Drill, Baby, Drill – Overlapping Coverage of Drilling Work under the Service Contract Act and Davis-Bacon Act

“If you're not confused, you're not paying attention.”

-- Tom Peters

One of the most challenging parts of wage and hour law revolves around the overlap of Service Contract Act (“SCA”) and Davis-Bacon Act (“DBA”) coverage. It is entirely possible for an employee doing the same activity under one contract to be covered by a different wage law on the next contract. The main reason for this is the jurisdictional confusion and imprecision that caused by congressional and regulatory language. This blog discusses how the same type of drilling activity could fall under the SCA or the DBA based only on what some might consider trivial details of the contract,.

The SCA applies to certain contracts entered into by the United States which have the principal purpose is to furnish services. The DBA applies to contracts that are for the construction, alteration, or repair of a public building or a public work. These two acts require different standard wages and benefits for the workers employed under their covered contracts. The confusion between each act’s coverage stems from the premise that a service activity, which would normally be covered by the SCA, could be covered under the DBA if that service involved a public work or building. Window washing for example is a service that could be covered under the DBA if the windows being washed were for a construction of a “public work”. Here is where it gets tricky -- for drilling contracts different purposes determines the coverage of the SCA or DBA.

Different purposes

Since the DBA is limited by the legislative language of a “public work”, the purpose of the drilling is vital to the act’s coverage. The Department of Labor’s Field Operations Handbook (“FOH”) explains that “drilling … is usually considered construction activity.” But the DBA inquiry depends on whether that activity falls within the statutory term for “public works” which “refers typically to improvements, such as buildings, canals, or roads, rather than mere progress or activity.” FOH 15d05(b). For example, drilling a well for a water utility would fall under an improvement and thus would be subject to the DBA if the other jurisdictional requirements are met. In the same way, drilling a pressure relief well for a dam or an oil well are both activities that are connected to improvements on a public work or the construction of a public work.

Conversely, there is drilling that is not associated with improvements for building or public works. This is usually exploratory drilling that are for the purposes of soil and water surveys and other data collection, these more often fall under the SCA as it is a service that is not connected to an already existing or planned public work.  

The Field Operation Handbook Guidance

Here is what the DBA portion of the Field Operations Handbook (“FOH”) says:

15d05 Drilling work in various situations.

(a)The application of the DBA to a contract for drilling work would turn upon whether the contract is one for “construction” of “public works” within the meaning of the DBA.

(b) Exploratory drilling. Drilling, like excavating generally, is usually considered construction activity. The critical question is whether the holes which would be dug during the course of the exploratory drilling would be “works” within the statutory term “public work”. The word “works” in the term “public works” refers typically to improvements, such as buildings, canals, or roads, rather than mere progress or activity. Consequently, exploratory drilling for the purpose of obtaining data to be used in engineering studies and the planning of a project such as a dam and reservoir, the actual construction of which has not been authorized and for which funds have not yet been appropriated, would not be within the term “work” because it relates to an activity as distinguished from a project or improvement. Also, the holes themselves, which are opened to obtain cores, and which are subsequently to be filled in or abandoned, would not be “works” because they are not improvements. The products sought by the digging are the cores of the earth and not the holes themselves. See FOH 14d02. In contrast, wells drilled to obtain a water supply for a military base or a contract for digging of test holes, which later may become “public works” or permit conversion to water wells, oil wells, or other “public works,” are covered.

(c) Soil boring prior to or during construction for the purpose of setting foundations. Soil boring contracts are considered covered by the DBRA if they are directly related and incidental to, or an integral part of, the actual construction process. This is to be distinguished from the situation where such contracts are for the formulation of engineering plans and specifications, designs, and the conduct of site investigations. The latter activities are regarded as preliminary work, and not as a part of the construction process. See FOH 14d04.

(d) Plugging of oil or gas wells. A contract which calls for the plugging of oil or gas wells and the removal of above-ground equipment in connection with the construction of a reservoir on land containing such wells would be covered by the DBRA no matter whether the work is characterized as demolition (i.e., the dismantling of the above-ground equipment), incidental to construction, or well drilling (i.e., the rerunning of the tubing and replacement of the cement plugs).

FOH 15d05.

            And here is what the Service Contract Act (“SCA”) portion of the FOH says:

14d02 Exploratory drilling.

Contracts for subsurface exploration, which have as their principal purpose the furnishing of technical information, together with soil samples and rock cores, and/or a record to the government of what was encountered during subsurface drilling, are subject to the SCA if such drilling operations are not directly connected with the construction of a public work (in which case they would be DBA covered). See FOH 15d05.

14d03 Gathering and processing of geophysical and seismic data.

Where the principal purpose of a contract is to gather, compile, analyze, and report geophysical and seismic data, such contracts are covered by the SCA even though certain tangible end items (paper, maps, or manuscripts) may result from the intelligence, information, and labor service. See 29 CFR 4.131(a) and (e). Thus, while professional services may be involved and individual employees may be exempt under 29 CFR 541, the principal purpose of such contracts is to provide services which could not be furnished without a significant number of logistic support service workers to carry out the survey work. See 29 CFR 4.130(a)(21) and FOH 14c07.

FOH 14d02 and 03.

Case Law Guidance

Since the jurisdictional requirement for the DBA includes a “public work”, coverage could depend on whether or not the work has been planned. For example, in CTL Engineering, WAB No. 80-07 (WAB July 22, 1983), a subcontract to drill for soil samples was subjected to the DBA because the prime contract statement of work included a pressure release well to relieve pressure in a nearby dam. Had the contract only been for soil samples, DOL guidance suggests that it would be SCA work since it is “distinguished from a project or improvement.” FOH 15d05(b). The federal agency requisitioning the work is often in the best position to evaluate the purpose of the drilling and determine DBA coverage.

Conclusion

Of course, DBA wages tend to exceed the SCA wages. DOL being what it is, is institutionally  predisposed to saying all drilling is DBA. Sometime contractors need to push back. Drilling is just one example of work commonly associated with both the DBA and the SCA, and a contractor may have a fight on its hands and could end up being liable for back wages if a DOL audit finds that they made the wrong determination of which applies. Consulting with an attorney if the coverage is murky will pay off in the long run.