B-202854.OM, AUG 18, 1981

B-202854.OM: Aug 18, 1981

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PRECIS-UNAVAILABLE THE COMPTROLLER GENERAL: WE ARE FORWARDING THE FILE PERTAINING TO THE APPARENT VIOLATIONS OF THE DAVIS-BACON ACT. DETAILS OF THE VIOLATIONS AND ADMINISTRATIVE RECOMMENDATIONS CONCERNING DEBARMENT ARE CONTAINED IN THE ATTACHED INVESTIGATIVE REPORT AND DEPARTMENT OF LABOR TRANSMITTAL LETTER. OUR PROPOSAL AND THE MATTER OF WHETHER THE CONTRACTORS' NAMES SHOULD BE PLACED ON THE DEBARRED BIDDERS LIST FOR VIOLATIONS UNDER THE DAVIS-BACON ACT ARE FORWARDED FOR YOUR CONSIDERATION AND INSTRUCTIONS. THE EVIDENCE OF RECORD IS SUFFICIENT TO ESTABLISH THAT THE WORKERS IN QUESTION WERE UNDERPAID. DAVIS-BACON OBLIGATIONS COME INTO BEING ONLY BY VIRTUE OF CONTRACTUAL PROVISIONS AND ARE NOT IMPOSED BY OPERATION OF STATUTE.

B-202854.OM, AUG 18, 1981

PRECIS-UNAVAILABLE

THE COMPTROLLER GENERAL:

WE ARE FORWARDING THE FILE PERTAINING TO THE APPARENT VIOLATIONS OF THE DAVIS-BACON ACT, 40 U.S.C. 276A, BY DEWITT'S REFRIGERATION, INC., RICHMOND, VIRGINIA, M W CONTRACTORS, INC., ASHLAND, VIRGINIA, AND RICHMOND REFRIGERATION SERVICE, INC., ASHLAND, VIRGINIA, WHICH PERFORMED WORK UNDER ARMY CORPS OF ENGINEERS CONTRACT NO. DCA65-77-C 0087 AT FORT LEE, VIRGINIA.

DETAILS OF THE VIOLATIONS AND ADMINISTRATIVE RECOMMENDATIONS CONCERNING DEBARMENT ARE CONTAINED IN THE ATTACHED INVESTIGATIVE REPORT AND DEPARTMENT OF LABOR TRANSMITTAL LETTER.

WE PROPOSE, WITH YOUR APPROVAL, TO DISBURSE THE $12,854.84 ON DEPOSIT HERE TO THE THIRTEEN AGGRIEVED WORKERS IN ACCORDANCE WITH ESTABLISHED PROCEDURES. OUR PROPOSAL AND THE MATTER OF WHETHER THE CONTRACTORS' NAMES SHOULD BE PLACED ON THE DEBARRED BIDDERS LIST FOR VIOLATIONS UNDER THE DAVIS-BACON ACT ARE FORWARDED FOR YOUR CONSIDERATION AND INSTRUCTIONS.

FOR FURTHER INFORMATION, PLEASE CONTACT MYRON COLBREUNER ON EXTENSION 53218.

INDORSEMENT

ASSOCIATE DIRECTOR, AFMD-CLAIMS GROUP

RETURNED. THE EVIDENCE OF RECORD IS SUFFICIENT TO ESTABLISH THAT THE WORKERS IN QUESTION WERE UNDERPAID. HOWEVER, THE RECORD ALSO ESTABLISHES THAT NEITHER RICHMOND REFRIGERATION SERVICE, INC. (RICHMOND), NOR M W CONTRACTORS, INC. (M W), THE TWO SECOND-TIER SUBCONTRACTORS, HAD A WRITTEN AGREEMENT WITH THE PRIME CONTRACTOR, KENBRIDGE CONSTRUCTION COMPANY (KENBRIDGE), OR THAT EITHER FIRM AGREED TO THE LABOR STANDARDS PROVISIONS OF THE PRIME CONTRACT. DAVIS-BACON OBLIGATIONS COME INTO BEING ONLY BY VIRTUE OF CONTRACTUAL PROVISIONS AND ARE NOT IMPOSED BY OPERATION OF STATUTE. SEE, 40 COMP.GEN. 565 (1961). IN THE ABSENCE OF A WRITTEN SUBCONTRACT CONTAINING THE REQUIRED WAGE STIPULATIONS OR AN EXPRESS OR IMPLIED AGREEMENT BY THE TWO SECOND-TIER SUBCONTRACTORS TO COMPLY WITH THE LABOR STANDARDS PROVISIONS OF THE PRIME CONTRACT, THE TWO FIRMS HAD NO OBLIGATIONS TO EMPLOYEES UNDER THE DAVIS-BACON ACT. ACCORDINGLY, THERE APPEARS TO BE NO PROPER BASIS FOR THE DEBARMENT OF THESE TWO FIRMS. B-191982-O.M., JUNE 15, 1978, AND B-189539-O.M., SEPTEMBER 23, 1977.

CONCERNING THE FIRST-TIER SUBCONTRACTOR, DE WITT'S REFRIGERATION, INC. (DE WITT), IT DID SIGN A DD FORM 1566 IN WHICH IT AGREED TO THE LABOR STANDARDS PROVISIONS OF THE PRIME CONTRACT. HOWEVER, MOST OF THE UNDERPAYMENTS BY DE WITT WERE THE RESULT OF PAYING SEVERAL OF ITS EMPLOYEES AS "REFRIGERATION MECHANICS," A CLASSIFICATION NOT INCLUDED IN THE WAGE DETERMINATION BUT RECOGNIZED LOCALLY AND ON PROJECTS COVERED BY THE SERVICE CONTRACT ACT. IT WAS ULTIMATELY DETERMINED BY THE DEPARTMENT OF LABOR, AFTER APPEALS BY BOTH DE WITT AND KENBRIDGE, THAT THESE EMPLOYEES SHOULD HAVE BEEN PAID THE MUCH HIGHER WAGE RATE FOR "PLUMBERS AND STEAMFITTERS." THEREFORE, IT IS APPARENT TO US THAT THESE UNDERPAYMENTS WERE THE RESULT OF A CLASSIFICATION DISPUTE, RATHER THAN A WILLFUL INTENT ON THE PART OF DE WITT TO UNDERPAY ITS WORKERS, AND THAT DEBARMENT OF DE WITT IS NOT WARRANTED. SEE, B-191999-O.M., JULY 7, 1978. ALSO, THE RECORD INDICATES THAT DE WITT IS NO LONGER IN BUSINESS. THUS, IT WOULD APPEAR THAT DEBARMENT WOULD SERVE NO USEFUL PURPOSE. SEE, B-191969-O.M., JUNE 20, 1978.

REGARDING THE CONTRACTOR, WHILE THE DEPARTMENT OF LABOR DID NOT RECOMMEND IMPOSITION OF DEBARMENT SANCTIONS AGAINST THE CONTRACTOR, OR ANY OTHER PARTY, THE DEPARTMENT OF THE ARMY RECOMMENDED DEBARMENT OF KENBRIDGE EVEN THOUGH THERE IS NO EVIDENCE INDICATING THAT ANY OF KENBRIDGE'S EMPLOYEES HAD BEEN UNDERPAID OR THAT KENBRIDGE HAD FAILED TO COMPLY WITH THE DAVIS- BACON ACT REQUIREMENTS ON ANY OTHER GOVERNMENT CONTRACT. THE DEPARTMENT OF ARMY BASES ITS RECOMMENDATION ON THE FOLLOWING ALLEGATIONS:

(1) KENBRIDGE WILLFULLY VIOLATED THE DAVIS-BACON ACT AND 18 U.S.C. SEC. 1001 (1976), BY SUBMITTING THREE SETS OF PAYROLLS FOR DE WITT IN AN ATTEMPT TO CONCEAL UNDERPAYMENTS,

(2) KENBRIDGE SUBMITTED APPRENTICESHIP AGREEMENTS FOR TWO OF RICHMOND'S EMPLOYEES FOR THE PURPOSE OF ESTABLISHING THAT THEY WERE APPRENTICES DURING THE PERIOD MARCH 29 TO JUNE 13, 1979, WHEN KENBRIDGE KNEW THAT THESE TWO EMPLOYEES WERE NOT ENROLLED IN AN OFFICIAL APPRENTICESHIP PROGRAM AND THIS WAS DONE FOR THE PURPOSE OF AVOIDING THE PAYMENT OF THE REQUIRED DAVIS-BACON WAGE RATE.

IT APPEARS FROM THE RECORD THAT IN REGARD TO THOSE EMPLOYEES CLASSIFIED AS "REFRIGERATION MECHANICS," BOTH DE WITT AND KENBRIDGE WERE OF THE VIEW THAT THEY WERE PROPERLY CLASSIFIED AND PAID. THUS, WE ARE UNABLE TO CONCLUDE, AT LEAST IN REGARD TO THESE EMPLOYEES, THAT KENBRIDGE WILLFULLY VIOLATED THE DAVIS-BACON ACT. AS TO THE OTHER FIVE UNDERPAID EMPLOYEES, THERE IS NO EVIDENCE INDICATING THAT KENBRIDGE WILLFULLY PARTICIPATED OR CONTRIBUTED TO THE UNDERPAYMENT OF THESE WORKERS WITHIN THE INTENT OF THE DAVIS-BACON ACT SO AS TO PROVIDE A BASIS FOR DEBARMENT. AS FOR THE THREE SETS OF ERRONEOUS PAYROLLS SUBMITTED FOR DE WITT, THE EXPLANATION THAT THIS WAS THE RESULT OF AN ATTEMPT TO CONCEAL UNDERPAYMENTS IS ONLY ONE PLAUSIBLE EXPLANATION. THE ERRONEOUS PAYROLLS COULD HAVE RESULTED FROM INADEQUATE INFORMATION RECEIVED FROM DE WITT OR, FOR THAT MATTER, "SLOPPY" BOOKKEEPING.

IN REGARD TO THE ARMY'S SECOND ALLEGATION, A REVIEW OF THE APPRENTICESHIPS AGREEMENTS REVEALS ONLY THAT THE APPRENTICESHIP TERM WAS TO BEGIN ON AUGUST 29, 1978, AND TERMINATE UPON THE SATISFACTORY COMPLETION OF 48 MONTHS OF EMPLOYMENT. MRS. DIANA B. HUBBARD, OWNER OF RICHMOND, CONTENDS THAT KENBRIDGE KNEW THAT THE TWO EMPLOYEES IN QUESTION HAD BEEN DROPPED FROM THE APPRENTICESHIP PROGRAM WHICH HAD BEEN CANCELED DECEMBER 22, 1978, BUT, NEVERTHELESS, INSTRUCTED HER TO LIST THE TWO EMPLOYEES AS APPRENTICES ON THE PAYROLLS. KENBRIDGE DENIES THAT IT EVER STATED THAT THE TWO EMPLOYEES WERE ENROLLED IN AN APPRENTICESHIP PROGRAM DURING THE PERIOD IN QUESTION. KENBRIDGE FURTHER ARGUES, IN EFFECT, THAT SINCE THERE IS NO PRIVITY OF CONTRACT BETWEEN IT AND RICHMOND AND M W, THE LATTER TWO FIRMS WERE UNDER NO OBLIGATION TO SUBMIT PAYROLLS TO KENBRIDGE AND KENBRIDGE WAS UNDER NO OBLIGATION TO MAKE RESTITUTION TO THESE EMPLOYEES.

IT IS OUR VIEW THAT THE EVIDENCE CONCERNING KENBRIDGE'S MOTIVES OR INTENT WHEN IT SUBMITTED THE TWO APPRENTICESHIP AGREEMENTS IS, AT BEST, INCONCLUSIVE, AND THAT DEBARMENT OF KENBRIDGE ON THE BASIS OF THIS EVIDENCE IS NOT WARRANTED. ALSO, WE DO NOT BELIEVE THAT IT IS NECESSARY TO DISCUSS THE QUESTION OF WHETHER RICHMOND AND M W WERE UNDER ANY OBLIGATION TO SUBMIT PAYROLLS TO KENBRIDGE OR, IN THE ALTERNATIVE, WHETHER KENBRIDGE WAS UNDER ANY OBLIGATION TO LIST EMPLOYEES OF THESE FIRMS ON ITS PAYROLLS, SINCE IT IS THE POSITION OF THIS OFFICE THAT THE CONTRACTOR IS FINANCIALLY RESPONSIBLE FOR UNDERPAYMENTS OF SUBCONTRACTOR EMPLOYEES, REGARDLESS OF WHETHER THEY ARE EMPLOYEES OF A FIRST-TIER SUBCONTRACTOR OR EMPLOYEES OF A LOWER TIER SUBCONTRACTOR. SEE, GRANITE CONSTRUCTION COMPANY, B-201631, JULY 17, 1981, 81-2 CPD .

FOR THE ABOVE REASONS, WE DO NOT BELIEVE THAT DEBARMENT OF ANY OF THE PARTIES IS WARRANTED.

THE FUNDS ON DEPOSIT WITH YOUR OFFICE SHOULD BE DISBURSED TO THE AGGRIEVED EMPLOYEES IN ACCORDANCE WITH ESTABLISHED PROCEDURES.