B-154214, AUG. 10, 1964

B-154214: Aug 10, 1964

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TO THE SECRETARY OF THE ARMY: REFERENCE IS MADE TO LETTER DATED MAY 14. WAS AWARDED TO THE FLUOR CORPORATION BY THE CORPS OF ENGINEERS BALLISTIC MISSILE CONSTRUCTION OFFICE FOR THE CONSTRUCTION OF MISSILE LAUNCH FACILITIES. THE PLANT WAS ACQUIRED APPARENTLY FOR THE PURPOSE OF FULFILLING CERTAIN TERMS OF ITS SUBCONTRACT WITH THE GRAVER TANK COMPANY. THE RECORD IS NOT CLEAR AS TO WHETHER IMI LEASED OR BOUGHT THE PLANT. THE MATERIAL STOCKPILED AT THE PLANT WERE FOR EVENTUAL INCORPORATION INTO THE MISSILE PROJECT. SOME OF THESE EMPLOYEES WERE PAID A LOWER WAGE RATE THAN THAT PREVAILING IN THE AREA FOR THE CORRESPONDING CLASSES OF CONSTRUCTION WORKERS. IMI ALSO EMPLOYED SOME 54 WORKERS AT THE MISSILE COMPLEXES WHO WERE PAID THE PREVAILING CONSTRUCTION WAGES FOR THEIR WORK.

B-154214, AUG. 10, 1964

TO THE SECRETARY OF THE ARMY:

REFERENCE IS MADE TO LETTER DATED MAY 14, 1964, FROM THE DIRECTOR OF PROCUREMENT REQUESTING OUR DECISION ON A MATTER INVOLVED IN A CLAIM SUBMITTED BY THE FLUOR CORPORATION, LTD., UNDER CONTRACT NO. DA-04-548 ENG -43 FOR THE CONSTRUCTION OF MISSILE LAUNCH FACILITIES NEAR DAVIS MONTHAN AIR FORCE BASE, TUCSON, ARIZONA.

CONTRACT DA-04-548-ENG-43 DATED MAY 29, 1961, WAS AWARDED TO THE FLUOR CORPORATION BY THE CORPS OF ENGINEERS BALLISTIC MISSILE CONSTRUCTION OFFICE FOR THE CONSTRUCTION OF MISSILE LAUNCH FACILITIES, TITAN II, PHASE II AT EIGHTEEN SITES NEAR DAVIS-MONTHAN AIR FORCE BASE, TUCSON, ARIZONA. THE FLUOR CORPORATION ON THE SAME DATE SIGNED A SUBCONTRACT WITH THE GRAVER TANK AND MANUFACTURING COMPANY, DIVISION OF UNION TANK CAR COMPANY, FOR DETAIL ENGINEERING, FABRICATION, ERECTION AND ALL OTHER ITEMS OF WORK CONNECTED WITH THE FURNISHING OF STRUCTURAL STEEL AND OTHER MISCELLANEOUS ITEMS FOR THE EIGHTEEN SILO SITES. THE GRAVER TANK COMPANY IN TURN SUBCONTRACTED PART OF ITS WORK TO THE JOINT VENTURE OF IDAHO-MARYLAND INDUSTRIES AND WARD INDUSTRIES CORPORATION, HEREAFTER REFERRED TO AS IMI.

IN THE LATTER PART OF SEPTEMBER 1961 IMI TOOK OCCUPANCY OF THE FORMER AUSTED FABRICATING PLANT AT 820 WEST CONGRESS, TUCSON, ARIZONA, APPROXIMATELY 18 MILES FROM THE NEAREST SITE AND 59 MILES FROM THE FURTHEREST SITE. THE PLANT WAS ACQUIRED APPARENTLY FOR THE PURPOSE OF FULFILLING CERTAIN TERMS OF ITS SUBCONTRACT WITH THE GRAVER TANK COMPANY. THE RECORD IS NOT CLEAR AS TO WHETHER IMI LEASED OR BOUGHT THE PLANT. THE PLANT SITE COVERED ABOUT EIGHT ACRES AND INCLUDES A PLANT WHICH HAS ABOUT 24,000 FEET OF WORKING SPACE, A PERMANENT OFFICE BUILDING, STORAGE AND WAREHOUSE SPACE AND A TRUCK SHOP. THE EQUIPMENT IN THE PLANT INCLUDES OVERHEAD CRANE, BOOMS, ROLLER, PRESS-BREAK, SHEER, IRONWORKER AND AUTOMATIC WELDING MACHINES.

THE MATERIAL STOCKPILED AT THE PLANT WERE FOR EVENTUAL INCORPORATION INTO THE MISSILE PROJECT. AS OF DECEMBER 1961 THE PLANT EMPLOYED ABOUT 60 WORKERS IN CLASSIFICATIONS INCLUDING LAYOUT-MAN, MASTER MECHANICS, SHOP MECHANIC, SHOP FOREMAN, CRANE OPERATOR, OILER, BURNER, WELDER, MACHINIST, MACHINIST HELPER, RIGGERS, LABORERS, MAINTENANCE ELECTRICIANS AND SHOP SUPERINTENDENT. SOME OF THESE EMPLOYEES WERE PAID A LOWER WAGE RATE THAN THAT PREVAILING IN THE AREA FOR THE CORRESPONDING CLASSES OF CONSTRUCTION WORKERS. IMI ALSO EMPLOYED SOME 54 WORKERS AT THE MISSILE COMPLEXES WHO WERE PAID THE PREVAILING CONSTRUCTION WAGES FOR THEIR WORK, AS REQUIRED BY THE DAVIS BACON PROVISIONS OF THE CONTRACT.

THE WORK PERFORMED IN THE TUCSON PLANT WAS THE ALTERATION AND COMPLETION OF CABLEWAY SECTIONS, THE FABRICATION OF SUBASSEMBLIES OR INTERSECTIONS OF THE SILO CLOSURE DOORS AND FABRICATION OF TOP AND BOTTOM SECTION OF DOOR PLATES FOR THE SILO DOORS. THE RECORDS INDICATE THAT IMI OPERATED THE PLANT SOLELY FOR THE PURPOSE OF THE MISSILE LAUNCH FACILITIES CONSTRUCTION AND DID NOT USE IT TO SELL TO OR SERVE THE GENERAL PUBLIC.

UPON THE RECEIPT OF REQUESTS FROM LOCAL 570 OF THE INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS, THE SOUTHERN ARIZONA BUILDING AND CONSTRUCTION TRADES COUNCIL, BOTH OF TUCSON, ARIZONA, AND FROM OTHER LABOR ORGANIZATIONS FOR A RULING UNDER SECTION 5.11 OF THE DEPARTMENT OF LABOR REGULATIONS PART 5 (29 CFR SUBTITLE A) AS TO THE APPLICABILITY OF THE DAVIS-BACON ACT (40 U.S.C. 276A) TO THE OPERATIONS OF THE IMI TUCSON PLANT, A REPORT DATED DECEMBER 20, 1961, WAS PREPARED BY THE CORPS OF ENGINEERS AND FORWARDED TO THE DEPARTMENT OF LABOR FOR DECISION.

THE SOLICITOR OF LABOR RULED ON JANUARY 29, 1962, THAT IT WAS HIS OPINION THAT THE OPERATIONS OF IMI TUCSON PLANT IN CONNECTION WITH THE WORK DESCRIBED WERE DESIGNED TO MEET THE CONSTRUCTION REQUIREMENTS OF THE PRIME CONTRACT, AND FURTHER THAT THE EMPLOYEES ENGAGED IN THE PROSECUTION OF SUCH WORK WERE LABORERS AND MECHANICS ENGAGED IN CONSTRUCTION CONTRACT PERFORMANCE AND THUS ENTITLED TO PAYMENT AT NOT LESS THAN THE CONTRACT RATES FOR THE CLASSIFICATION OF WORK WHICH THEY PERFORMED. ACCORDINGLY, IT WAS HIS CONCLUSION THAT THE WORK IN QUESTION WAS SUBJECT TO THE PROVISIONS OF THE DAVIS-BACON ACT AND WAS SUBJECT TO THE MINIMUM WAGE CONDITIONS SET FORTH IN THE SUBJECT CONTRACT. RECOGNIZING THE ADMINISTRATIVE DIFFICULTIES WHICH MIGHT ARISE FROM ANY EFFORT TO MAKE HIS DECISION RETROACTIVE, AND IN VIEW OF ALL THE CIRCUMSTANCES HE CONFIRMED AN INFORMAL UNDERSTANDING WITH THE GENERAL COUNSEL, OFFICE OF THE CHIEF OF ENGINEERS, THAT COMPLIANCE WOULD BE REQUIRED ONLY FROM THE DATE OF NOTICE TO THE PRIME CONTRACTOR. THE PRIME CONTRACTOR WAS VERBALLY NOTIFIED OF THE SOLICITOR'S RULING ON FEBRUARY 3, 1962, COPIES OF THE RULING WERE FURNISHED TO IT ON FEBRUARY 7, 1962, AND THE CONTRACTING OFFICER DIRECTED THE ADJUSTMENT OF THE WAGES OF WORKMEN EMPLOYED IN THE PLANT.

IMI CEASED OPERATION OF THE TUCSON PLANT ON FEBRUARY 2, 1962, APPARENTLY BECAUSE OF FINANCIAL DIFFICULTIES. ON FEBRUARY 15, 1962, THE GRAVER COMPANY REOPENED THE PLANT AND OPERATED IT IN COMPLIANCE WITH THE CONTRACT LABOR STANDARDS PROVISIONS UNDER THE SOLICITOR'S RULING UNTIL FEBRUARY 27, 1962. ALLIED ENGINEERING THEN OPERATED THE PLANT FROM FEBRUARY 27 TO JUNE 17, 1962, AT WHICH TIME THE USE OF THIS PLANT FOR THIS CONTRACT CEASED.

CONSTRUCTION SITE 11 WAS THE NEAREST SITE GEOGRAPHICALLY TO THE LOCATION OF THE PLANT IN TUCSON. HOWEVER, IT IS REPORTED THAT AT THE BEHEST OF THE LABOR UNIONS THE EMPLOYEES IN THE PLANT WERE ACTUALLY PAID AT WAGE RATES HIGHER THAN THOSE CALLED FOR AT SITE NO. 11. IN FACT, THE WAGES ACTUALLY PAID EXCEEDED FOR THE MOST PART THOSE CALLED FOR AT SITE NO. 2 WHICH CONTAINED THE HIGHEST WAGE DETERMINATIONS OF THE EIGHTEEN SITES.

THE GRAVER TANK COMPANY HAS SUBMITTED CLAIMS AGAINST THE GOVERNMENT THROUGH THE PRIME CONTRACTOR AND INDIVIDUALLY FOR REIMBURSEMENT OF ITS ALLEGED INCREASED COSTS ATTRIBUTABLE TO THE FORCED COMPLIANCE WITH THE DAVIS-BACON WAGE RATES FOR THE WORK PERFORMED AT THE TUCSON PLANT. CLAIMS THAT THE TUCSON PLANT WAS NOT LOCATED "UPON THE SITE OF THE WORK" AS THAT PHRASE IS USED IN THE DAVIS-BACON ACT AND THAT THEREFORE THE CONTRACT WAGE RATES WERE NOT APPLICABLE TO THE WORK PERFORMED AT THE PLANT.

OUR DECISION IS REQUESTED AS TO THE PROPRIETY OF THE GOVERNMENT'S ACTION IN RULING THAT THE CONTRACT MINIMUM WAGE RATES WERE APPLICABLE TO THE WORK PERFORMED AT THE SUBCONTRACTOR'S PLANT.

EXAMINATION OF THE SOLICITOR'S OPINION DATED JANUARY 29, 1962, DISCLOSES THAT DAVIS-BACON COVERAGE OF THE WORK PERFORMED AT THE TUCSON PLANT WAS DETERMINED TO BE REQUIRED FOR REASONS EXPLAINED AS FOLLOWS:

"AS YOU KNOW, THE DEPARTMENT OF LABOR HAS TRADITIONALLY CONSIDERED THE MANUFACTURE AND DELIVERY OF SUPPLY ITEMS TO THE SITE OF THE WORK WHEN ACCOMPLISHED BY A BONA FIDE SUPPLIER OR MATERIALMAN WHO REGULARLY SERVES THE GENERAL PUBLIC, AS AN ACTIVITY NOT COVERED BY THE DAVIS BACON ACT. HOWEVER, WHERE A FACILITY, SUCH AS A BATCHING PLANT OR AN ASSEMBLY SITE, IS ESTABLISHED IN THE VICINITY OF A COVERED CONSTRUCTION PROJECT FOR THE EXCLUSIVE PURPOSE OF SERVING THE REQUIREMENTS OF THE CONSTRUCTION CONTRACT, WE HAVE HISTORICALLY HELD THAT THE OPERATOR OF SUCH A FACILITY IS FUNCTIONING AS A SUBCONTRACTOR AS TO THE PRIME CONTRACT, AND NOT ENTITLED TO AN EXEMPTION FROM COVERAGE OF THE CONTRACT LABOR STANDARDS PROVISIONS AS A MATERIALMAN * * *.

"THE FACT THAT A COVERAGE DECISION SUCH AS HERE INVOLVED WOULD AFFECT AN OTHERWISE GENERALLY RECOGNIZED SUPPLIER PRESENTS NO DIFFICULTY IN THIS CASE SINCE THE TUCSON STEEL DIVISION OF IDAHO MARYLAND INDUSTRIES, INC. WAS NON-EXISTENT PRIOR TO THE COMMENCEMENT OF WORK ON THE MISSILE PROJECT. AT THE PRESENT TIME, AND FOR THE FORESEEABLE FUTURE, THE ENTIRE CAPACITY OF THE PLANT, IN TERMS OF EQUIPMENT, MATERIALS, AND EMPLOYEES, IS BEING UTILIZED EXCLUSIVELY TO MEET THE REQUIREMENTS OF THE COVERED CONTRACT. MOREOVER, THE LEASE FOR THIS FACILITY IS FOR ONE YEAR, AND FOR THE APPROXIMATE PERIOD REQUIRED FOR THE COMPLETION OF THE PROJECT. CONSIDER SUCH AN OPERATION, SO ESTABLISHED AND SO UTILIZED, AND THEREFORE SO INTIMATELY TIED INTO THE CONTRACT, AS NOT COVERED BY ITS LABOR STANDARDS PROVISIONS WOULD DEFEAT THE ADMITTED PURPOSE OF THE DAVIS-BACON ACT AND RELATED STATUTES.

"IN DETERMINING DAVIS-BACON ACT COVERAGE IT IS IMPORTANT TO EXAMINE BOTH THE GEOGRAPHICAL AND FUNCTIONAL ASPECTS OF THE WORK IN QUESTION. THE PLANT HERE INVOLVED IS LOCATED SOMEWHAT CENTRALLY IN RELATION TO THE VARIOUS MISSILE COMPLEXES. TO ALLOW THAT AN EMPLOYER COULD ESCAPE COVERAGE OF REMEDIAL LEGISLATION SUCH AS THE DAVIS-BACON ACT SIMPLY BY LOCATING HIS FACILITY AWAY FROM THE GEOGRAPHICAL SITE OF THE INSTALLATION WOULD BE TO DEFEAT THE CLEAR INTENT OF THE STATUTE.

"BASED ON THE FACTS AS PRESENTED TO US, AND IN LINE WITH PREVIOUS RULINGS OF THIS DEPARTMENT AND DECISIONS BY THE COURTS, IT IS OUR OPINION THAT THE OPERATIONS OF THE TUCSON STEEL DIVISION OF IDAHO MARYLAND INDUSTRIES, INC., IN CONNECTION WITH THE WORK DESCRIBED ABOVE WERE DESIGNED TO MEET THE CONSTRUCTION REQUIREMENTS OF THE PRIME CONTRACT, AND FURTHER THAT THE EMPLOYEES ENGAGED IN THE PROSECUTION OF SUCH WORK ARE LABORERS AND MECHANICS ENGAGED IN CONSTRUCTION CONTRACT PERFORMANCE AND THUS ENTITLED TO PAYMENT AT NOT LESS THAN THE CONTRACT RATES FOR THE CLASSIFICATION OF WORK WHICH THEY PERFORMED. ACCORDINGLY, IT IS OUR CONCLUSION THAT THE WORK IN QUESTION IS SUBJECT TO THE PROVISIONS OF THE DAVIS-BACON ACT, AS SET FORTH IN THE SUBJECT TRACT.'

THE DAVIS-BACON ACT PROVIDES THAT EVERY COVERED CONTRACT SHALL CONTAIN A STIPULATION THAT THE CONTRACTOR OR HIS SUBCONTRACTOR SHALL PAY ALL MECHANICS AND LABORERS EMPLOYED DIRECTLY UPON THE SITE OF THE WORK AT WAGE RATES NOT LESS THAN THOSE STATED IN THE ADVERTISING SPECIFICATIONS. IT IS OUR CONSIDERED OPINION, FOR THE REASONS STATED IN 43 COMP. GEN. 84, THAT THE DAVIS-BACON ACT DOES NOT UNDERTAKE TO PROVIDE MINIMUM WAGE COVERAGE FOR WORK OFF THE SITE, WHETHER BY CONTRACTORS, SUBCONTRACTORS, OR MATERIALMEN, EVEN THOUGH PERFORMED IN THE IMMEDIATE COMMUNITY, AND THAT THE LEGISLATIVE HISTORY OF THE ACT SHOWS THAT THE "FUNCTIONAL" TEST OF COVERAGE USED BY THE SOLICITOR OF LABOR WAS REJECTED BY THE CONGRESS. SEE ALSO B-152524, MAY 8, 1964. WHILE WE RECOGNIZED IN THE CITED DECISION THAT INSTANCES MIGHT BE FOUND IN WHICH "ACROSS THE STREET" CONSTRUCTION ACTIVITIES MIGHT BE QUESTIONABLE, INASMUCH AS THE PLANT AT 820 WEST CONGRESS, TUCSON IS APPROXIMATELY 18 MILES FROM THE NEAREST SITE AND 59 MILES FROM THE FURTHEREST SITE, IT IS CLEAR THAT WORK PERFORMED THEREAT REGARDLESS OF ITS NATURE, COULD NOT BE CONSIDERED IN THAT CATEGORY, AND WAS NOT SUBJECT TO THE PROVISIONS OF THE DAVIS-BACON ACT.

ACCORDINGLY, WE CONCLUDE THAT THE CONTRACTING OFFICER WAS IN ERROR WHEN HE DIRECTED THE ADJUSTMENT OF THE WAGES OF THE WORKMEN EMPLOYED IN THE TUCSON PLANT. IT THUS APPEARS THAT THE GRAVER TANK COMPANY HAS A VALID CLAIM FOR ANY ADDITIONAL COSTS OF PERFORMANCE INCURRED AS A RESULT OF THAT ORDER. SEE SUNSWICK CORPORATION OF DELAWARE V. UNITED STATES, 75 F.SUPP., 221, CERTIORARI DENIED. 334 U.S. 827.

WE DO NOT HAVE, HOWEVER SUFFICIENT FACTS BEFORE US TO DETERMINE SUCH ADDITIONAL COSTS OF PERFORMANCE. WE ARE THEREFORE REFERRING THE MATTER BACK TO YOUR DEPARTMENT FOR APPROPRIATE ACTION ON THE CLAIM FOR INCREASED COST OF PERFORMANCE IN ACCORDANCE WITH THE EQUITABLE ADJUSTMENT PROVISIONS OF THE CONTRACT. SEE SUNSWICK CORPORATION OF DELAWARE V. UNITED STATES, SUPRA. IN VIEW OF THE REPORTED FACT THAT EMPLOYEES AT THE PLANT WERE IN FACT PAID HIGHER WAGES THAN REQUIRED BY THE CONTRACT, IT WOULD APPEAR THAT THERE MAY BE A SUBSTANTIAL QUESTION WHETHER ALL OF THE INCREASED LABOR COSTS ARE ATTRIBUTABLE TO THE CONTRACTING OFFICER'S ORDER, AND ANY PRICE ADJUSTMENT MADE SHOULD TAKE THIS FACTOR INTO CONSIDERATION.

COPIES OF THIS LETTER ARE BEING FURNISHED TO THE CLAIMANT'S ATTORNEYS AND TO THE SECRETARY OF LABOR FOR THEIR INFORMATION.