B-150293, FEBRUARY 13, 1963, 42 COMP. GEN. 410

B-150293: Feb 13, 1963

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COULD BE PAID IN FULL WITHOUT PREJUDICING THE PROTECTION THE ACT AFFORDS WORKMEN WHO HAVE NOT BEEN PAID WAGE ADJUSTMENTS REQUIRED UNDER A MINIMUM WAGE STIPULATION REVISION MADE IN ACCORDANCE WITH LETTERS OF INADVERTENCE CHANGING A WORK CLASSIFICATION. WAS UNAUTHORIZED. ALTHOUGH THERE IS NO OBJECTION TO INCREASING A CONTRACT PRICE TO THE EVENT THAT MINIMUM WAGE REQUIREMENTS WERE MODIFIED BY LETTERS OF INADVERTENCE RESULTING IN ADDED COSTS OF PERFORMANCE. PARTICULARLY WHERE MODIFICATIONS WERE ORDERED PRIOR TO 40 COMP. CHANGE ORDERS REVISING THE ORIGINAL CONTRACT UNDERTAKINGS SHOULD BE CANCELED WHERE WAGE ADJUSTMENTS IN ACCORDANCE WITH MODIFICATIONS ORDERED UNDER SIMILAR CONDITIONS HAVE NOT BEEN COMPLETED.

B-150293, FEBRUARY 13, 1963, 42 COMP. GEN. 410

CONTRACTS - LABOR STIPULATIONS - DAVIS-BACON ACT - MINIMUM WAGE DETERMINATIONS. CONTRACTS - LABOR STIPULATIONS - DAVIS-BACON ACT - ERRONEOUS DETERMINATION AS REQUIRING MODIFICATION THE ORIGINAL PRICE UNDER A CONSTRUCTION CONTRACT INCORPORATING WAGE DETERMINATIONS FOR WORK CLASSIFICATIONS AS MINIMUM WAGE STIPULATIONS PURSUANT TO THE DAVIS-BACON ACT, 40 U.S.C. 276A, COULD BE PAID IN FULL WITHOUT PREJUDICING THE PROTECTION THE ACT AFFORDS WORKMEN WHO HAVE NOT BEEN PAID WAGE ADJUSTMENTS REQUIRED UNDER A MINIMUM WAGE STIPULATION REVISION MADE IN ACCORDANCE WITH LETTERS OF INADVERTENCE CHANGING A WORK CLASSIFICATION, THE ORIGINAL WAGE SCHEDULES FURNISHED BY THE DEPARTMENT OF LABOR AND INCORPORATED IN THE SPECIFICATIONS HAVING CORRECTLY STATED THE WAGE DETERMINATION, THE REVISION OF THE CONTRACT WAGE STIPULATION, PURSUANT TO THE LETTERS OF INADVERTENCE, WAS UNAUTHORIZED; THEREFORE, ENTITLING THE CONTRACTOR TO AN EQUITABLE PRICE ADJUSTMENT FOR THE INCREASED COST OF PERFORMANCE, AND, BECAUSE ANY WAGE DIFFERENCE, OR UNDERPAYMENT, PRESUMABLY WOULD EQUAL THE PRICE INCREASE, UNLESS OR UNTIL THE INCREASE HAS BEEN ALLOWED, NO WITHHOLDING OF MONIES WOULD BE NECESSARY OR PROPER TO PROTECT THE GOVERNMENT OR THE EMPLOYEES. ALTHOUGH THERE IS NO OBJECTION TO INCREASING A CONTRACT PRICE TO THE EVENT THAT MINIMUM WAGE REQUIREMENTS WERE MODIFIED BY LETTERS OF INADVERTENCE RESULTING IN ADDED COSTS OF PERFORMANCE, PARTICULARLY WHERE MODIFICATIONS WERE ORDERED PRIOR TO 40 COMP. GEN. 557, CHANGE ORDERS REVISING THE ORIGINAL CONTRACT UNDERTAKINGS SHOULD BE CANCELED WHERE WAGE ADJUSTMENTS IN ACCORDANCE WITH MODIFICATIONS ORDERED UNDER SIMILAR CONDITIONS HAVE NOT BEEN COMPLETED.

TO THE SECRETARY OF THE ARMY, FEBRUARY 13, 1963:

REFERENCE IS MADE TO A REPORT FURNISHED BY THE CORPS OF ENGINEERS UNDER DATE OF DECEMBER 21, 1962, FILE ENGGC-M, CONCERNING THE EFFORTS OF KING CONSTRUCTION COMPANY AND ASSOCIATES TO CLARIFY MINIMUM WAGE REQUIREMENTS UNDER CONTRACT DA-41-443-ENG-5368 AND TO OBTAIN PAYMENT OF $20,000 AWARDED UNDER ASBCA NO. 7205, JANUARY 31, 1962.

FROM THE REPORT IT APPEARS THAT WAGE DETERMINATIONS FOR BOTH BUILDING AND HEAVY-HIGHWAY WORK CLASSIFICATIONS WERE INCORPORATED IN THE CONTRACT AS MINIMUM WAGE STIPULATIONS IN ACCORDANCE WITH REQUIREMENTS OF THE DAVIS- BACON ACT, 40 U.S.C. 276A. THE HEAVY-HIGHWAY SCHEDULES EXPRESSLY WERE MADE APPLICABLE TO "CONSTRUCTION OF MISSILE LAUNCHERS AND UNDERGROUND MISSILE STORAGE STRUCTURE" AS WELL AS GRADING, DRAINAGE, PAVING AND OTHER WORK CUSTOMARILY DONE AT HEAVY HIGHWAY RATES. SUBSEQUENTLY, AFTER COMPLAINTS HAD BEEN RECEIVED FROM LABOR ORGANIZATIONS,"THE SOLICITOR OF LABOR ISSUED LETTERS OF INADVERTENCE WHICH CHANGED "CONSTRUCTION OF MISSILE LAUNCHER AND UNDERGROUND MISSILE STORAGE STRUCTURES" TO THE SAME RATES AS THOSE INCLUDED IN THE VARIOUS BUILDING DETERMINATIONS * * *.'

THEREAFTER, IN ACCORDANCE WITH INSTRUCTIONS FROM THE CHIEF OF ENGINEERS, THE CONTRACTING OFFICER, ON FEBRUARY 13, 1959, ADVISED THE CONTRACTOR TO REVISE THE CONTRACT MINIMUM WAGE STIPULATIONS AND MAKE CURRENT BUILDING SCHEDULES FURNISHED WITH THE LETTERS OF INADVERTENCE APPLICABLE TO THE CONSTRUCTION OF LAUNCHERS AND UNDERGROUND STORAGE STRUCTURES, STATING THAT "SUCH WAGE RATES SHOULD BE RETROACTIVE TO THE COMMENCEMENT OF WORK UNDER THIS CONTRACT.' THE CONTRACTOR, IT IS REPORTED, SUBSEQUENTLY BEGAN PAYING THE BUILDING RATES, BUT ITS SUBCONTRACTORS IN SOME INSTANCES CONTINUED TO PAY THE HEAVY-HIGHWAY RATES. THE RECORD IS NOT CLEAR AS TO THE EXTENT EQUITABLE ADJUSTMENTS HAVE BEEN AGREED UPON OR COMPLETED IN ACCORDANCE WITH CLAUSE 3, CHANGES, OF THE CONTRACT, ALTHOUGH IT INDICATES THAT SOME CLAIMS AND EQUITABLE ADJUSTMENTS CONTAIN ALLOWANCES FOR THE DIFFERENCES BETWEEN THE NEW BUILDING RATES AND THE HEAVY-HIGHWAY RATES ORIGINALLY PROVIDED FOR.

BECAUSE THE CONTRACTOR DID NOT MAKE RETROACTIVE PAYMENTS TO THE WORKMEN INVOLVED OF SUCH DIFFERENCES, EXPRESSING DOUBT THAT THE PAYMENTS INVOLVED WOULD BE PROPER, THE CORPS OF ENGINEERS COMPUTED THE WAGE DIFFERENCES IN ISSUE, INCLUDING UNDERPAYMENTS AND PENALTIES UNDER THE EIGHT-HOUR-LAW, 40 U.S.C. 325A, AGGREGATING $32,428.72. IT IS EXPLAINED THAT THE $20,000 AWARDED BY ASBCA NO. 7205 (AS ADDITIONAL COMPENSATION FOR PAINTING NOT REQUIRED BY THE CONTRACT) IS BEING WITHHELD UNTIL SUCH DIFFERENCES OR UNDERPAYMENTS ARE ADJUSTED, AS FOLLOWS:

* * * (1) IN ACCORDANCE WITH THE INSTRUCTIONS OF THE CHIEF OF ENGINEERS AND PRIOR DECISIONS OF THE ARMED SERVICES BOARD OF CONTRACT APPEALS AND THE COMPTROLLER GENERAL, THE CONTRACTING OFFICER WAS REQUIRED TO INCLUDE THE WAGE PREDETERMINATIONS AS ALTERED BY THE LETTERS OF INADVERTENCE IN THE PRIME CONTRACT; (2) THE SAME AUTHORITIES REQUIRED THE EFFECT OF THE CHANGE TO BE BOTH RETROSPECTIVE AND PROSPECTIVE; (3) UNDER THE TERMS OF THE CONTRACT AND IN ACCORDANCE WITH APPLICABLE REGULATIONS, THE CONTRACTING OFFICER IS REQUIRED TO WITHHOLD FUNDS DUE THE CONTRACTOR UNTIL THE VIOLATIONS CEASE AND THE WORKMEN ARE PAID THE SUMS DUE THEM; AND (4) EIGHT-HOUR LAW UNDERPAYMENTS MUST BE SIMILARLY WITHHELD. FOR THESE REASONS, NONE OF THE MONEY NOW WITHHELD BY THE CONTRACTING OFFICER CAN BE PAID TO THE CONTRACTOR UNTIL THE REQUIRED RESTRICTION IS PAID.

AS WE INTERPRET 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 DO NOT OBJECT 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, IT IS CLEAR THAT AN OTHERWISE APPROPRIATE WAGE DETERMINATION DOES NOT BECOME BINDING UPON A CONTRACTOR. 40 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 SUBSTITUTED FOR THE STATUTORY PROCEDURE. 40 COMP. GEN. 48.

IN PASSING UPON THE PROPRIETY OF CHANGING OR ADDING 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

THE CHANGES ADOPTED IN THE INSTANCE OF CONTRACT DA-41-443-ENG-5368 INVOLVE CIRCUMSTANCES VERY SIMILAR TO THOSE CONSIDERED IN THE LAST MENTIONED CASE, 40 COMP. GEN. 557. IT SEEMS CLEAR THAT THE WAGE SCHEDULES ORIGINALLY FURNISHED BY THE DEPARTMENT OF LABOR AND INCORPORATED IN THE SPECIFICATIONS CORRECTLY STATED THE DETERMINATIONS ACTUALLY MADE BY IT AT THE TIME, AND THAT THE SO-CALLED INADVERTENCES REPRESENT A CHANGE OF JUDGMENT CONCERNING APPLICABLE CLASSIFICATIONS AND RATES. THE CONCLUSION EXPRESSED IN 37 COMP. GEN. 326, THAT A CORRECTION OF INADVERTENT ERRORS IN WAGE DETERMINATIONS WOULD BE CONSONANT WITH A PROPER OBSERVANCE OF THE STATUTORY DIRECTIONS OF THE DAVIS-BACON ACT, WAS NOT INTENDED TO APPROVE CHANGES OF ANY KIND IN THE WAGE SCHEDULES INCLUDED IN SPECIFICATIONS UPON WHICH CONTRACTS HAD BEEN AWARDED, EXCEPT AS NECESSARY TO CORRECT UNAVOIDABLE INACCURACIES RESULTING FROM MECHANICAL OR CLERICAL ERRORS. HENCE, WE WOULD NOT CONSIDER A REVISION OF THE MINIMUM WAGE SCHEDULES ORIGINALLY MADE A PART OF THE CONTRACT TO BE AUTHORIZED OR REQUIRED BY THE TERMS OF THE ACT.

MOREOVER, THE UNPUBLISHED DECISION CITED AS AUTHORITY FOR AMENDING THE MINIMUM WAGE REQUIREMENTS, B-106987, DATED MAY 8, 1953, INVOLVED THE CORRECTION OF A WAGE SCHEDULE WHICH HAD EXPIRED AND, THEREFORE, NO LONGER STATED THE DETERMINATIONS ACTUALLY MADE BY THE DEPARTMENT OF LABOR. THE ERROR OR INADVERTENCY OCCURRED WHEN, AS A RESULT OF FAILURE TO OBSERVE A REGULATION LIMITING THE LIFE OF THE WAGE DETERMINATIONS, THE DEPARTMENT OF THE INTERIOR UNKNOWINGLY INCORPORATED THEM IN A CONTRACT. CONTRARY TO THE SITUATION EXISTING IN THE PRESENT CASE, THE WAGE SCHEDULE WAS INVALID AT THE TIME. ALSO OUR AGREEMENT TO REFORMATION OF THE CONTRACT THROUGH THE ISSUANCE OF A CHANGE ORDER CORRECTING THE CONTRACTING AGENCY'S MISTAKE WAS INFLUENCED TO SOME EXTENT BY THE COURT OF CLAIM'S DECISION IN UNITED STATES V. BINGHAMTON CONSTRUCTION COMPANY, INC., 347 U.S. 171, WHICH SUBSEQUENTLY WAS REVERSED BY THE SUPREME COURT AT 347 U.S. 171. IN ANY EVENT, THE CORRECTION OF ERRORS OR INADVERTENCES HAS BEEN CONSIDERED IN NUMEROUS DECISIONS SINCE THAT TIME, INCLUDING THOSE CITED ABOVE, AND IN VIEW OF THE CIRCUMSTANCES OF THE CASE CONSIDERED IN OUR DECISION OF MAY 8, 1953, IT SHOULD NOT BE REGARDED AS A PRECEDENT FOR GENERAL APPLICATION.

IN THE PAST WE HAVE AGREED THAT WHEN THE MINIMUM WAGE CONDITIONS OF A CONTRACT ARE MODIFIED AN EQUITABLE ADJUSTMENT OF THE CONTRACT PRICE IS AUTHORIZED TO THE EXTENT THE GOVERNMENT'S ACTION MAY HAVE INCREASED OR DECREASED THE CONTRACTOR'S COST OF PERFORMANCE. HOWEVER, IN INSTANCES WHERE AN EQUITABLE ADJUSTMENT IS TO BE MADE FOR INCREASED COST OF PERFORMANCE, IT IS CLEAR THAT THE ORIGINAL PRICE COULD BE PAID TO THE CONTRACTOR IN FULL WITHOUT PREJUDICING THE PROTECTION INTENDED BY THE DAVIS-BACON ACT TO BE ACHIEVED THROUGH WITHHOLDINGS FOR AGGRIEVED EMPLOYEES. BECAUSE ANY WAGE DIFFERENCE, OR UNDERPAYMENT, PRESUMABLY WOULD BE EQUAL TO THE INCREASE IN PRICE TO WHICH THE CONTRACTOR WOULD BE ENTITLED UNDER AN EQUITABLE ADJUSTMENT, UNLESS OR UNTIL THAT INCREASE HAS BEEN ALLOWED, NO WITHHOLDING OTHERWISE OF MONIES WOULD BE NECESSARY OR PROPER TO PROTECT THE GOVERNMENT OR THE EMPLOYEES.

THUS, UNLESS EQUITABLE ADJUSTMENTS ALREADY HAVE BEEN ALLOWED COVERING THE RETROACTIVE WAGE CORRECTIONS, THE CONTRACTOR'S COMPLAINT THAT EARNINGS UNDER THE CONTRACT (SPECIFICALLY, THE $20,000 DUE IN ACCORDANCE WITH ASBCA NO. 7205) IMPROPERLY ARE BEING WITHHELD FROM PAYMENT TO IT, BECAUSE IT HAS NOT MADE ALL OF THE CORRECTIONS AS DIRECTED, WOULD APPEAR TO BE VALID.

THE PRESENT RECORD IS INADEQUATE TO PERMIT ACCURATE ASCERTAINMENT OF THE EXTENT TO WHICH EQUITABLE ADJUSTMENTS HAVE BEEN ALLOWED, AND WE THEREFORE ARE UNABLE AT THIS TIME TO DETERMINE WHETHER THE $20,000 ITEM PROPERLY OR IMPROPERLY IS BEING WITHHELD TO COVER WAGE DEFICIENCIES. IN THE CIRCUMSTANCES IT IS SUGGESTED THAT YOUR DEPARTMENT MAY WISH TO GIVE FURTHER CONSIDERATION TO THE MATTERS DISCUSSED AND TO COMPLETE APPROPRIATE ACTION.

IN THE INSTANT CASE NO OBJECTION WILL BE INTERPOSED TO INCREASING THE CONTRACT PRICE TO THE EXTENT THAT MODIFICATIONS OF MINIMUM WAGE REQUIREMENTS HAVE RESULTED IN ADDED COSTS OF PERFORMANCE, PARTICULARLY SINCE IT APPEARS THAT SUCH MODIFICATIONS WERE ORDERED PRIOR TO RECEIPT OF OUR DECISION DATED APRIL 3, 1961, 40 COMP. GEN. 557. HOWEVER, IN THIS CASE, AND IN ANY OTHER INSTANCES WHERE WAGE ADJUSTMENTS IN ACCORDANCE WITH MODIFICATIONS ORDERED UNDER SIMILAR CONDITIONS HAVE NOT BEEN COMPLETED, CHANGE ORDERS REVISING THE ORIGINAL CONTRACT UNDERTAKINGS SHOULD BE CANCELED.

WE ARE TAKING THE LIBERTY OF FURNISHING A COPY OF THIS STATEMENT OF OUR VIEWS TO THE CONTRACTOR WITH ASSURANCES THAT IT MAY EXPECT IN THE NEAR FUTURE TO RECEIVE FURTHER ADVICES CONCERNING SETTLEMENT FROM THE CORPS OF ENGINEERS. A COPY ALSO IS BEING SENT TO THE SECRETARY OF LABOR, ADVISING THAT THERE IS NO LEGAL BASIS FOR THE DEPARTMENT OF LABOR TO AMEND VALID PREVAILING WAGE DETERMINATION SCHEDULES INCORPORATED INTO DAVIS-BACON ACT CONTRACTS OR FOR A CONTRACTING AGENCY TO REQUIRE A CONTRACTOR TO COMPLY WITH SUCH AMENDMENTS.