B-167639, SEPTEMBER 19, 1969, 49 COMP. GEN. 186

B-167639, SEPTEMBER 19, 1969, 49 COMP. GEN. 186

CONTRACTS -- LABOR STIPULATIONS -- SERVICE CONTRACT ACT OF 1965 -- MINIMUM WAGE, ETC., DETERMINATIONS -- PROSPECTIVE WAGE RATE INCREASES WAGE DETERMINATIONS ISSUED UNDER THE SERVICE CONTRACT ACT OF 1965. U.S.C. 351-357, TO ESTABLISH CURRENTLY PREVAILING WAGE RATES MAY NOT INCLUDE A PROVISION FOR THE ESCALATION OF WAGES ON DEFINITE FUTURE DATES AT SPECIFIED RATES IN VIEW OF THE FACT THE PHRASE "AS DETERMINED BY THE SECRETARY ***IN ACCORDANCE WITH PREVAILING RATES" IN SECTION 2(A)(1) OF THE ACT MEANS THE SAME AS "BASED UPON THE WAGES THAT WILL BE DETERMINED BY THE SECRETARY OF LABOR TO BE PREVAILING" IN SECTION 1(A) OF THE DAVIS- BACON ACT, WHICH HAS BEEN HELD TO MEAN PREVAILING RATES ARE THE RATES EXISTING AT THE TIME THE CONTRACT IS ADVERTISED. THEREFORE, AS AN ESCALATION PROVISION IN A WAGE DETERMINATION WOULD HAVE NO LEGAL EFFECT, IT SHOULD NOT BE INCLUDED IN CONTRACTS SUBJECT TO THE SERVICE CONTRACT ACT.

TO THE SECRETARY OF THE AIR FORCE, SEPTEMBER 19, 1969:

REFERENCE IS MADE TO THE LETTER OF AUGUST 1, 1969 (REFERENCE AFSPPMA), WITH ENCLOSURE, FROM THE CHIEF, INDUSTRIAL LABOR RELATIONS, CONTRACT MANAGEMENT DIVISION, DIRECTORATE, PROCUREMENT POLICY, REQUESTING OUR DECISION AS TO THE PROPRIETY OF WAGE DETERMINATIONS ISSUED UNDER THE SERVICE CONTRACT ACT OF 1965, PUBLIC LAW 89-286, 41 U.S.C. 351-357, WHICH IN ADDITION TO ESTABLISHING CURRENTLY PREVAILING WAGE RATES ALSO PURPORT TO PROVIDE FOR ESCALATION ON DEFINITE FUTURE DATE AT SPECIFIED RATES. THE DETERMINATIONS IN QUESTIONS ARE ISSUED BY THE ADMINISTRATOR, WAGE AND HOUR AND PUBLIC CONTRACT DIVISIONS (WHPC), DEPARTMENT OF LABOR, IN THE EXERCISE OF AUTHORITY DELEGATED TO HIM BY THE SECRETARY OF LABOR UNDER 29 CFR 4.3.

ENCLOSED WITH THE LETTER IS A COPY OF WAGE DETERMINATION NUMBER 65 225 (REV. 2) DATED JULY 16, 1969, RELATING TO THE VANDENBERG AIR FORCE BASE IN SANTA BARBARA COUNTY, CALIFORNIA. IT IS EXPLAINED THAT THE DETERMINATION WAS REQUESTED IN CONTEMPLATION OF SOLICITING AND AWARDING A FOOD SERVICE CONTRACT TO REPLACE ONE THEN CURRENT WHICH EXPIRES ON SEPTEMBER 30, 1969.

THE CHIEF, INDUSTRIAL LABOR RELATIONS, SAYS THAT THE WAGE DETERMINATION WAS ISSUED BY WHPC AFTER SEVERAL DISCUSSIONS BETWEEN THEIR REPRESENTATIVES AND THOSE OF HIS HEADQUARTERS; THAT THESE DISCUSSIONS PERTAINED, IN PART, TO THE INCLUSION OF A SCHEDULE OF RATES HELD BY WHPC TO BE THOSE WHICH WILL BE PREVAILING AT A FUTURE DATE OR DATES CORRESPONDING TO THE DATES OF UNION NEGOTIATED INCREASES, AND THAT THE ENCLOSED DETERMINATION TYPIFIES THE WHPC PRACTICE OF ISSUING RATES INTENDED TO BE EFFECTIVE IN THE FUTURE.

IT IS FURTHER STATED THAT DURING THE DISCUSSIONS WITH WHPC, IT WAS LEARNED THAT SOMETHING IN EXCESS OF 100 DETERMINATIONS CONTAINING PROSPECTIVE RATES HAVE BEEN ISSUED AND ARE PRESUMABLY STILL IN EFFECT; THAT IN ORDER TO PREVENT DELAY OF A PROCUREMENT NECESSARY TO THE OPERATION OF A MAJOR AIR FORCE INSTALLATION THE ENCLOSED WAGE DETERMINATION WAS INCLUDED IN THE SOLICITATION IN QUESTION; BUT THAT OUR OPINION IS REQUESTED AS TO THE PROPRIETY OF SUCH RATES AND THE ACTION TO BE TAKEN IN THE EVENT OTHERS ARE RECEIVED IN THE FUTURE.

SECTION 2(A)(1) OF THE SERVICE CONTRACT ACT OF 1965, 41 U.S.C. 351(A)(1), PROVIDES THAT "EVERY CONTRACT (AND ANY BID SPECIFICATION THEREFOR)," WITH CERTAIN EXCEPTIONS, ENTERED INTO BY THE UNITED STATES OR THE DISTRICT OF COLUMBIA THE PRINCIPAL PURPOSE OF WHICH IS TO FURNISH SERVICES THROUGH THE USE OF SERVICE EMPLOYEES SHALL CONTAIN "A PROVISION SPECIFYING THE MINIMUM MONETARY WAGES TO BE PAID THE VARIOUS CLASSES OF SERVICE EMPLOYEES *** AS DETERMINED BY THE SECRETARY (OF LABOR) *** IN ACCORDANCE WITH PREVAILING RATES FOR SUCH EMPLOYEES IN THE LOCALITY *** ."

SIMILAR LANGUAGE IS EMPLOYED IN THE DAVIS-BACON ACT, AS AMENDED, 40 U.S.C. 276A, SECTION 1(A) OF WHICH PROVIDES THAT THE ADVERTISED SPECIFICATIONS FOR EVERY CONSTRUCTION CONTRACT TO WHICH THE UNITED STATES OR THE DISTRICT OF COLUMBIA IS A PARTY SHALL CONTAIN PROVISIONS 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 SIMILAR PROJECTS IN THE CITY, TOWN, VILLAGE, OR CIVIL SUBDIVISION IN WHICH THE WORK IS TO BE PERFORMED. PROVISION IS MADE FOR ANY MODIFICATION OR ADJUSTMENT OF SUCH ADVERTISED MINIMUM WAGE RATES, AND SINCE THERE IS NO AUTHORITY FOR CONSIDERING AS "PREVAILING" A RATE WHICH IS NOT IN FACT BEING PAID AT THE TIME A CONTRACT SPECIFICATION IS ADVERTISED IN A SOLICITATION OF BIDS, AND SINCE THE MINIMUM RATES ARE REQUIRED TO BE FIXED IN THE ADVERTISED SPECIFICATIONS FOR A CONTRACT, WE HELD IN 47 COMP. GEN. 754 (1968) THAT THE DAVIS-BACON ACT REQUIRES SUCH RATES TO BE BASED ON THE PREVAILING RATES EXISTING AT THE TIME THE CONTRACT IS ADVERTISED.

WE ARE OF THE VIEW THAT THE WORDS "AS DETERMINED BY THE SECRETARY *** IN ACCORDANCE WITH PREVAILING RATES," WHICH APPEAR IN SECTION 2(A)(1) OF THE SERVICE CONTRACT ACT, WERE INTENDED BY THE CONGRESS TO HAVE EXACTLY THE SAME EFFECT AS THE WORDS "BASED UPON THE WAGES THAT WILL BE DETERMINED BY THE SECRETARY OF LABOR TO BE PREVAILING" AS APPEARING IN SECTION 1(A) OF THE DAVIS-BACON ACT. THIS VIEW FINDS SUPPORT IN THE STATEMENT MADE BY THE THEN SOLICITOR OF LABOR, CHARLES DONAHUE, AS REPORTED ON PAGE 11 OF THE HEARING BEFORE THE SUBCOMMITTEE ON LABOR OF THE SENATE COMMITTEE ON LABOR AND PUBLIC WELFARE, 89TH CONGRESS, 1ST SESSION, ON H.R. 10238, WHICH WAS SUBSEQUENTLY ENACTED AS PUBLIC LAW 89-286. THAT STATEMENT, IN PART, READS AS FOLLOWS:

AT THE THRESHOLD I HAVE BEEN TOLD THAT THERE IS SOME CURIOSITY AS TO WHY WE DID NOT SIMPLY TAKE THE DAVIS-BACON ACT AND EXTEND IT SO THAT IT WOULD COVER SERVICE CONTRACTS AS WELL AS CONSTRUCTION CONTRACTS.

ANOTHER ANSWER TO THAT QUESTION IS, THAT IN PRINCIPLE, WITHOUT MENTIONING IT, WE HAVE FOLLOWED THE DAVIS-BACON ACT. I ADDRESS MYSELF TO THE PROVISIONS ON PAGE 2 OF THE BILL AS IT WAS REPORTED IN THE HOUSE OF REPRESENTATIVES, PARAGRAPH NO. 2, WHICH PROVIDES FOR THE DETERMINATION OF PREVAILING WAGE RATES BY THE SECRETARY OF LABOR ON THE BASIS OF THOSE PREVAILING FOR SERVICE EMPLOYEES IN THE LOCALITY.

FURTHER, THE DEPARTMENT OF LABOR'S OWN REGULATIONS IMPLEMENTING THE SERVICE CONTRACT ACT CLEARLY CONTEMPLATE THAT EVEN WHERE, BECAUSE OF UNION AGREEMENTS, IT IS ANTICIPATED THAT INCREASES IN PREVAILING RATES WILL BE EFFECTIVE AT SPECIFIC FUTURE DATES, WAGE RATE DETERMINATIONS MUST ONLY REFLECT RATES CURRENT AT THE TIME THE DETERMINATIONS ARE MADE. THESE REGULATIONS (29 CFR 4.162) READ, IN PART, AS FOLLOWS:

(A) INFORMATION CONSIDERED. THE MINIMUM MONETARY WAGES AND THE FRINGE BENEFITS SET FORTH IN DETERMINATIONS OF THE SECRETARY ARE BASED ON INFORMATION AS TO WAGE RATES AND FRINGE BENEFITS IN EFFECT AT THE TIME THE DETERMINATION WAS MADE. THE DEPARTMENT CONSIDERS ALL PERTINENT INFORMATION REGARDING PREVAILING WAGE RATES AND FRINGE BENEFITS IN THE LOCALITY FOR THE CLASSES OF SERVICE EMPLOYEES FOR WHICH DETERMINATIONS ARE MADE.

SUCH INFORMATION MAY BE DERIVED FROM AREA SURVEYS MADE BY THE BUREAU OF LABOR STATISTICS OR OTHER DEPARTMENT PERSONNEL, FROM GOVERNMENT CONTRACTING OFFICERS, AND FROM OTHER AVAILABLE SOURCES INCLUDING EMPLOYEES AND THEIR REPRESENTATIVES AND EMPLOYERS AND THEIR ASSOCIATIONS. THE DETERMINATIONS MAY BE BASED ON THE WAGE RATES AND FRINGE BENEFITS CONTAINED IN UNION AGREEMENTS WHERE SUCH HAVE BEEN DETERMINED TO PREVAIL IN A LOCALITY FOR A SPECIFIED OCCUPATIONAL GROUP.

(B) PROVISION FOR CONSIDERATION OF CURRENTLY PREVAILING WAGE RATES AND FRINGE BENEFITS. (1) DETERMINATIONS WILL BE REVIEWED PERIODICALLY AND WHERE PREVAILING WAGE RATES OR FRINGE BENEFITS HAVE CHANGED, SUCH CHANGES WILL BE REFLECTED IN NEW DETERMINATIONS. IN A LOCALITY WHERE IT IS DETERMINED THAT THE WAGE RATE WHICH PREVAILS FOR A PARTICULAR CLASS OF SERVICE EMPLOYEES IS THE RATE SPECIFIED IN A COLLECTIVE BARGAINING AGREEMENT OR AGREEMENTS APPLICABLE IN THAT LOCALITY, AND SUCH AGREEMENT OR AGREEMENTS SPECIFY INCREASES IN SUCH RATES TO BE EFFECTIVE ON SPECIFIC DATES, THE PRIOR DETERMINATIONS WOULD BE MODIFIED TO REFLECT SUCH CHANGES WHEN THEY BECOME EFFECTIVE, AND THE REVISED DETERMINATIONS WOULD APPLY TO CONTRACTS ENTERED INTO AFTER THE MODIFICATION *** .

IN VIEW OF THE FOREGOING WE MUST CONCLUDE THAT THE SERVICE CONTRACT ACT DOES NOT AUTHORIZE THE DEPARTMENT OF LABOR TO ISSUE WAGE RATE DETERMINATIONS WHICH, IN ADDITION TO ESTABLISHING CURRENTLY PREVAILING WAGE RATES, ALSO PURPORT TO PROVIDE FOR ESCALATION AT DEFINITE FUTURE DATES AT SPECIFIED RATES. THEREFORE, SUCH ESCALATION PROVISIONS ARE OF NO LEGAL EFFECT, AND SHOULD NOT BE INCLUDED IN CONTRACTS SUBJECT TO THE ACT. IN OTHER WORDS, ONLY THE RATE INCLUDED IN THE SPECIFICATIONS UPON WHICH BIDS OR PROPOSALS ARE SOLICITED (OR SUBSTITUTED BY AMENDMENT PRIOR TO THE OPENING OF BIDS OR PROPOSALS) PURSUANT TO DETERMINATIONS OF THE SECRETARY OF RATES CURRENTLY PREVAILING, HAVE ANY LEGAL EFFECT DURING THE LIFE OF A CONTRACT AWARDED ON SUCH SOLICITATION. IN THIS CONNECTION, WHILE IT IS RECOGNIZED THAT THE CORRECTNESS OF A WAGE RATE DETERMINATION UNDER THE SERVICE CONTRACT ACT IS NOT OPEN TO REVIEW (SEE UNITED STATES V BINGHAMTON CONSTRUCTION CO., 347 U.S. 171), WE DO NOT CONSTRUE THE PRINCIPLE OF THAT CASE TO BE APPLICABLE TO A DETERMINATION WHICH ON ITS FACE DOES NOT PURPORT TO DETERMINE WAGE RATES ACTUALLY PREVAILING AT THE TIME OF THE DETERMINATION.

A COPY OF THIS LETTER HAS BEEN FORWARDED TO THE SECRETARY OF LABOR.