For further discussion on these proposed terms, see the corresponding discussion in § 3.2 and 5.2 below.

(E) Paragraph Designations

The Department is also proposing to amend §§ 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 proposes to make conforming edits throughout parts 1, 3, and 5 in any provisions that currently reference lettered paragraph definitions.

iii. Section 1.3 Obtaining and Compiling Wage Rate Information

(A) 29 CFR 1.3(b)

The Department proposes to switch the order of § 1.3(b)(4) and (5) for clarity. This nonsubstantive change would simply group together the subparagraphs in § 1.3(b) that apply to wage determinations generally, and follow those subparagraphs with one that applies only to Federal-aid highway projects under 23 U.S.C. 113.

(B) 29 CFR 1.3(d)

As part of its effort to modernize the regulations governing the determination of Davis-Bacon prevailing wage rates, the Department is considering whether to revise § 1.3(d), regarding 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 is not proposing any specific revisions to § 1.3(d) in this NPRM, but rather is seeking comment on whether this regulatory provision—particularly its limitation on the use of Federal project data in determining wage rates for building and residential construction projects—should be revised.

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 § 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.”
42

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.”
43

42

See
Final Rule, Procedures for Predetermination of Wage Rates, 47 FR 23644 (May 28, 1982).

43

Id.

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.
44

The final rule therefore provided in § 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 determine the prevailing wages in the absence of such data.” 29 CFR 1.3(d). In subsequent litigation, the D.C. Circuit upheld § 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.
45

44

See Donovan,
712 F.2d at 620.

45

Id.
at 621-22.

As a result of § 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 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 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 § 1.7. For wage determinations for federally funded 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-county group is insufficient, then WHD includes Federal project data from all the counties in that county group. If both non-Federal project and Federal project data for a surrounding-county group is still insufficient to determine a prevailing wage rate, then, for classifications that have been designated as “key”

classifications, WHD may expand to a “super group” of counties or even to the statewide level.
See Chesapeake Housing,
2013 WL 5872049, at *6; PWRB, Davis-Bacon Surveys, at 6.
46

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.

46

See
note 16,
supra.

As reflected in the plain language of § 1.3(d) as well as WHD's implementation of that regulatory provision, the current formulation of § 1.3(d) does not prohibit all uses 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 where “there is insufficient wage data to determine the prevailing wages in the absence of such data.” 29 CFR 1.3(d). WHD often uses Federal project data in calculating prevailing wage rates applicable to residential construction due to insufficient non-Federal project survey data submissions. 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.
47

47

See
note 8,
supra.

Notwithstanding the use of Federal project data in calculating prevailing wage rates for building and residential construction, the Department recognizes that some interested parties may believe that § 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 strongly encourages robust participation in Davis-Bacon prevailing wage surveys, including building and residential surveys, and it therefore urges 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. In the absence of such Federal project data, for example, a prevailing wage rate may be calculated at the surrounding-county 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 § 1.3(d), the Department recognizes that revisions to § 1.3(d) may nonetheless be warranted. Specifically, the Department is interested in comments regarding whether to revise § 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 the U.S. Department of Housing and Urban Development—it may be appropriate to expand the amount of Federal project data that is available to use in setting prevailing wage rates for residential construction.

There may also be other specific circumstances that particularly warrant greater use of Federal project data. More generally, if the current limitation on the use of Federal project data were removed from § 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. Alternatively, § 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 invites comments on these and any other issues regarding the use of Federal project data in developing building and residential wage determinations.

(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 subsection are discussed below in part III.B.1.xii (“Frequently conformed rates”), together with proposed changes to § 5.5(a)(1).

(D) 29 CFR 1.3(g)-(j)—Adoption of State/Local Prevailing Wage Determinations

The Department proposes to add new paragraphs (g), (h), (i), and (j) to § 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.

About half of the States, as well as many localities, have their own prevailing wage laws (sometimes called “little” Davis-Bacon laws).
48

Additionally, a few states have processes for determining prevailing wages in public construction even in the absence of such State laws.
49

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 statute and regulation to “consult[ ]” with “the highway department of the State” in which the work is to be performed, and to “give due regard to the information thus obtained.” 23 U.S.C. 113(b); 29 CFR 1.3(b)(4).

48
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
(last updated Jan. 2021).

49
These states include Iowa, North Dakota, and South Dakota.

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 Department's Office of the Inspector General (OIG), WHD used highway wage

determinations from 15 states between fiscal years 2013 and 2017.
See
2019 OIG Report at 10.
50

50

See
note 11,
supra.

The 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 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 § 1.2(a) and the ARB's
Mistick
decision.
Id.
at 10.

The Department shares OIG's concern regarding outdated wage rates. Outdated and/or inaccurate wage determinations are inconsistent with the intent of the Davis-Bacon labor standards, which aim to ensure that laborers and mechanics on covered projects are paid locally prevailing wages and fringe benefits. Wage rates that are significantly out-of-date do not reflect this intent and could even have the effect of depressing wages if covered contractors pay no more than an artificially-low prevailing wage rate that has not been adjusted over time to continue to reflect the wages paid to workers in a geographic area. Accordingly, the Department agrees with OIG that, where appropriate, adoption of more current wage determinations made by states and localities would be consistent with the DBA's purpose. States often conduct wage surveys far more frequently than WHD.
51

Furthermore, if a State or locality is already engaged in efforts to determine prevailing wages—and if the State's methods are reliable, rigorous, and transparent—similar activities conducted by WHD on a less regular basis can be duplicative and an inefficient use of survey respondents' efforts and WHD's scarce resources. Relatedly, states and localities that regularly update their own wage determinations may have ongoing relationships with stakeholders in the relevant geographic areas that facilitate that process. In contrast, WHD may lack similarly strong relationships with those stakeholders given the relative infrequency with which it surveys any given area. Thus, many states and localities may be in a position to ensure greater participation in wage surveys, which can improve wage survey accuracy.

51
Some states, such as Minnesota, conduct surveys annually.
See
Prevailing Wage: Annual Statewide Survey, Minn. Dep't of Labor & Indus.,
https://www.dli.mn.gov/business/employment-practices/prevailing-wage-annual-statewide-survey
(last visited Nov. 17, 2021). Others use a different frequency; for example, Nevada conducts a survey every 2 years.
See
Nevada's 2021-2023 Prevailing Wage Survey Released, Nev. Dep't of Bus. & Indus.,
https://business.nv.gov/News_Media/Press_Releases/2021/Labor_Commissioner/Nevada%E2%80%99s_2021-2023_Prevailing_Wage_Survey_Released/
(last visited Nov. 17, 2021).

The Department believes that a regulatory revision would best ensure that WHD can incorporate State and local wage determinations where 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] § 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.
52

Because the current regulations at §§ 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 § 1.3(b) must be filtered through the definition of “prevailing wage” in § 1.2, the Department is proposing 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.

52
For example, Washington uses a definition similar to the Department's current majority rule. See Wash. Rev. Code § 39.12.010(1) (2021). Wyoming, in contrast, uses a method that mirrors the three-step process in this proposed rule. Wyo. Stat. Ann. §§ 27-4-401-413 (2021). Other states use CBA rates as a starting point. N.M. Stat. Ann. §§ 13-4-10-17 (2021); N.M. Code R. § 11.1.2.12 (2021); N.Y. Lab. Law §§ 220-224 (McKinney 2021).

Additionally, the Department's regulations apply numerous requirements and constraints to WHD's own wage determinations, such as those concerning geographic scope,
see
§ 1.7, and the type of project data that may be used,
see
§ 1.3(d). Like the definition of prevailing wage, analogous requirements under State and local prevailing wage laws vary. Although, as noted above, the Department's regulations permit WHD to “consider” State and local determinations and to give “due regard” to State rates for highway construction, the current regulations do not specifically address whether WHD may adopt State or local rates derived using methods and requirements that differ from those used by WHD.

Accordingly, and in light of the advantages of adopting State and local rates discussed above, the Department is proposing to add a new paragraph, § 1.3(g), which would explicitly permit WHD to adopt prevailing wage rates set by State or local officials, even where the methods used to derive such rates, including the definition of the prevailing wage, may differ in some respects from the methods the Administrator uses under the DBA and the regulations in 29 CFR part 1. The proposal would permit WHD to adopt such wage rates provided that the Administrator, after reviewing the rate and the processes used to derive the rate, concludes that they meet certain listed criteria. The criteria, which are explained further below, 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 adopt State or local rates.

Importantly, the proposed rule requires the Administrator to make an affirmative determination that the enumerated criteria 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. This makes clear that if the proposed rule is finalized, 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,
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. 6,516 (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.”)).

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 proposing 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) (agency's use of “imperfect[ ]” data set was permissible under the Administrative Procedure Act).

The Department is proposing to permit the adoption of State and local rates for all types of construction. The FHWA's 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.”). In sum, the FHWA's requirement sets a floor for reliance on State data for highway construction, not a ceiling, and does not foreclose reliance on State or local data for other types of construction.

The criteria the Department proposes for the adoption of State or local rates, which are included in proposed new paragraph § 1.3(h), are as follows:

First, 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 requirement ensures that WHD will not adopt a prevailing wage rate where the process to set the rate artificially 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 use of the language “survey or other process” in the proposed regulatory text is 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.
53

53
For example, a few states determine prevailing wage rates through stakeholder negotiations that typically involve labor and employer groups. The proposed rule does not foreclose acceptance of rates set using such a process providing that the process is generally open to full participation by all interested parties and that the other required criteria are met.

Second, the State or local wage rate must reflect both a basic hourly rate of pay as well as any locally prevailing bona fide fringe benefits, each of which can be calculated separately. Thus, under the proposed rule, WHD must be able to confirm during its review process that both figures are prevailing for the relevant classification(s), and must be able to 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 in order to determine compliance with the Contract Work Hours and Safety Standards Act (CWHSSA) and the Fair Labor Standards Act (FLSA).

Third, the State or local government must classify laborers and mechanics in a manner that is recognized within the field of construction. The Department 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. Indeed, unlike in the case of the Service Contract Act (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. 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.

Finally, the State or local government's criteria for setting prevailing wage rates must be substantially similar to those the Administrator uses in making wage determinations under 29 CFR part 1. The proposed regulation provides 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 their corresponding wage rate(s) will be accepted. While the proposed regulation lists the above factors as guidelines, it ultimately directs 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 intends 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).

Proposed § 1.3(g) permits the Administrator to adopt State or local wage rates with or without modification. This is 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 § 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. It is anticipated that the Administrator would cooperate with the State or locality to make the appropriate modifications to any wage rates.

The Department also proposes to add a new paragraph § 1.3(i), which would explain that in order for WHD to adopt a State or local government prevailing wage rate, the Administrator must obtain the wage rates and any relevant supporting documentation and data from the State or local entity, and provides instructions for submission.

Finally, the Department proposes to add a new paragraph § 1.3(j), which would explain that nothing in the additional proposed sections described above precludes the Administrator from considering State or local prevailing wage rates in a more holistic fashion, consistent with § 1.3(b)(3), or from giving due regard to information obtained from State highway departments, consistent with § 1.3(b)(4), as part of the Administrator's process of making prevailing wage determinations under 29 CFR part 1. For example, under this 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 the proposed additional language is 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. These proposed revisions therefore address the concerns WHD voiced to OIG that the current regulations, and in particular the definition of prevailing wage as interpreted by the ARB in
Mistick,
could preclude, or at least be in tension with, such an approach.

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 § 1.4 assist WHD in its multi-year 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 careful consideration, the Department proposes to remove the language in the regulation that currently allows agencies to submit reports only “to the extent practicable.” Instead, as proposed, § 1.4 would require Federal agencies to submit the construction reports.

The Department also now proposes 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 § 1.4 would codify these guidelines as part of the regulations.

The Department also proposes new language requiring Federal agencies to include notification of any expected options to extend the terms of current construction contracts. The Department is proposing 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, which will in turn contribute to the effectiveness of the overall Davis-Bacon wage survey program. The Department also proposes 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 proposes 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 proposes 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 proposes deleting the reference to the Interagency Reports Management Program as the requirements of that program were terminated by the General Services Administration (GSA) in 2005.
See
70 FR 3132 (Jan. 19, 2005).

The Department does not believe that these proposed changes will 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. However, the Department also seeks comment on any alternative methods through which the Department may obtain the information and eliminate the need to require the agency reports.

v. Section 1.5 Publication of General Wage Determinations and Procedure for Requesting Project Wage Determinations

The Department proposes a number of revisions to § 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 proposes to re-title § 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.

Additionally, the Department proposes to add language to § 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 proposes to add language to § 1.5(b) to explain circumstances under which an agency 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 § 1.2 discussed above that would permit the issuance of project wage determinations for multi-county 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 proposes to add language to § 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 proposes to add language to § 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 proposes 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.

Finally, the Department proposes to clarify the term “agency” in § 1.5. In proposed § 1.5(b)(2) (renumbered, currently § 1.5(b)(1)), which describes the process for requesting a project wage determination, the Department proposes to delete the word “Federal” that precedes “agency.” This proposed deletion, and the resulting incorporation of the definition of “agency” from § 1.2, clarifies that, as already implied elsewhere in § 1.5, non-Federal agencies may request project wage determinations.
See, e.g.,
§ 1.5(b)(3) (proposed § 1.5(b)(4)) (explaining that a State highway department under the Federal-Aid Highway Acts may be a requesting agency).

vi. Section 1.6 Use and Effectiveness of Wage Determinations

(A) Organizational, Technical and Clarifying Revisions

The Department proposes to reorganize, rephrase, and/or re-number several regulatory provisions and text in § 1.6. These proposed revisions include adding headings to paragraphs and subparagraphs for clarity; changing the order of some of the paragraphs and subparagraphs 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 re-issued entirely (referred to in the current regulatory text as a “supersedeas” wage determination), such as after a new wage survey; consolidating certain subsections 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 (co

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2022-05346. Public record. Not legal advice.