B-150223, DEC. 3, 1962

B-150223: Dec 3, 1962

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TO THE SECRETARY OF LABOR: REFERENCE IS MADE TO MEMORANDUM NO. 43. MOST OF THE CONTROVERSIAL AREAS WERE EXPLAINED IN DETAIL DURING THE HEARINGS HELD RECENTLY BY THE SPECIAL SUBCOMMITTEE ON LABOR. OUR CONCERN WITH THE REGULATORY PROVISIONS IN THIS RESPECT IS BEING FURTHER OUTLINED AT THIS TIME FOR YOUR READY REFERENCE AND APPROPRIATE CONSIDERATION IN FORMULATING THE REVISIONS. PART 1 - WAGE DETERMINATIONS A DEFINITION OF THE TERM "PREVAILING WAGE" IS EMPLOYED IN SECTION 1.2 WHICH. "THE OVERALL LANGUAGE OF THE STATUTES IN WHICH THE WORD "PREVAILING" IS USED INDICATES THAT THE CONSTRUCTION EXPECTED TO BE PLACED UPON THIS WORD WAS ONE WHICH WOULD GIVE FULL WEIGHT TO THE STATUTORY PURPOSE OF PROTECTING COMMUNITIES IN WHICH FEDERAL WORK WOULD BE UNDERTAKEN FROM THE DEPRESSING INFLUENCE OF LOW WAGES AT WHICH WORKMEN MIGHT BE HIRED ELSEWHERE AND BROUGHT ONTO THE WORK. * * *" IF.

B-150223, DEC. 3, 1962

TO THE SECRETARY OF LABOR:

REFERENCE IS MADE TO MEMORANDUM NO. 43, DATED OCTOBER 22, 1962, FROM THE SOLICITOR OF LABOR, TRANSMITTING COPY OF A TENTATIVE DRAFT OF PROPOSED NEW REGULATIONS, PARTS 1, 3 AND 5, TITLE 29, CODE OF FEDERAL REGULATIONS, DEALING WITH THE ESTABLISHMENT AND ENFORCEMENT OF MINIMUM WAGES UNDER FEDERAL AND FEDERAL INTEREST CONTRACTS, FOR COMMENT NOT LATER THAN DECEMBER 3, 1962.

CERTAIN PROVISIONS OF THE PROPOSED REGULATIONS APPEAR TO OVERLOOK THE RESPONSIBILITIES PLACED IN THE GENERAL ACCOUNTING OFFICE BY THE DAVIS- BACON ACT, 40 U.S.C. 276A, AND RELATED DECISIONS ISSUED BY IT UNDER THE GENERAL AUDITING AND ACCOUNTING LAWS. MOST OF THE CONTROVERSIAL AREAS WERE EXPLAINED IN DETAIL DURING THE HEARINGS HELD RECENTLY BY THE SPECIAL SUBCOMMITTEE ON LABOR, COMMITTEE ON EDUCATION AND LABOR, HOUSE OF REPRESENTATIVES. HOWEVER, OUR CONCERN WITH THE REGULATORY PROVISIONS IN THIS RESPECT IS BEING FURTHER OUTLINED AT THIS TIME FOR YOUR READY REFERENCE AND APPROPRIATE CONSIDERATION IN FORMULATING THE REVISIONS.

PART 1 - WAGE DETERMINATIONS

A DEFINITION OF THE TERM "PREVAILING WAGE" IS EMPLOYED IN SECTION 1.2 WHICH, IN OUR OPINION, DOES NOT GIVE FULL EFFECT TO STATUTORY INTENT. POINTED OUT IN OUR TESTIMONY OF JUNE 12, 1962 (PAGE 290 OF THE HEARINGS),

"THE OVERALL LANGUAGE OF THE STATUTES IN WHICH THE WORD "PREVAILING" IS USED INDICATES THAT THE CONSTRUCTION EXPECTED TO BE PLACED UPON THIS WORD WAS ONE WHICH WOULD GIVE FULL WEIGHT TO THE STATUTORY PURPOSE OF PROTECTING COMMUNITIES IN WHICH FEDERAL WORK WOULD BE UNDERTAKEN FROM THE DEPRESSING INFLUENCE OF LOW WAGES AT WHICH WORKMEN MIGHT BE HIRED ELSEWHERE AND BROUGHT ONTO THE WORK. * * *"

IF, AS IS UNDERSTOOD, THE PREVAILING WAGES REQUIRED TO BE DETERMINED AND PROTECTED ARE THE WAGES BEING RECEIVED BY WORKMEN FOR THEIR SERVICES IN THE AREAS IN WHICH THE FEDERAL WORK IS TO BE PERFORMED, IT IS NECESSARY TO VIEW THE WORD "PREVAILING" AS IDENTIFYING ACTUAL, EXISTING WAGE SITUATIONS IN SUCH AREAS. ON THE OTHER HAND, AN INTERPRETATION WHICH CALLS FOR THE ESTABLISHMENT OF PREVAILING WAGES WHERE NONE EXIST, BY RELIANCE UPON WAGE LEVELS FOUND ONLY OUTSIDE A PROTECTED AREA, WOULD SEEM TO BE UNREASONABLE IN THE LIGHT OF THE LEGISLATIVE PURPOSE. IN OUR OPINION, NO DETERMINATION OF PREVAILING WAGES CAN BE FREE FROM LEGITIMATE CRITICISM UNLESS BASED UPON WAGES IN THE AREA WHICH THE CONGRESS DESIRED TO PROTECT AND UNLESS ASCERTAINED WITH SUFFICIENT ACCURACY AND DETAIL TO PRECLUDE ARTIFICIALITY OR INFLATION. NO EVIDENCE HAS BEEN FOUND IN THE DAVIS-BACON ACT OR IN OTHER "PREVAILING WAGE" STATUTES THAT THE CONGRESS INTENDED TO REQUIRE MINIMUM WAGE STANDARDS OTHER OR HIGHER THAN THOSE, IF ANY, ALREADY EXISTING IN THE COMMUNITIES AFFECTED BY THE WORK. ADDITIONAL RELEVANT COMMENT IS CONTAINED IN OUR REPORT ON WAGE DETERMINATIONS FOR HOUSING AT QUANTICO, VIRGINIA (PAGE 325 OF THE HEARINGS), AND IN OUR LETTER OF SEPTEMBER 4, 1962, TO THE SUBCOMMITTEE.

ALSO, AS WE READ THE DAVIS-BACON ACT, ITS PROVISIONS CONTEMPLATE THAT MINIMUM WAGE CONDITIONS BASED UPON PREVAILING WAGE DETERMINATIONS ARE TO BECOME EFFECTIVE ONLY WHEN, AS EXPRESSLY DIRECTED, THEY HAVE BEEN INCLUDED IN ADVERTISED OR NEGOTIATED (40 U.S.C. 276A-7) SPECIFICATIONS. THE ACT DOES NOT AUTHORIZE MAKING SUCH CONDITIONS EFFECTIVE IN ANY OTHER WAY, ALTHOUGH WE HAVE NOT OBJECTED TO A CORRECTION OF CONTRACT WAGE RATES IN INSTANCES WHERE THE ADVERTISED CONDITIONS HAVE CONTAINED INADVERTENT ERRORS. WHERE THE STATUTORY PROCEDURE HAS NOT BEEN OBSERVED, WHETHER PROPERLY OR IMPROPERLY, IT IS CLEAR THAT AN OTHERWISE APPROPRIATE WAGE DETERMINATION CAN NOT OF ITSELF BECOME BINDING UPON A CONTRACTOR. COMP. GEN. 565.

THIS POINT MAY BE REGARDED AS WELL ESTABLISHED. AS EARLY AS 1937, WE CONSIDERED THE FEASIBILITY OF A CONTRACT PROVISION PROVIDING FOR PERIODIC ADJUSTMENTS OF THE WAGE DETERMINATIONS INCORPORATED IN A CONTRACT AND HELD THAT SUCH A STIPULATION WOULD BE "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.' 17 COMP. GEN. 471.

IN RESPONSE TO A REQUEST FOR AN OPINION CONCERNING THE PROPRIETY OF A CONTRACTUAL PROVISION REQUIRING AGREEMENT TO PAY MINIMUM WAGES AS DETERMINED BY THE SECRETARY OF LABOR, EVEN THOUGH THE WAGE DETERMINATION NOT BE RECEIVED UNTIL AFTER BID OPENING, IT WAS DECIDED THAT SUCH A PROVISION COULD NOT BE AN ACCEPTABLE SUBSTITUTE FOR THE STATUTORY ADVERTISING PROCEDURE. 40 COMP. GEN. 48.

IN PASSING UPON THE PROPRIETY OF ADDING NEW CLASSIFICATIONS AND WAGE RATES FOR WORK AFTER AWARD OF A CONTRACT, IT WAS POINTED OUT IN 40 COMP. GEN. 557 THAT:

"* * * SO FAR AS THE FIXING OF THE WAGE FLOORS INCLUDED IN THE SPECIFICATIONS IS CONCERNED, THE STATUTORY FUNCTION OF THE SECRETARY OF LABOR IS EXHAUSTED ONCE HE HAS FURNISHED A PREVAILING WAGE DETERMINATION AND A CONTRACT HAS BEEN AWARDED CONTAINING A MINIMUM WAGE SCHEDULE BASED THEREON. * * *

"SINCE IN THE CASE HERE PRESENTED THE ORIGINAL CERTIFICATIONS OF THE PREVAILING WAGE RATES FOR THE PARTICULAR CONTRACT APPEAR TO HAVE CORRECTLY STATED THE DETERMINATIONS ACTUALLY MADE AT THAT TIME, WE DO NOT CONSIDER THE CASE TO BE ONE IN WHICH MODIFICATION OF THE CONTRACT WOULD BE REQUIRED

WHILE THE UNDOUBTED PURPOSE OF THE MECHANICS ADOPTED IN THE DAVIS BACON ACT WAS TO ELIMINATE AT THE TIME OF AWARD ANY UNCERTAINTY CONCERNING THE MINIMUM WAGES TO BE PAID, AND WE ARE NOT AWARE OF A DIFFERENT PURPOSE EXISTING UNDER ANY OF THE OTHER MINIMUM WAGE STATUTES PROVIDING FOR DETERMINATION OF PREVAILING WAGES IN ACCORDANCE WITH THE DAVIS-BACON ACT, THE PROBLEMS ARISING FROM THE FACT THAT ADDITIONAL (SECTION 1.15) CLASSIFICATIONS TO THOSE COVERED BY THE WAGE DETERMINATIONS INCORPORATED IN THE ADVERTISED SPECIFICATIONS LATER MAY BE FOUND DESIRABLE HAVE NOT BEEN OVERLOOKED. HOWEVER, IT SEEMS CLEAR THAT REASONABLE REGULATORY CONTROL OVER SUCH CLASSIFICATIONS AND WAGES MAY NOT PROPERLY EXTEND TO OR PROVIDE FOR A PRESCRIPTION OF WAGE RATES OTHER THAN IN THE MANNER AND THROUGH THE PROCEDURE PROVIDED FOR BY STATUTE. IT IS BELIEVED THAT THE INFLEXIBILITY OF THE LAW IN THIS RESPECT IS SUCH THAT A MEASURE OF CONTROL SUCH AS APPARENTLY IS SOUGHT CAN BE OBTAINED ONLY AS A RESULT OF LEGISLATIVE CHANGE.

WITH THIS IN MIND, THE PROVISIONS OF SECTION 1.21, FIXING THE PERIOD SPECIFIC WAGE DETERMINATIONS ARE VALID, AND OF SECTION 1.22, CONCERNING THE EFFECTIVENESS OF SO-CALLED ,MODIFICATION OR SUPERSEDE AS," IT IS BELIEVED, SHOULD GIVE DUE CONSIDERATION TO ADMINISTRATIVE CONTRACTING PROBLEMS AND BE BASED UPON A REALISTIC ALLOWANCE OF TIME NEEDED TO ADVERTISE AND MAKE AWARDS. IF THE LIFE OF WAGE DETERMINATIONS COULD BE PREDICATED UPON AN ADEQUATE ALLOWANCE OF TIME FOR COMPLETION OF THE PROCUREMENT PROCESSES FOLLOWING DATES OF BID OPENINGS THEIR USE WOULD BE GREATLY FACILITATED.

IN THIS CONNECTION YOUR ATTENTION IS DIRECTED TO A MEETING HELD ON NOVEMBER 8, 1962, ATTENDED BY REPRESENTATIVES OF THE CORPS OF ENGINEERS, U.S. ARMY, THE BUREAU OF YARDS AND DOCKS, U.S. NAVY, THE DEPARTMENT OF LABOR, THE GENERAL SERVICES ADMINISTRATION, THE GENERAL ACCOUNTING OFFICE, AND THE ASSOCIATED GENERAL CONTRACTORS, INC. AT THAT MEETING THERE WAS A GENERAL CONCURRENCE OF ALL (WITH THE EXCEPTION OF THE DEPARTMENT OF LABOR REPRESENTATIVE, WHO TOOK NO POSITION AT THAT TIME) THAT WAGE DETERMINATIONS INCLUDED AS ADVERTISED SPECIFICATIONS SHOULD BE VALID FOR 120 DAYS AFTER THE BID OPENING. WE STRONGLY RECOMMEND THAT THE PROPOSED REGULATION BE AMENDED TO SO PROVIDE. SEE, ALSO, SECTION 1.32. WITH RESPECT TO THE EFFECTIVENESS OF SUPPLEMENTAL OR ADDITIONAL DETERMINATIONS (SECTIONS 1.24 AND 1.25), AS OBSERVED, SUCH DETERMINATIONS DO NOT APPEAR TO BE AUTHORIZED.

SECTION 3.15 REQUIRES INSERTION IN CONTRACTS OF A PROVISION THAT "ANY EMPLOYEE LISTED ON A PAYROLL AT AN APPRENTICE WAGE RATE, WHO IS NOT REGISTERED, SHALL BE PAID THE WAGE RATE DETERMINED BY THE SECRETARY OF LABOR FOR THE CLASSIFICATION OF THE WORK HE ACTUALLY PERFORMED.' TO THE EXTENT THAT THIS MAY BE INTERPRETED AS AGREEMENT TO HAVE PRESCRIBED AND TO PAY JOURNEYMAN RATES, IT WOULD APPEAR TO BE OBJECTIONABLE. NOT ONLY WOULD IT RESULT IN SUCH WORKMEN BEING ARBITRARILY RECLASSIFIED, BUT THEY WOULD RECEIVE WAGES IN EXCESS OF THEIR CAPABILITIES OR ACTUAL PERFORMANCES. 144382, DATED MARCH 21, 1961, TO THE SECRETARY OF LABOR.

PART 5 - ENFORCEMENT

THE GENERAL ACCOUNTING OFFICE IS PARTICULARLY INTERESTED IN THE REGULATORY PROVISIONS DEALING WITH ENFORCEMENT BECAUSE OF ITS RESPONSIBILITIES UNDER THE DAVIS-BACON ACT. AS NOTED IN OUR STATEMENT OF JUNE 12, 1962 (PAGE 284 OF THE HEARINGS), THE STATUTORY DIVISION OF AUTHORITY OVER ENFORCEMENT ACTIVITIES PRESENTS SERIOUS OBSTACLES TO THE FORMULATION OF UNIFORM REGULATIONS UNDER REORGANIZATION PLAN NO. 14 OF 1950, 5 U.S.C. 133Z-15. IT HAS THE EFFECT OF PRECLUDING THE DEPARTMENT OF LABOR FROM EXERCISING FINAL REGULATORY JURISDICTION OVER ENFORCEMENT IN THE WAGE ADJUSTMENT AND DEBARMENT AREAS, JUST AS IT PRECLUDES CONTRACTING AGENCIES FROM MAKING FINAL ENFORCEMENT DETERMINATIONS CONCERNING VIOLATIONS AND INTERFERES WITH THEIR SETTLEMENT OF CONTRACTS. OF COURSE, THIS DOES NOT MEAN THAT APPROPRIATE REGULATIONS WHICH TAKE INTO CONSIDERATION RESPECTIVE RESPONSIBILITIES ARE NOT POSSIBLE OR PRACTICABLE.

SECTION 5.4 PROVIDES THAT FIRMS DEBARRED UNDER THE DAVIS-BACON ACT "SHALL BE DEBARRED CONCURRENTLY FROM FEDERALLY ASSISTED CONSTRUCTION WORK SUBJECT TO ANY OF THE STATUTES LISTED IN SEC. 5.1," AND THAT FIRMS ADMINISTRATIVELY DEBARRED UNDER OTHER CONTRACTS CONTAINING MINIMUM WAGE REQUIREMENTS SHALL BE PRECLUDED FROM "RECEIVING OR PARTICIPATING UNDER ANY CONTRACTS" SUBJECT TO SUCH REQUIREMENTS. THE TERMS OF THE DAVIS-BACON ACT PERTAINING TO THE EXTENT OF DEBARMENT ARE SPECIFIC AND APPEAR TO COVER ONLY CONTRACTS AWARDED BY THE UNITED STATES. DOUBT ALSO EXISTS THAT ANY NONSTATUTORY DEBARMENT CAN AFFECT AWARDS OF CONTRACTS OR SUBCONTRACTS BY PRIVATE PARTIES EVEN THOUGH THE GOVERNMENT HAS AN INTEREST IN THE WORK PERFORMED. CONSEQUENTLY, IT WOULD SEEM THAT EFFECTIVE CONTROL OVER SUCH WORK OR AWARDS THEREFOR SHOULD BE SOUGHT THROUGH CONTRACTUAL CONDITIONS. SEE 37 COMP. GEN. 544.

IN CONNECTION WITH DEBARMENT PROCEEDINGS UNDER SECTION 5.5, IT SHOULD BE NOTED THAT FINAL DETERMINATIONS IN DAVIS-BACON ACT CASES BY THE GENERAL ACCOUNTING OFFICE ARE BASED UPON EVIDENCE CONTAINED IN THE WRITTEN RECORD. EVEN IF AN ACCUSED WERE MADE FULLY AWARE OF THIS FACT AND OF OUR AUTHORITY IN THE MATTER, WE WOULD NOT BE PREPARED TO ACCEPT THE FINDINGS, CONCLUSIONS AND RECOMMENDATIONS CONTEMPLATED BY THAT SECTION AS FINAL; WE WOULD BE UNABLE TO DIVEST OURSELVES OF THE STATUTORY RESPONSIBILITY TO MAKE FINAL DECISIONS BASED UPON AN INDEPENDENT EVALUATION OF ALL OF THE EVIDENCE AND THE LAW.

UNDER SECTION 5.8, SINCE OUR REPORTING REQUIREMENTS (B-3368, DATED MARCH 19, 1957), ARE SOMEWHAT DIFFERENT THAN THOSE OF THE DEPARTMENT OF LABOR PROPOSED IN THIS REGULATION, IT IS BELIEVED THAT A CLARIFYING REFERENCE SHOULD BE MADE TO THEM.

UNDER SECTION 5.11 IT DOES NOT APPEAR THAT WAGE ADJUSTMENTS SHOULD BE "ORDERED" IN DAVIS-BACON ACT CASES WITHOUT GIVING NOTICE THAT ADMINISTRATIVE AUTHORITY IS RESTRICTED TO WITHHOLDING AMOUNTS TO COVER WAGE DIFFERENCES AND THAT FINAL AUTHORITY TO MAKE ADJUSTMENTS IS PLACED BY THE ACT IN THE GENERAL ACCOUNTING OFFICE.

SECTION 5.14, ESTABLISHING PROCEDURES FOR THE RESOLUTION OF DISPUTES GENERALLY, THROUGH HEARING EXAMINERS AND A WAGE APPEALS BOARD, AND SECTION 5.16, PROVIDING FOR AUTHORITATIVE RULINGS AND INTERPRETATIONS, DO NOT APPEAR ADEQUATELY TO RECOGNIZE OR MAKE ALLOWANCES FOR THE MATTER OVER WHICH THE GENERAL ACCOUNTING OFFICE EXERCISES FINAL AUTHORITY.

OUR COMMENTS SHOULD NOT BE CONSIDERED AS QUALIFIED ENDORSEMENT OR IMPLIED APPROVAL OF THE REGULATIONS OR ANY PART THEREOF. WE EXPRESSLY RESERVE OUR CONTINUED RIGHT TO REVIEW AND REPORT UPON THE CONTENT AND ACTUAL APPLICATION OF THE REGULATIONS.

WE SHALL BE AVAILABLE TO DISCUSS ANY OF THE POINTS RAISED IN GREATER DETAIL IF THAT WOULD BE HELPFUL.