On Dec. 14, the U.S. Department of Labor’s Wage and Hour Division issued two All Agency Memoranda, AAM 235 and AAM 236, with revisions to certain DOL wage determinations for federal contractors under the Davis-Bacon Act.  

According to AAM 236, WHD has updated its $1 million threshold used to determine which wage determinations of the four general categories of construction (building, residential, highway and heavy) will be applied to a construction project. The memo states, “when work in a different category exceeds either $2.5 million or 20% of costs, a contracting agency should generally apply the wage determination for the different category in addition to the wage determination for the overall project.”

WHD is updating this policy for the first time since 1987, when WHD introduced $1 million as an indicator for whether the cost of construction items in a different category is substantial despite not exceeding 20% of total project costs.

In 2020, ABC submitted letters to both President Trump and Rep. James Comer, the ranking member of the U.S. House of Representatives Committee on Oversight and Reform during the 116th Congress, on how the policy prior to AAM 236 impacted its members—particularly for projects financed by the U.S. Department of Housing and Urban Development.

In its letter to Rep. Comer, ABC said, “Items generally deemed by HUD as ‘incidental’ to residential construction (four stories or less), i.e. swimming pools, community buildings, storage sheds, etc., have received Davis-Bacon multiple or ‘split wage’ rate determinations, which has caused confusion and created uncertainty for ABC contractors and contracting officers in charge of HUD-financed projects. In order to alleviate confusion and mitigate barriers to constructing federal HUD-financed affordable housing projects, DOL should issue guidance to reinstate DOL’s past policy that only residential wage decisions shall be applied to housing projects (four stories or less), including all incidental items, unless there is an established area practice to the contrary. Further, in cases where a quantitative guideline may be appropriate, the guideline should be a threshold of more than 20% of the total costs (not a threshold of $1 million), and it should apply only to individual work components of a project (not to aggregations).”

AAM 235 Impacts Surveyors

Effective immediately, AAM 235 rescinded an Obama-era memorandum, AAM 212, allowing survey crew members performing physical and/or manual work to be considered laborers or mechanics subject to the Davis-Bacon labor standards on covered projects. According to AAM 235, “since the issuance of AAM 212, concerns have been raised that this guidance was issued without a sufficiently broad appreciation of the coverage issue it addressed, especially with respect to identifying the duties performed by, and training required of, survey crew members who perform work immediately prior to and during construction, in direct support of construction crews. Delay in implementing AAM 212, while providing an opportunity for such concerns to be raised, has caused further confusion for the regulated community.”

In 2018, ABC joined a coalition of industry groups in sending a letter to former DOL Secretary Alexander Acosta strongly supporting the rescission of AAM 212, saying the Obama memorandum set a dangerous precedent and unilaterally overturned more than 50 years of accepted and settled policy.

Changes May Be Reversed by Biden Administration

Contractors and employees impacted by these reforms should be prepared for additional changes in the future.

“Because All Agency Memorandums do not require notice and comment from the public, these measures can easily be rescinded by the Biden Administration’s DOL,” said ABC Vice President of Regulatory, Labor and State Affairs Ben Brubeck. “These minor and likely temporary common-sense changes to DOL policy are long overdue and pale in comparison to the extensive reforms the 90-year-old Davis-Bacon Act and related regulations must undergo in order to properly support construction workers, contractors and taxpayers in today’s modern economy.”

For decades ABC has suggested to DOL and Congress ways it can improve and modernize Davis-Bacon Act regulations and the DOL Wage and Hour Division’s internal processes that determine prevailing wage and benefits rates for construction workers building federal contracts exceeding $2,000 and additional public works projects receiving federal financial assistance.

“The truth is, American taxpayers and construction industry workers and small business contractors would benefit from a broad overhaul of the Davis-Bacon Act bureaucracy,” said Brubeck. “Taxpayers deserve the best possible construction product at the best possible price when the federal government builds or invests in infrastructure. Likewise, long overdue regulatory clarity and common-sense reforms would provide more opportunities for small businesses and create more jobs for construction workers across America.”

More information on the Davis-Bacon and Related Acts can be found on the DOL website.

The information contained in this article is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.