A-90503, DECEMBER 4, 1937, 17 COMP. GEN. 471

A-90503: Dec 4, 1937

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IT IS ANTICIPATED THAT THE CONSTRUCTION PERIOD WILL APPROXIMATE THREE YEARS AND. IF IT IS PERMISSIBLE TO DO SO. I BELIEVE IT WILL BE IN THE INTEREST OF THE GOVERNMENT TO MAKE PROVISION IN THE SPECIFICATIONS FOR PERIODIC CHANGES IN WAGE RATES. THE DEPARTMENT OF LABOR IS DETERMINING RATES OF WAGES PURSUANT TO THE PROVISIONS OF THE DAVIS-BACON ACT. WHERE CONSTRUCTION IS BEING FINANCED WITH ANNUAL AND SPECIFICALLY APPROPRIATED FUNDS (AS CONTRASTED WITH EMERGENCY RELIEF FUNDS). ARE MADE A PART OF THE SPECIFICATIONS ISSUED BY THE BUREAU OF RECLAMATION. THE FORM OF CONTRACT USED FOR THIS CONSTRUCTION WORK IS U.S. HAVE VISITED HIS OFFICE. THAT ALL ARE MUCH CONCERNED OVER THE PROSPECT OF HIGHER WAGES ON FUTURE CONTRACTS.

A-90503, DECEMBER 4, 1937, 17 COMP. GEN. 471

CONTRACTS - WAGE STIPULATIONS - STATUTORY PUBLIC BUILDINGS AND PUBLIC WORKS REQUIREMENTS - PERIODIC ADJUSTMENT OF WAGE RATES A CONTRACT STIPULATION PROVIDING FOR PERIODIC ADJUSTMENT BY THE SECRETARY OF LABOR OF THE MINIMUM RATES OF WAGES STATED IN THE CONTRACT WOULD BE IN CONTRAVENTION OF THE ACT OF AUGUST 30, 1935, 49 STAT. 1011, THE PLAIN PROVISIONS OF WHICH REQUIRE THAT THERE BE INCLUDED IN EVERY GOVERNMENT CONTRACT IN EXCESS OF $2,000 FOR CONSTRUCTION, ETC., OF PUBLIC BUILDINGS AND PUBLIC WORKS, A STIPULATION THAT CONTRACTOR SHALL PAY "WAGE RATES NOT LESS THAN THOSE STATED IN THE ADVERTISED SPECIFICATIONS.'

ACTING COMPTROLLER GENERAL ELLIOTT TO THE SECRETARY OF THE INTERIOR, DECEMBER 4, 1937:

THERE HAS BEEN RECEIVED YOUR LETTER OF NOVEMBER 15, 1937, AS FOLLOWS:

THIS DEPARTMENT HAS UNDER IMMEDIATE CONSIDERATION THE ISSUANCE OF SPECIFICATIONS FOR THE CONSTRUCTION OF A HIGH DAM AT GRAND COULEE, COLUMBIA BASIN PROJECT IN WASHINGTON.

IT IS ANTICIPATED THAT THE CONSTRUCTION PERIOD WILL APPROXIMATE THREE YEARS AND, IF IT IS PERMISSIBLE TO DO SO, I BELIEVE IT WILL BE IN THE INTEREST OF THE GOVERNMENT TO MAKE PROVISION IN THE SPECIFICATIONS FOR PERIODIC CHANGES IN WAGE RATES.

UNDER THE PRESENT PRACTICE, AS OF COURSE YOU KNOW, THE DEPARTMENT OF LABOR IS DETERMINING RATES OF WAGES PURSUANT TO THE PROVISIONS OF THE DAVIS-BACON ACT, AS AMENDED AUGUST 30, 1935, 49 STAT. 1011, WHERE CONSTRUCTION IS BEING FINANCED WITH ANNUAL AND SPECIFICALLY APPROPRIATED FUNDS (AS CONTRASTED WITH EMERGENCY RELIEF FUNDS), AND THESE WAGE SCALES, AS ESTABLISHED BY THE LABOR DEPARTMENT, ARE MADE A PART OF THE SPECIFICATIONS ISSUED BY THE BUREAU OF RECLAMATION. THE FORM OF CONTRACT USED FOR THIS CONSTRUCTION WORK IS U.S. STANDARD FORM NO. 23, AS REVISED SEPTEMBER 9, 1935, AND THIS FORM MAKES NO PROVISION FOR ADJUSTMENT OF WAGES BECAUSE OF CHANGES IN ECONOMIC CONDITIONS.

I AM ADVISED BY THE COMMISSIONER OF THE BUREAU OF RECLAMATION THAT A NUMBER OF PROMINENT CONTRACTORS, AS WELL AS REPRESENTATIVES OF THE ASSOCIATED GENERAL CONTRACTORS, HAVE VISITED HIS OFFICE, AND THAT ALL ARE MUCH CONCERNED OVER THE PROSPECT OF HIGHER WAGES ON FUTURE CONTRACTS, ESPECIALLY THOSE WHICH EXTEND OVER A LONG PERIOD. IT WOULD BE OF CONSIDERABLE ASSISTANCE IN THE DIRECTION OF SECURING LOWER BIDS UNDER OUR FUTURE SPECIFICATIONS IF SOME MACHINERY COULD BE SET UP IN THE CONSTRUCTION CONTRACTS WHICH WOULD PERMIT ADJUSTMENT FOR MAJOR CHANGES IN ECONOMIC CONDITIONS, JUSTIFYING GENERAL INCREASES OR DECREASES IN WAGES. WITH THIS PURPOSE IN VIEW, THE DEPARTMENT HAS DRAFTED AND THERE IS ENCLOSED A PROPOSED PARAGRAPH FOR INCLUSION IN SPECIFICATIONS WHERE OUR CONTRACTS RUN OVER A PERIOD OF SEVERAL YEARS, WHICH HAS BEEN DESIGNATED "PROPOSAL NO. " THERE IS ALSO ENCLOSED A PARAGRAPH SUBMITTED BY THE DENVER OFFICE OF THE BUREAU OF RECLAMATION COVERING THE SAME SUBJECT MATTER, WHICH HAS BEEN DESIGNATED "PROPOSAL NO. 2.'

A COPY OF PROPOSAL NO. 1 WAS SUBMITTED TO THE DEPARTMENT OF LABOR, AND I AM ALSO ENCLOSING A COPY OF THE LABOR DEPARTMENT'S REPLY OF NOVEMBER 12, 1937, WHICH SUGGESTS, BECAUSE OF DOUBTS EXPRESSED THEREIN, THAT THE MATTER BE SUBMITTED TO YOUR OFFICE FOR OPINION.

I AM CONVINCED THAT MORE REASONABLE BIDS WILL BE SUBMITTED ON LARGE CONSTRUCTION JOBS WHICH EXTEND OVER A PERIOD OF SEVERAL YEARS IF THE BIDDERS KNOW IN ADVANCE THAT THE WAGE RATES FIXED PRIOR TO INITIATION OF CONSTRUCTION WILL BE ADJUSTED TO MEET CHANGING ECONOMIC CONDITIONS DURING CONSTRUCTION. THERE IS NO SPECIFIC INHIBITION IN THE DAVIS BACON ACT AGAINST REVISION OF WAGE RATES. THE ACT APPARENTLY CONTEMPLATES, TO QUOTE A PORTION THEREOF:

"MINIMUM WAGES TO BE PAID VARIOUS CLASSES OF LABORERS AND MECHANICS WHICH SHALL BE BASED UPON THE WAGES TO BE DETERMINED BY THE SECRETARY OF LABOR TO BE PREVAILING FOR THE CORRESPONDING CLASSES OF LABORERS AND MECHANICS EMPLOYED ON PROJECTS OF A CHARACTER SIMILAR TO THE CONTRACT WORK IN THE CITY, TOWN, VILLAGE, OR OTHER CIVIL SUBDIVISION OF THE STATE IN WHICH THE WORK IS TO BE PERFORMED * * *.'

THE UNDERLINING IS SUPPLIED, AND IT SEEMS TO ME THAT THE VERY PURPOSE OF THE ACT WILL BE DEFEATED IN LONG TERM CONTRACTS IF THE WAGE RATES, AS ORIGINALLY ESTABLISHED, DO NOT TRULY REFLECT THE WAGE RATES ACTUALLY PREVAILING IN THE SAME LOCALITY DURING THE LATER YEARS OF THE CONTRACT PERIOD.

IT IS NOT FEASIBLE TO COMPLETE A LARGE RECLAMATION PROJECT UNDER ONE CONTRACT AND ONE CONTRACTOR, NOR IS IT PRACTICABLE TO LET THE CONTRACTS AT APPROXIMATELY THE SAME TIME. THIS RESULTS, AND IT ACTUALLY HAS RESULTED ON THE SALT RIVER PROJECT IN ARIZONA, IN TWO OR MORE APPRECIABLY DIFFERENT WAGE SCALES ON THE SAME PROJECT AND COVERING THE SAME CRAFTS. IT IS HARDLY NECESSARY TO STATE THAT THIS CONDITION READILY INVITES LABOR TROUBLES.

IT WILL BE APPRECIATED IF YOU WILL EXPRESS YOUR VIEWS AS TO WHETHER IN YOUR OPINION, THERE IS ANY LEGAL OBSTACLE TO THE INCLUSION OF THE PROPOSAL NO. 1 OR THE PROPOSAL NO. 2 IN THE SPECIFICATIONS FOR THE HIGH DAM AT GRAND COULEE AND OTHER SPECIFICATIONS WHERE OUR CONTRACTS RUN OVER A PERIOD OF SEVERAL YEARS. ALSO THE DEPARTMENT WILL BE GLAD TO RECEIVE YOUR SUGGESTIONS AS TO ANY CHANGES IN PHRASEOLOGY WHICH IN YOUR OPINION WOULD MORE CERTAINLY ATTAIN THE DESIRED OBJECTIVE. INVITATIONS FOR BIDS UNDER THE GRAND COULEE SPECIFICATIONS HAVE ALREADY BEEN ISSUED, FIXING DECEMBER 10, 1937, AS THE OPENING DATE, AND IT IS HOPED THAT IT WILL BE POSSIBLE FOR YOU TO RENDER DECISION AT AN EARLY DATE.

AS SUGGESTED IN THE ABOVE-QUOTED LETTER, THE PROPOSED STIPULATIONS, BOTH NOS. 1 AND 2, WOULD PROVIDE FOR READJUSTMENT BY THE SECRETARY OF LABOR OF THE RATES OF WAGES TO BE PAID FROM TIME TO TIME, AND IN THIS CONNECTION IT IS TO BE OBSERVED THAT SECTION 1 OF THE ACT OF AUGUST 30, 1935, 49 STAT. 1011, PROVIDES---

THAT THE ADVERTISED SPECIFICATIONS FOR EVERY CONTRACT IN EXCESS OF $2,000, TO WHICH THE UNITED STATES OR THE DISTRICT OF COLUMBIA IS A PARTY FOR CONSTRUCTION, ALTERATION, AND/OR REPAIR, INCLUDING PAINTING AND DECORATING, OF PUBLIC BUILDINGS OR PUBLIC WORKS OF THE UNITED STATES OR THE DISTRICT OF COLUMBIA WITHIN THE GEOGRAPHICAL LIMITS OF THE STATES OF THE UNION OR THE DISTRICT OF COLUMBIA, AND WHICH REQUIRES OR INVOLVES THE EMPLOYMENT OF MECHANICS AND/OR LABORERS, SHALL CONTAIN A PROVISION STATING THE MINIMUM WAGES TO BE PAID VARIOUS CLASSES OF LABORERS AND MECHANICS WHICH SHALL BE BASED UPON THE WAGES THAT WILL BE DETERMINED BY THE SECRETARY OF LABOR TO BE PREVAILING FOR THE CORRESPONDING CLASSES OF LABORERS AND MECHANICS EMPLOYED ON PROJECTS OF A CHARACTER SIMILAR TO THE CONTRACT WORK IN THE CITY, TOWN, VILLAGE, OR OTHER CIVIL SUBDIVISION OF THE STATE IN WHICH THE WORK IS TO BE PERFORMED, OR IN THE DISTRICT OF COLUMBIA IF THE WORK IS TO BE PERFORMED THERE; AND EVERY CONTRACT BASED UPON THESE SPECIFICATIONS SHALL CONTAIN A STIPULATION THAT THE CONTRACTOR ON HIS SUBCONTRACTOR SHALL PAY ALL MECHANICS AND LABORERS EMPLOYED DIRECTLY UPON THE SITE OF THE WORK, UNCONDITIONALLY AND NOT LESS OFTEN THAN ONCE A WEEK, AND WITHOUT SUBSEQUENT DEDUCTION OR REBATE ON ANY ACCOUNT, THE FULL AMOUNTS ACCRUED AT TIME OF PAYMENT, COMPUTED AT WAGE RATES NOT LESS THAN THOSE STATED IN THE ADVERTISED SPECIFICATIONS, REGARDLESS OF ANY CONTRACTUAL RELATIONSHIP WHICH MAY BE ALLEGED TO EXIST BETWEEN THE CONTRACTOR OR SUBCONTRACTOR AND SUCH LABORERS AND MECHANICS, AND THAT THE SCALE OF WAGES TO BE PAID SHALL BE POSTED BY THE CONTRACTOR IN A PROMINENT AND EASILY ACCESSIBLE PLACE AT THE SITE OF THE WORK; AND THE FURTHER STIPULATION THAT THERE MAY BE WITHHELD FROM THE CONTRACTOR SO MUCH OF ACCRUED PAYMENTS AS MAY BE CONSIDERED NECESSARY BY THE CONTRACTING OFFICER TO PAY TO LABORERS AND MECHANICS EMPLOYED BY THE CONTRACTOR OR ANY SUBCONTRACTOR ON THE WORK THE DIFFERENCE BETWEEN THE RATES OF WAGES REQUIRED BY THE CONTRACT TO BE PAID LABORERS AND MECHANICS ON THE WORK AND THE RATES OF WAGES RECEIVED BY SUCH LABORERS AND MECHANICS AND NOT REFUNDED TO THE CONTRACTOR, SUBCONTRACTORS, OR THEIR AGENTS.

THE SUGGESTED STIPULATIONS CONTAINED IN THE ABOVE-QUOTED LETTER OF NOVEMBER 15, 1937, ARE IN CONTRAVENTION OF THE SAID ACT OF AUGUST 30, 1935, THE PURPOSE OF WHICH WAS TO MAKE DEFINITE AND CERTAIN AT THE TIME THE CONTRACT WAS ENTERED INTO THE CONTRACT PRICE AND THE MINIMUM WAGES TO BE PAID THEREUNDER. NOTE THAT SAID ACT PROVIDES THAT THE MINIMUM RATES OF WAGES TO BE PAID UNDER THE CONTRACT SHALL BE STATED IN THE ADVERTISED SPECIFICATIONS, AS WELL AS IN THE CONTRACT. A STIPULATION IN A CONTRACT FOR CHANGING SAID MINIMUM RATES EVERY 12 MONTHS AS PROPOSED WOULD BE INCONSISTENT WITH THIS REQUIREMENT OF THE ACT OF AUGUST 30, 1935. FURTHERMORE, THE SAID ACT CONTAINS PROVISIONS IN OTHER SECTIONS THEREOF FOR ENFORCING THE CONTRACT STIPULATIONS WHICH THE STATUTE REQUIRES TO BE STATED IN THE CONTRACT WITH RESPECT TO WAGE PAYMENTS, BUT IT DOES NOT PROVIDE THAT SAID MEANS COULD BE EMPLOYED TO ENFORCE THE SUBSTITUTE OR ADDITIONAL PROVISION PROPOSED TO BE INSERTED IN THE CONTRACT. ALSO, THE INSERTION OF SUCH A PROVISION IN THE CONTRACT WOULD RENDER THE GOVERNMENT'S OBLIGATION THEREUNDER INDEFINITE IN AMOUNT AND MIGHT INVOLVE AN OBLIGATION IN EXCESS OF THE AMOUNT OF THE APPROPRIATION AVAILABLE FOR ITS PAYMENT.

THIS OFFICE AGREES WITH THE CONCLUSION STATED IN THE LETTER OF NOVEMBER 12, 1937, FROM THE DEPARTMENT OF LABOR THAT PERIODIC FINDINGS OR READJUSTMENTS OF MINIMUM RATES OF WAGES MAY NOT REST UPON A CONTRACT STIPULATION, AS THAT WOULD BE INCONSISTENT WITH THE ACT OF AUGUST 30, 1935.

IN VIEW OF THE PLAIN PROVISION IN THE STATUTE HEREINBEFORE QUOTED TO THE EFFECT THAT THE CONTRACT SHALL CONTAIN A STIPULATION REQUIRING THE CONTRACTOR TO PAY "WAGE RATES NOT LESS THAN THOSE STATED IN THE ADVERTISED SPECIFICATIONS," I ASSUME IT WOULD NOT SERIOUSLY BE CONTENDED THAT IT WOULD BE LEGAL TO PROVIDE IN THE CONTRACT FOR A DOWNWARD READJUSTMENT OF THE MINIMUM WAGE SCALE WHICH WOULD PERMIT THE CONTRACTOR TO PAY AT WAGE RATES LESS THAN THOSE STATED IN THE ADVERTISED SPECIFICATIONS. AND IT WOULD APPEAR INCONSISTENT AND UNFAIR TO THE GOVERNMENT TO INSERT IN THE CONTRACT A PROVISION--- NOT REQUIRED BY THE STATUTE--- UNDER WHICH THE GOVERNMENT WOULD HAVE TO BEAR THE BURDEN OF ANY INCREASE IN THE PREVAILING RATE OF WAGES BUT COULD RECEIVE NO BENEFIT FROM ANY DECREASE THEREIN.