Davis-Bacon: When Will Federal Contracts Catch Up with DOL's New "Operation of Law" Rule
Last week my distinguished colleague wrote about the new Davis-Bacon “operation of law” rule that went into effect in October 2023. This new rule, among many others issued by the Department of Labor (“DOL”), essentially provides that the Government’s Davis-Bacon requirements apply to covered contracts by “operation of law” even if the contracts to which Davis-Bacon apply did not include the clauses or wage decisions. But what’s happening now? Is there a currently valid contract clause that federal Contracting Officers can modify into a contract? For now, the answer appears to be no.
By way of extremely incomplete background, the Davis-Bacon Act (first adopted in the 1930s) mandates that federal contracts include provisions requiring contractors to pay prevailing wages and fringe benefits to “laborers and mechanics” who work on sites where contracts are being performed for the construction of public buildings or public works. Later laws have required compliance with Davis-Bacon for projects that are financed with federal funds (for example federal housing projects, highways among many others). There now are well over 70 such laws, which are listed in excel worksheet you can download from DOL’s website here.
In most cases, federal contracting agencies do a thorough job of adding the necessary contract clauses and furnishing the correct wage decisions for the type of project and the locality where the projects are being performed. However, errors occur. Sometimes contracting officers simply omit the clauses by accident. Sometimes incorrect wage decisions are selected. And there are times when the agency simply believes that the requirements don’t apply to a particular project.
As my partner pointed out last week, one of DOL’s primary goals was to make sure it could force contractors to implement Davis-Bacon, presumably using DOL’s clause as the model, without waiting for the contracting agency to modify the contract.
For now, however, there are no Federal Acquisition Regulation (“FAR”) contract clauses for contracting agencies to use that are aligned with the contract clause (see 29 C.F.R. § 5.5) that DOL mandates will be incorporated verbatim by operation of law without any actual contract modifications. According to the most recently issued Unified Agenda of Federal Agency Regulatory and Deregulatory Actions, the FAR Council is in the process of developing a proposed rule that it hopes to issue in April of 2024 with a comment period that, if the schedule holds, will conclude in June 2024. According to the FAR Council’s December 8 Case Status Report, the drafting process for the new rule was initiated in October, but it appears that some of the preliminary steps were extended so the overall schedule for coming up with new FAR part 22 rules (and presumably a contract clause) might slip. So, I think we’ll be lingering in uncharted waters for quite some time.
And based on what I’ve heard, federal contracting personnel and their agency labor advisors consider themselves to be in a bit of a netherworld. From their point of view (and mine), DOL can mandate all the clauses they like but they can’t just put them into contracts without their being in the FAR. Hence, DOL might compel compliance with contract provisions it has no direct authority to insert into a contract. Only Contracting Officers with a warrant have the power to bind the Government.
That leaves all of us wondering how to proceed. So, as my partner indicated last week, there are a number of options to consider if you have any doubts about whether you have a contract that lacks the appropriate contract clauses as well as the proper wage decisions (BOTH should be there). Give those some thought because we fully expect there to be some glitches ahead.