ONGRESSIONAL RESEARCH SERVICE THE LIBRARY -OF CONGRESS N G E p Ear} P E” . ,1’. ,—.»~. '~ '.~:.v“ ‘ ‘ “''r ;; .=y.F$’ ;=,,,;‘_:;I_.t«‘S;‘;sv_; S 3:” s..__:,._‘_«.__,4 A '~ S . «.,,. 13,/4.({,“27 5?}; I,‘ . issoun ll ::I1w‘iHTfiI‘:IflIr‘nI4 I 17 mm 010-1 394ll)39O '1» I“. ;~ 7 ' _.~‘ A ' “.4, \_z\__]' ..fi~‘£ _ E; .!.»'-7' R’ r" | | é{._x__,._- i " \.’.;':) .-I. -~ :.. V (V 1" U mm ia Ifli THE DAVIS-BACON ACT: CONSIDERATION DURING THE 97TH CONGRESS ISSUE BRIEF NUMBER IB8lO38 AUTHOR: William G. Whittaker Economics DiDisiDn NMEEy‘JEDe Bol1E' - Economics Division THE LIBRARY OF CONGRESS CONGRESSIONAL RESEARCH SERVICE MAJOR ISSUES SYSTEM DATE ORIGINATED 03/1o/81 DATE UPDATED 11/19/82 FOR ADDITIONAL INFORMATION CALL 287-5700 lll9 F “that is difficult, CRS- l IB8lO38 UPDATE-ll/l9/82 SSUE DEFINITION locality of the project for similar classes of crafts or skills The Davis-Bacon Act of l93l, as amended, requires that federally financed or federally assisted contracts for construction, alteration, and repair, including painting and decorating, of public buildings or public works, specify minimum wages to be paid the various classes of laborers and mechanics working under the contract. "Minimum wages" are defined by the Act as those determined by the U.S. Secretary of Labor to be prevailing in the on projects of'a similar nature. The Davis=Bacon ACt COVGFS all SUCH contracts in EXCESS ybetter value for the Federal construction dollar. (Ed its administration differ sharply. of $2,000, whether arranged through bids or negotiation, of all agencies of the Federal Government and the District of Columbia, where such and related work is involved. In addition, Davis-Bacon provisions have been written into more than fifty other statutes at the Federal level. Further, some states have enacted "little Davis-Bacon acts" within their respective jurisdictions. The Federal law covers directly purchased construction work, but,may also cover federally-assisted construction! The Davis-Bacon Act has been criticized as an inflationary Federal program if not impossible, to administer in a fair and equitable manner and which'is not needed in today's economy. Others contend that the Act offers an essential stabilizing element for the construction industry and protects both» contractors and workers from unscrupulous, "fly—by-night" competition. The result, they suggest, is a higher quality product and a Perspectives about the Act Should the Davis-Bacon Act be strengthened, streamlined, repealed altogether or, should no action be taken concerning the If change is necessary or desirable, should it come suspended or statute? through administrative or legislative ‘processes? Numerous legislative proposals relating to the Davis-Bacon Act have been considered in the 97th Congress. BACKGROUND AND POLICY ANALYSIS BACKGROUND PERSPECTIVES Although the Davis-Bacon Act became law in I931, its roots extend back into the l9th century and are an outgrowth of a variety of wage and hour statutes enacted by the several states. While the states and the Federal Government encountered constitutional problems in the creation of wage and hour standards applicable to the private sector, they found less difficulty in establishing such protections for their own direct employees. In part, since higher standards and thus higher costs might prevail for public employees than for private sector employees, State agencies began to contract-out construction and related public work, frequently to the lowest private bidder. In this manner, Government found itself, often, a party to the promotion of substandard conditions of labor -- ultimately, it was "gued, to the profit of "fly-by-night" contractors little concerned with the qiality of construction, the stability of the construction industry, or the Welfare of workers. than the current In l89l, Kansas adopted a law requiring that "not less on. construction~ CRS- 2 IB8lO38 UPDATE-ll/19/82 rate of per diem wages in the locality where the work is performed shall be paid to laborers, workmen, mechanics, and other persons so employed by or on behalf of the State of Kansas, or any county, city, township, or ot. r municipality of said State." At least six other states (New York, Oklahoma, Idaho, Arizona, New Jersey, and Massachusetts) enacted prevailing wage statutes for public work prior to the enactment of the Davis-Bacon Act at the Federal level in l93l. oftentimes, the effect of the State and Federal statutes was to remove direct wage costs as an element of competition among contractors bidding for public work. The several State statutes (which became significantly more numerous in the wake of passage of the "Davis-Bacon Act) have been open to court challenge; but, generally, they have been sustained by the courts. Congressional interest in minimum and/or prevailing wages for workers) employed on publicly financed Federal construction projects varied in form and content. In 1927, Congressman Robert L. Bacon (R—N.Y.) »introduced legislation to require that local prevailing standards be met in ‘Federal public construction. when introducing his prevailing wage bill, Congressman‘ Bacon noted that wages and hours and conditions of labor in New Yorfi State were good, and that the relationship between labor and management in the _construction industry was peaceful. However, he noted, local standards ,and labor-management harmony were in danger of) being subverted ‘through the importation of cheap (often, non—union) workers from low-wage sections of the 1 country and by contractors whose bids fOI' public construction WOFK were based upon depressed wages and standards inconsistent with those prevailing locally" within the region of the construction. The intent of the Bacon proposal was not to increase wages artifically to a level out of step with local prevailing rates but, rather, to take note of local prevailing rates 1 simply to comply with or meet them in contracting for Federal Governmental construction. Enactment of a Federal prevailing wage law did not occur until l93l. In the interim, however, Congressman Bacon and his associates continued to urge legislative action in this area. A l928 bill, offered by Congressman Bacon, won the warm endorsement of the Department of Labor. Ethelbert Stewart, Commissioner of Labor Statistics (during the Hoover Administration), in a memorandum prepared for the Secretary, explained: "The essence of the thing as I see it is: Is the Government willing for the sake of the lowest bidder to break down all labor standards and have its work done by the cheapest labor that can be secured and shipped from State to State ...." Stewart called for the Department's support for the Bacon proposal, a judgment in which Labor Secretary James J. Davis concurred. In 1930, Bacon again attempted to secure enactment of prevailing wage legislation, being joined in a similar proposal by Congressman Elliott Sproul (R-Ill.), the latter a Chicago-area building contractor prior to his election to the House. Late in 1930, after nearly a decade as Secretary of Labor in three Republican administrations, Davis was elected to the U.S. Senate from Pennsylvania. One of his first acts was to introduce prevailing wage legislation for the construction industry -- companion legislation to that offered in the House by Congressman Bacon. with the unanimous support of the Hoover Administration, the Davis-Bacon measure was promptly reported by the then Senate Committee on Manufactures, chaired by Senator Robert LaFolle e (R-wisc), and by the House Committee on Labor, chaired by Congressman Richard J. welch (R-Calif.). On Mar. 3, l93l, the Davis-Bacon Act was signed into law by President Herbert Hoover. Dissatisfaction with the Act was soon experienced. Organized labor CRS- 3 IB8lO38 UPDATE-ll/l9/82 objected to the lack of effective enforcement and penalties against violators; contractors objected to the fact that prevailing wage rates were ‘“etérmined after a contract had been awarded -- putting contractors to A inexpected expense when the prevailing rates were found to be higher than those they had used in their bids. Both‘ issues had been raised during hearings prior to enactment of the law but had been passed over. Further, there were allegations of abuses in the payment "practices of construction contractors. Through ehe years, the Davis-Bacon Act has been variously supplemented or amended. First. In l934, the Congress adopted the Copeland |"Anti-Kickback" Act, dealing with deductions or kickbacks: from the wages of workers yon Federal public construction and requiring regular reporting by contractors to the Department of Labor. on salary matters.. Second. In T1935, the Act underwent extensive revision. Inter alia, the 1935 amendments provided for (a) predetermination of pqevailing#local'wages by the Secretary of Labor so that contractors would‘know their approximate labor costs in advance of submission of bids; (b) extension of the coverage of the Act from public buildings to public works and» also specifically including contracts for painting and decorating under the Act; and (c) lowering the dollar ivalue of ,contracts covered under the Actrfrom $5,000 to $2,000-and,abbve.p Third.‘ In l940, the coverage of the Act was extended to include the then-Territories of Hawaii and Alaska. Fourth. In l94l, the Act was amended to make it clear‘ that its ;provisions applied not only to ‘contracts determined through competitive bidding but also to contracts awarded on at cost-plus or other Anegotiated basis. Fifth. In 1964, the concept of "wage" under the Act was broadened to include fringe benefits, as might ocally prevail, such as ,medical and/or hospital care, pensions, vacation p y .and "other bona fide hinge benefits ... not required by other Federal,fState, or local law." I The last major change in the Act wes legislated in 1964 -- although regulations governing the administratioh‘of the Act are under constant review by the Department of Labor and othefi fpublic agencies. During recent Congresses, numerous bills have been introduced to provide for revision or repeal of the Davis-Bacon Act. Several committees of the Congress have conducted hearings on the Act and its administration. There has been consideration, both in committee and on the floor, of removal of the Davis-Bacon provisions from various pieces of program legislation. No changes have been effected, however; all legislative efforts having failed. ARGUMENTS FOR AND AGAINST THE DAVIS-BACON CONCEPT Arguments against the Davis-Bacon concept, often raised by those critical of the statute in its present form and given its current pattern of administration by the Department of Labor, generally stress the following: (1) The Act was a depression measure that has long since outlived its usefulness, subsequent legislation —- notably the Fair Labor Standards Act -- having eliminated the necessity for its continued application. (2) It interfere with the normal processes of the free competitive market, eliminating wages as a "super minimum wage" or wage floor for construction ‘workers. (3) It is inflationary because it results in Federal and federally assisted construction costing more than other private sector construction rk. (4) It gives an unfair advantage to union employers, normally the iarger firms, over non-union open-shop contractors in bidding on government construction work. (5) It impedes entry of minority groups into the construction industry. CRS- 4 IB8lO38 UPDATE-ll/19/82 Arguments sympathetic to the purposes of the Davis-Bacon Act as raised, frequently, by those who support the Act generally stress the following: /c) The Act, proposed first in l927 during a time of prosperity prior to ‘L,& Great Depression (and re-introduced in the Congress in 1928, l93O and 1931), is much more than a Depression-era measure and is needed now as much as ever. Its focus is upon quite a different group of workers from the Fair Labor Standards Act and its basic purposes are different. (b) It prevents cutthroat competition and promotes fair competition based upon decent labor standards, benefiting both labor and industry. (c) The _Act is not inflationary, merely determining the rate of pay (including fringe benefits) already existing in a given area for projected construction and, thus, allowing the Federal'Government to adhear to pre-existing area standards andt not to act as a disruptive force in local economies. (d) By maintaining prevailing standards, rather than having public work performed by the cheapest labor available, the Act encourages fair wages and high quality of workmanship and, thus, the public secures better quality for its financial investment -- a product more economical in the long-run. (e) The repeal ‘or weakening of the Act would produce instability within the construction industry, adyersely affecting apprenticeship programs and hurting minority trainees. A low—wage, migratory firm employing the cheapest available labor »on_an ad hoc basis may have littleginterest in human capital development.g In addition to the pro/con arguments stated above, an argument raised by critics is that the Act, whatever its essential merit, has not been administered equitably or effectively by the Department of Labor. Indeed, some critics, without condemning any particular Department of Labor administrators, suggest that the Act simply cannot be administered properly and, for that reason ought to be repealed. .F. Ray Marshall, as La. 7 Secretary in the Carter Administration, has variously acknowledged that there have been problems in the administration of the Act; but, he has also observed that the Department has made adjustments in the way the Act is carried out. An inter-agency task force has been! appointed to suggest further refinements in the management of the Davis-Bacon program. GAO STUDIES OF DAVIS-BACON ADMINISTRATION During the l920s, when the Davis-Bacon legislation was first being, considered, the Comptroller General was very critical of the concept and questioned the feasibility of administering the various proposals were they to become law. Through the years, the General Accounting office hasy conducted, at its own initiative largely, a series of studies of the administration of the Davis-Bacon Act and of its impact. In April of l979, the agency released a major work titled: "The Davis-Bacon Act Should Be Repealed." The study has become, itself, a subject of controversy -- being sharply criticized both by organized labor and by the Department of Labor for its alledged lack of objectivity and for its limited sample size. Further, some observers have wondered why the GAO has been so pre—occupied with the Davis-Bacon Act through the years. spokespersons for certain contractor groups and those who oppose the Davis-Bacon Act, in general, have welcomed the GAO study and have praised it -- among them, witnesses _for the United States Chamber of Commerce, the National Association of Manufacturers, and the Associated General Contractors. A recent statement from the GAO concerning Administration of the Davis-Bacon Act discussed "preliminary findings" concerning the impact of the prevailing wage statute upon METRO construction. Requested by Congressmen John Ashbrook (R—Ohio) and Robert Bauman (R—Md.), the report notes: "We found CRS— 5 IB8lO38 AUPDATE-ll/l9/82 that setting prevailing wages for METRO construction -- as “required by the Davis-Bacon Act -- may increase the construction costs by about 6.8%. we /"stimate that, as a result of Labor establishing wages at higher rates than -nose actually prevailing in the area of METRO projects, METRO construction costs could be increased by $149 million.P This particular report, again, was preliminary. The usual practice of soliciting agency comment upon the GAO's findings was not followed. THE AMERICAN FARM BUREAU STUDY A study conducted by the Department of Economics, Oregon State University, and~funded by the American Farm Bureau Federation (AFBF) was released early in l982. Titled Effect of the Davis-Bacon Act on Construction Costs in Non-metropolitan Areas of the United States, it has been a focus of discussion at various Congressional hearings. A The Farm Bureau has long been a critic of the Davis=Bacon Act, calling for its repeal -- together with the repeal of the Federal minimum wage and the Comprehensive Employment and Training Act, the extension of "right-to-work" legislation, and the outlawing of strikes in vital public jservices such as- "transportation and food processing." (See Farm Bureau News, Jan. 25, 1982, pp. 34-35.) The Bureau "felt so strongly about the need for facts in judging the merits of the Davis-Bacon Act," explained. the Assistant Director for National Affairs, AFBF, C.H. Fields, that "we decided to provide funding lfor an unbiased scientific study of the economic impact of the act on federally aided construction inithe non-metropolitan counties of the United States." _(Hearings, Senate Subcommittee on Government Procurement, Feb. l982, p. 3l.) ;nducted by Professor Martha Fraundorf, an Oregon State economist, with several associates, the Oregon study was formally presented to the Congress in testimony by the Bureau before the Senate psubcommittee on Government Procurement, chaired by Senator Don Nickles (R—Okia.). The Fraundorf report begins by cautioning ;that the impact of the Davis-Bacon Act upon construction costs may differ substantially from one area to another -- and from rural to urban settings. Further, it suggests that some distinction must be made between wage costs and overall costs. "while it is fairly clear that the law results in higher wages," the study suggests, "it does not follow that the law therefore raises overall costs. Higher productivity of workers engaged on Davis-Bacon projects," it notes, "may more than offset the associated higher wage and administrative costs." Further, they note, "[t]here is certainly a difference in the costs of public and private projects in our sample," but causality remains uncertain. "Not all the cost difference should be attributed to the effect of the Davis-Bacon Act," they report. "Differences in the physical characteristics of the buildings and their regional location may account for some or all of the difference." Such structural factors as style of construction, type of materials used, amount of decoration, etc., may distinguish public from private construction -- with resultant variations in costs. Finally, the team notes that, "based on our analysis of the different cost components, we think at least a part of the cost effect our model attributes to the Davis-Bacon Act is in reality due to other government programs, such as firmative action, or different standards for quality and safety. whenever one applies, so do the others." Ultimately, however qualified, Professor Fraundorf and her associates conclude: "That the Davis-Bacon Act increases the cost of public ithe coverage threshold for Davis-Bacon applicabilitygfkom the*c CRS- 6 T IB8l038 UPDATE-ll/19/82 non-residential buildings in rural areas is fairly certain from our estimates." A copy of the Fraundorf/AFBF study can be made available from CRS upon request. INTER-AGENCY TASK FORCE ON THE DAVIS-BACON ACT In August of l978, the Office of Federal Procurement Policy, of the Office of Management and Budget, convened an Inter-Agency Task Force to find ways to improve the administration of the Davis-Bacon Act and the Service Contract Act. The Task Force was composed of the major procuring agencies' and’ with the Department of Labor as_a participant. The work of the Task Force, seems to have been confidential and its report was not made generallyavailable to the public. It was reported (but not confirmed) that the recommendations of the Task Force include: (a) elimination of the "30% rule" whereby a wage rate, for Davis-Bacon purposes, is deemed to be lprevailing if 30% ofg an_ area's workers withinFa particular classification anelpaid at that rate; (b) using an averaging method for computing the prevailing wage: (c) modifying the current division of ‘construction into four ;separate categories -- residential, building, heavy, and highway fields; (d) r incorporating semieskilled classifications into lower rate categories; and ;(e)l increasing urrent $2,000 I , to $100,000. (BNA/DLR, 6/5/80, A-6/A-7 and E-l/B-6.) ‘ During hearings on S. l3l9, the "Military Construction Authorization Act of 1980," July 17 and l9, 1979, before the Senate Committee on Labor and Human Resources, a portion of which dealth with the application of the Davis-Bacon Act to military construction, the findings of the Task Force we discussed in an exchange between Senator Orrin Hatch (R-Utah) and Labor Department spokesmen Ray Marshall and Donald Elisburg. Secretary Marshall acknowledged that the Task Force had met and had made certain recommendations. Senator Hatch requested a copy of the findings of the Task Force. There followed an extensive discussion of the availability of the Task Force recommendations and memoranda, the Department spokesmen agreeing to determine what could and what could not be made available to Senator Hatch and to the Committee on Labor and Human Resources (PP. 2ll-237 of the Hearings). The issue of the availability of the report, recommendations, and associated documentation of the Task Force continued to be a source of controversy. On Jan. 24, l980, the United States Chamber of Commerce sought both from the Office of Management and Budget and from the Department of Labor certain Task Force-related documents, doing so under the Freedom of Information Act since the documentation ,had not been made available voluntarily. when the requests of the Chamber were denied, the Chamber brought suit against the two agencies in the United States District Court for the District of Columbia, June 5, 1980. 0 Early in l98l, court action was continuing. On Mar. 18, l98l, Senator Hatch released a portion of the task force documentation titled: "Options Paper: Inter-Agency Review of Contract Wage Lasw." A brief setting forth of the issues, the "options paper" offered few new insights, no new documentation and provided little information about the deliberations or ' 9 Conclusions of the Task Force. However, its release may have brought to~ a close the review of the several statutes begun under the Carter Administration. ~ \-dministration) published in the Federal Register Aregulations amounted t0 3 i 1. kfffirmed that all interested parties had 'CRS- 7 IB8lO38 UPDATE°ll/l9/82 PROPOSED NEW DAVIS-BACON REGULATIONS 28, 1979, of the Carter regulations was reviewed the closing to become however, for Labor (under proposed new Comment on Dec. the Department governing the administration of the Davis-Bacon Act. through the spring of 1980 and then, on Jan. 16, 1981, during days of the Carter Presidency, final regulations were published effective on Feb. 17, 1981. The incoming Reagan Administration, withdrew the Carter regulations for further study and, ultimately, revision. The new, revised, proposed regulations appearedl in the Register of Aug. 14, 1981. Comment was invited through the early fall of 1981. The Department of Labor received some 2,200 comments on the proposed rules. In the Federal Register of May 28, 1982, the final, regulations were published to take effect on July 27, 1982. The Reagan Administration revision of became an immediate source of controversy. In assessing the comments received and making final judgments, it would seem that the Administration moved perceptively‘nearer to the positions advocated by the several contractdrt and industry associations. AFL-CIO President Lane Kirkland charged that the "back door attempt to .nullify‘ the ,law." u~The AFL—CIO's Executive Council affirmed. that "[o]ur worst fears’ have been exceeded." In development of the nfinal regulations, the Building and Construction Trades Department charged that its perspectives had been largely ignored. Labor Secretary Raymond Donovan, who in private life was a vice-president in charge of labor relations for a construction company, did not agree. Donovan described the regulations as the "farest" approach "consistent with bringing the law back to the intent of the Congress." He been consulted before the final tregulations were published. "Bobby Georgine [president, the Building and Construction Trades Department, AFL-C10] was involved from day one in this process. I know that my final decision did not please him... but he was not blindsided," the Secretary noted. (BNA/DLR, July 1, 1982, pp. AAl-AA2. See also Labor Law Journal, April 1981, inside front cover.) K the Davis—Bacon regulations {filed suit to block (See below.) (BNA/DLR, industry was highly supportive. The On June 11, 1982, the interested trade unions implementation of the new Davis-Bacon regulations. June 11, 1982, pp. A9-A10.) Meanwhile, Chamber of Commerce's Washington Report, under byline of Kathy Root, noted that the "business community is hailing as a 'major improvement'" the new regulations. Ms. Root reported that the business community "including construction trade associations and other trade groups, has been working for years to abolish or amend the Davis-Bacon law and the regulations that implement it." John L. Fielder, president of the Associated Builders and Contractors, termed the regulations the "most positive step we've seen on the issue in a long time," adding: "These new regulations will definitely make it easier and more desirable for contractors to bid on federal projects." For the Chamber, Labor law specialist G. John Tysse affirmed: "we are pleasantly surprised by the final Davis-Bacon regulations issued by the Labor Department." (Washington Report, June 8, 1982, pp. 1 and 20.) The final regulations, as set forth on May 28, 1982, are lengthy and detailed. Among their provisions, the following seem to have attracted the 3 ‘st attention. The "30 Percent" Rule: Under the Davis-Bacon Act, the Department of Labor is charged with the Federal CRS- 8 IB8lO38 UPDATE-ll/19/82 responsibility for determining locally prevailing wage rates for the various classifications of construction labor. Since l935, those determinations h?‘e been made based upon the following formulae, sequentially: (l) the race actually being received by a majority of workers employed within the classification in a local area; or, (2) absent a majority of workers being paid at any particular rate, then the rate received by not less than 30 percent of the workers employed in the classification; or, (3) absent a single rate being received by not less than 30 percent of such workers, then an average‘of the‘ rates paid to all of the workers employed in the occupational classification. In areas of heavy trade unionization, organized workers will more likely be paid at the same rate and, thus, the 30 percent rate may in fact be the union rate -- since non-union'workers can be expected to be paid-a variety of rates even within a single classification. Critics charge that the "prevailing rate" may normally be the union rate under the operation of the 30 percent rule. ; _, ' . .. . Under the new regulations published by the Department, the "30 percent" rule would be eliminated and the "prevailing wage" would be defined as follows: ‘ 1 p y ' “ "The flprevailing.wageP shall be the wage paip: to the majority.(more than 50 percent) of the laborers or mechanics in the classification on similar projects in the area during‘the period in guestion. If the same wage is not paid to a majority of those employed in the classification, the ‘prevailing wage‘ shall be the average of the wages paid, weighted by the . total employed in the classification." Thus, the "30 percent" rule has given way to a "50 percent" rule. I Generally, industry applauds the change. The Associated General Contractors (AGC) noted that "[u]nion wages will now prevail only where they dominate." The Building and Construction Trades Department (BCTD), AFL—CIO, has branded the new regulations an attempt workers." "to bust the wages of construction Use of Davis-Bacon Project wage Data: Under current practice, the department of Labor, determination of locally prevailing wages for Davis-Bacon include wages paid on area Davis-Bacon projects. Contractor generally, have opposed this practice. "This often kept federal project wages inflated since Davis-Bacon rates were often the highest in the area," the AGC protested. The BCTD, on the other hand, argued: "It is obvious that if the DOL is to arrive at a prevailing wage which realistically reflects the rates being paid workers then it must consider data from all proj cts of a character similar whether they be publicly or privately financed." Further, the BCTD notes: "Clearly this is required because many federal projects have no counterpart in the private sector. To eliminate consideration of rates paid on federally funded or assisted projects is but one more device to lower the prevailing wages to be paid construction workers." its would groups, in making purposes, The new regulations limit the use of area Davis-Bacon projects. In preamble, the Department affirms that "[w]here° practicable, ‘it would be appropriate to exclude wage data from Davis-Bacon projects in determining prevailing wages. The Department also believes this result is in accordance a . CRS- 9 IB8lO38 UPDATE-ll/19/82 with the statutory purpose" of the Act, a contention disputed by some trade union spokespersons. The Department notes that the regulations have been (revised ". . . to provide that wages paid on projects subject to the Davis-Bacon Act will not be considered in developing wage determinations for 'building‘ and ‘residential’ projects unless the Department finds that there is not sufficient data from privately financed construction projects of a similar character to determine prevailing wages. we have also ‘concluded that it would not be practical to determine prevailing wages for 'heavy' and ‘highway’ construction projects if Davis-Bacon covered projects are excluded in making wage surveys because such a large portion of those types of construction receive Federal financing. The regulation therefore permits the use of such data on these types of projects." seeming to confirm the substance of the AGC perspective, at least rbyg implication, (the .BCTD ,notes. of .the . Department of Labor's decision: "The exclusion of federal rates from wage surveys in those two protions of the market will help to insure that a lower rate will be determined by the DOL for residential and building work." The Use of "Helpers" under Davis-Bacon: {T The "helper" question concerns at least two distinct issues: first, the \integrity of the skilled construction crafts and the education of new craftworkers; and, second, the desire of employers to secure the least expensive labor in order to realize the largest possible immediate profit. Construction work, normally, requires a high level of skill, developed through long years of specialized training and experience. Traditionally, these skills have been transmitted through on-the—job training -- either informally or through carefully structured apprenticeship programs. In the latter, over time, an apprentice is trained in a range of skills required for craft work and develops into a rounded craftsperson. By tradition, each craft has been carefully defined and union craftsmen have been zealous in protecting the integrity of their respective skill areas against fragmentation and dilution. In union shop construction, such matters are normally arranged through labor-management agreements. Certain firms have found it profitable to employ low-skilled or unskilled workers for general work around a construction site and to allow these persons to perform the less technically demanding craft functions. They suggest that, for many areas of construction work, a fully trained person is not required and that to assign a journeyman to perform tasks requiring a lower level of skill is inefficient, a waste of manpower and talent, and unnecessarily costly to the consumer of construction. Further, they would argue, a wider use of unskilled or low-skilled workers, where more developed skills are not really required, will allow for employment of persons (often g nority workers) who would be excluded were Federal regulation to require Vpioject workers to have extensive (and unnecessary, from their perspective) training. work preservation considerations aside (always a concern for workers), CRS-lO IB8lO38 UPDATE-ll/19/82 craft unions are fearful that an extensive use of helpers or low-skilled workers on public construction may result in the fragmentation of“ crafts, subversion of the apprenticeship system, and a long-term shortage of skill . craft workers. The development of craft training requires a certain stability of employment and, if apprentices are to be attracted and encouraged to complete their training, a resonable prospect for continuing employment. Such stability« and assurances may not be provided % by "fly-by-night" firms who hire from the streets and who, because of the short—term nature of the employment relationship, may not be concerned with skill development and the training of workers. Indeed, such firms may raid more stable and responsible employers for‘already trained (or semi-trained) workers -- enjoying the fruit of apprenticeship training without incurring the expense. when making Davis-Bacon prevailing wage determinations, the Department of Labor currently recognizes a helper. classification "i some areas under certain well-defined situations," for example: "where (1) it constitutes .a separate and distinct class of workers (i. e., the scope‘ of duties of the helper is differentiated from journeyman duties); (2) the particular helper‘ classification prevails in the area; and (3) the helper is not used as an informal apprentice OI: trainee.", Current practice sets;a.rati.o Of~ I'10t’ ITIOFGV than l helper to 5 journeymen." The Reagan Administration, seeking to broaden the use of helpers on Davis-Bacon construction, won support from contractor associations and from "numerous individual nonunion contractors." On the other hand, the Department explained, the proposed change "of policy was opposed by the building trades unions and some State and local agencies "on the ground t3 this would undermine formally established apprentice and trainee programs to the detriment of minorities and unskilled workers." Ultimately, the Administration took a stance similar to that of industry. The wider use of helpers, the Department pointed out, "will not only result in considerable cost savings to the government" but will "enhance productivity by allowing such workers to lo tasks requiring more limited skills, thus allowing higher skilled workers io use their skills more effectively." Under the new regulations, employers can make use of helpers on projects covered by the Davis-Bacon Act at the ration of 2 helpers to 3 journeymen. Further, under the new regulations, helpers could include multitrade or general utility helpers as well as those from a single craft "to provide employers with maximum flexibility in their employment practices." The Copeland Act Reporting Requirements: Early after enactment of the Davis-Bacon Act, it was alleged that certain contractors, though paying prevailing rates, were accepting kickbacks (sometimes direct transfers of cash; at other times, ithrough payroll deductions) as a means of circumventing the impact of the Act. In l934, Congress adopted the Copeland "Anti-Kickback" Act. Under the Copeland Act, which supplements the Davis-Bacon Act,- contractors are required to file weekly statements showing wages paid and deductions made, together with an affirmation of compliance. Contractor groups have argued that submission of the weekly payroll reports is unnecessarily burdensome, that such reports are rarely reviewed, and that company records can be made available for inspection when the need arises. Some have argued that elimination of the payroll reporting cRs-11 IB8lO38 UPDATE-ll/19/82 requirement "would result in significant construction cost savings, alleviate unnecessary paperwork burdens, simplify contract administration, and still ,comply with the requirements of the Copeland Act." Generally, industry seems 3 have favored a simplified affirmation of compliance which might be filed at appropriate intervals. " Conversely, organized labor has supported retention of current reporting requirements. "The need for the federal agency to have the actual payroll in hand stems from the nature of the construction industry,"‘ a BCTD analysis points out, in, which workers may have little permanent attachment to contractors, once a contract ‘has been, completed, and ink which hsome contractors (especially small contractors)1"have no .permanent headquarters" and "move'in and out of business with great frequency." without immediate ‘access to payroll records, the agency can do little but rely on the veracity of the employerfs self—certification, some point out; This .would make it "more ,difficult f r agencies and $DOL to monitor? compliance iwith the Davis—Bacon and Coptland Acts, while increasing enforcement costs." ' I The Reagan Administration concurred, largely, with the views of‘ imdustry. ThejDepartment affirmedsthat-the requirements of the Copeland Act could be satisfied "by the weekly submission ofqa statement certifying that the, wages en orcement would be made more difficult'by the elimination ’of the payroll re » orts, the Department explained: ". . . the regulations continue to require the maintenance of payrolls and basic records by the contractor. They further require that such fig” records be submitted fOI‘ inspection on request of the agency or the Department of Labor. Failure to submit such records upon request ay be grounds for debarment. In addition, the reg lations specify that falsification of the we kly statement of compliance may subject _he contractor or subcontractor to civil or criminal prosecution. . ." Since prime contractors are to be held responsible for monitoring subcontractors, the Department suggests that "prime contractors may wish to provide in their subcontracts for the examination of subcontractor payrolls." Under the new regulations, contractors are required to submit weekly an affirmation of compliance. Prime contractors must continue to maintain payroll records for a three .year period. Federal agencies can, when necessary, require that such payroll records be submitted but frequests for payroll submissions will only be made as part of a specific compliance check or enforcement action." The weekly payroll reports are no longer required. "Importing" wage Rates: Under Davis-Bacon, the Secretary of Labor determines the wage rates prevailing locally for the various classes of laborers and mechanics on "projects of a character similar" to projected Federal contract construction. ,““rmally, such determinations might reflect rates prevailing in a single A unty or city or village. when a major project -— a Grand Coulee Dam, for example at is to be constructed in a rural area far removed from any projects of a similar character, the Secretary may find it necessary to look to a neighboring state or even to areas more distant for "projects of a character paEd are ‘in 'compliancei_with%ithe Act." L Concerning allegations" that~ CRS-l2 IB8lO38 UPDATE-ll/l9/82 similar." Critics of the Act protest this practice, arguing that higher metropolitan wages are, thereby, "imported" into rural areas. One contractor association, for example, noted that "such importation has disrupted la. : relations in rural areas, because employees who received high wages on a Davis-Bacon project were unwilling to return to their usual pay scales after the project was completed." The Reagan Administration has mandated that locally prevailing wage determinations should be based upon local standards: that urban standards or the practice of distant labor markets not be "imported." Generally, industry has supported this decision while organized labor has, for various reasons, opposed it. I A 1 "Because of the nature of the construction industry," the BCTD notes, "the 'DOL recognizes that ‘in rare cases‘ it iS necessary t0 consider wage data from metropolitan areas in surveys for projects in rural areas." Arguing for flexibility, the trade union body observed that "unless county ilines are crossed then a wage determination for a highway, for example might be based on driveway construction in the rural county." Further, the BCTD noted ‘that "major projects‘such as dams, sewage treatment plants, etc., draw a workforce from across county lines. wage surveys should be_ based on rates actually paid these workers and rates designed to attract skilled workers to "these projects." W ' 1 I Concurringgin industry's judgment, the Department of Labor concedes that "its past practice of allowing the use of wage data from metropolitan areas in situations where sufficient data does not exist within the area of a rural project is inappropriate. Therefore, the prohibition proposed against t‘ 5 practice is adopted." (Emphasis added.) In the new regulations, for wage determination purposes, the term "area" will normally mean the county in which the proposed construction is to take place. Should insufficient, current, data be available within a single county, then the Department may look to adjoining counties "provided that projects in metropolitan counties may not be used as a source of data for a wage determination in ‘a rural county, and projects in rural counties may not be used as a source of data for a wage determination for a metropolitan county." If current data are not available within a single county or within a single State for the year prior to a new wage determination, then "wages paid on projects completed more than one year prior to the beginning of the survey or the request for a wage determination, as appropriate, may be considered. Other Changes Mandated In addition to the areas discussed above, a number of other "changes have been mandated. Where, for example, a contractor has several projects underway for the Federal Government, covered by Davis-Bacon, funds may now (under the new regulations) be "cross-withheld" from one project to cover a violation on another. Another provision extends the life of project wage determinations from the current standard of 120 days to l8O days. Under yet another provision, adjunct facilities, located apart from a construction site but used by a Davis-Bacon covered contractor, are redefined with respect to the "site of work." Items discussed in this summary of the proposed, final, Davis-Bacon regulations constitute select issues and select arguments pro and con. For more complete and precise data, see the Federal Register of May 28, l982. [Note: Discussion of the new Davis-Bacon regulations, here, is based largely CRS-l3 IB8lO38 UPDATE-ll/19/82 upon the following sources: (a) the Daily LaborReport (BNA), May 28, I982, pp. A4-A6, and El-E34, in which the regulations with accompanying [explanations are reprinted; (b) The Builders, June 2l, l982, published by the ,TD, AFL-CIO; and (c) "Davis—Bacon Report," an addendum to ‘the June I6, l982, National Newsletter of the Associated General Contractors.] ORGANIZED LABOR FILES SUIT TO BLOCK NEW DAVIS-BACON REGULATIONS On June ll, l982, the Building and Construction Trades Department (BCTD) of the AFL—CIO, together with fifteen affiliated international unions and the International Brotherhood of Teamsters, filed suit in the ULS. District Court for the District of Columbia seeking to block implementation of the Administration's final Davis-Bacon regulations which, absent a ruling to the contrary, were scheduled to take effect on July 27, l982. The suit charged that the regulations violate the statutory provisions of the Davis-Bacon and Copeland Acts. "The effect of these’unlawful regulations will; be to undermine the’ protection heretofore accorded laborers and mechanics employed on federally financed construction projects," the suit alleged, noting that they will reduce the workers "job .opportunities, ytheir ‘wages and their ability to enforc ‘ and ‘assist in ‘enforcing their rights ’thereunder." For this reason, th plaintiffs asked the court, first, to issue a preliminary injunction preventing the implementation of the regulations and, second, to declare the regulations unlawful. BCTD President Robert Georgine charged that "[t]he regulations are what anti—union elements have long sought without success" —- namely a weakening of the prevailing wage statute. "And we are going to do everything in our power -- on Capitol ,‘”ll, within the present Administration, in the courts, in the field and at the ballot box -- to see that they never become operative, much less on the scheduled July 27, 1982, date." (BNA-DLR, June ll, l982, pp. A9-Alo, El-E5.) On July 22, Judge Harold H. Greene granted a preliminary injunction against the enforcement of the Davis-Bacon and Copeland Act regulations. Complying with the Court's order, the Department deferred the effective date of the regulations until further notice. In his decision, Judge Greene affirmed that the "plaintiffs have demonstrated a substantial likelihood that they will prevail on the merits" of their case, basing his judgment both upon "the language of the statute and its legislative history ... and on the long and consistent administrative practice prior to the issuance of the new regulations." Judge Greene reviewed the proposed regulatory changes, item by item, in explaining his stand. On the question of "helpers," Judge Greene noted: "At the time of enactment of the Davis-Bacon Act, Congress was acutely conscious of fforts by some employers to classify workers as ‘helpers’ in order to avoid paying the laborers’ wage." He concluded: "The new regulations will permit precisely that which Congress intended to halt in 1935." Under existing practice, he pointed out, the helper classification is recognized "only if it is ‘prevailing’ in a particular area; under the new regulations, the use of helpers need only be ‘identifiable’ to be recognized." The effect of the I oposed change, he observed, "will be that when there is a single ‘helper’ c a small group of helpers in a town or a metropolitan area, helpers may be employed in substitution of traditional craft workers throughout that area in all aspects of construction work. In that respect, again," he continued, "the new regulations will depart both from prior practice and from the CRS-14 IB8lO38 UPDATE-ll/19/82 central purpose of the Act. ‘Inclusion of Federal project work in reaching a prevailing we . determination was also addressed by Judge Greene. He noted that the statute "expressly mandated the Secretary to consider ‘projects of a character similar‘; not ‘private projects of a character similar.'" Reviewing the legislative history of the statute and administrative practice covering nearly fifty years, Judge Greene found that both sustain "the plain meaning of the statute; they do not contradict it." And, thus, ‘he concludes: "It follows that this aspect of the regulation [proposed by the Department of Labor] is unauthorized by law." on the matter of importation of urban wage rates for rural projects, the Court was less clear. Judge Greene pointed out that, while the language of the*statute referred to geographical entities such as«a "city, town, village, or othe ,civil subdivision of the state in; which. the work is to, be perform dy" long-standing practice«provides for9the contrary use of ,rates ‘annexed from the next nearest project I absent a, basis for local ,determinations. He concludes that "the legislative history is mixed, and ... without the consideration of the factor of administrative practice ... the proper meanipgof the statute on this aspect of the case would [not be Jfreey ‘from doubt." A " ‘ T ’ ‘ ’ "l' ‘ ' I On the "30 percent" rule, the issue is similarly lacking‘a firm basis for judgment. Judge Greene observed that "[i]t has consistently been held that the Act itself does not establish any definition of ‘prevailing wage,’ this being the Secretary's responsibility." He notes that "it woul appear that if this issue camp up on a blank slate, the new regulation would be uphef However," he continues, "the fact is that the Secretary has gifien no reasoned explanation for the new regulation" and he points out that the current practflce (the '30 percent‘ rule) has been honored since the very day the l935 Davis-Ba on amendments became law. Any challenge to}«the Department's new regulati ns would, thus, seem to rest upon customary practice and the longstan ing refusal of the Congress to overturn that practice. The Copeland Act, the Court noted, requires the Secretary to issue regulations for Federal contractors requiring them to "furnish weekly a statement with respect to the wages paid each employee during the preceding week." The central fact, according to Judge Greene, is that "the statute requires contractors to submit to the Secretary each week information as to the wages paid to ‘each employee‘ during the preceding week. A general affidavit covering the wage paid to all the employees during the preceding week obviously does not comply with that mandate." Further, Judge Greene reviewed the intent of the statute, concluding that "generalized statements that there has been compliance would not‘give enforcement personnel even the beginnings of a basis for further investigation. In short, he notes, "it appears that enforcement of the Act would be in serious jeopardy if the new regulations were to be substituted for the present practice." In summary, Judge Greene notes that "the language and history of the two laws lend at least as much support to plaintiffs‘ position as to the Secretary's, and that with respect to several of the provisions only the construction advanced by the former [by the several trade unions] ‘s consistent with the statute." The Court placed heavy emphasis upon _.e weight Of tradition in this instance. "Administrative construction that was contemporaneous with the adoption of the Davis-Bacon Act conclusively CRS-15 _ IB8lO38 UPDATE-ll/19/82 supports the views espoused here by the plaintiffs in every significant respect. Those who knew best what Congress intended -— the administrators who issued interpretative regulations within a short period after the enactment of the statute, sometimes within days +- fully support by their actions the arguments made by the plaintiffs regarding congressional intent and the inferences they ask the Court to draw with respect to the meaning of these laws." Again: "For forty-seven years thereafter, through the administrations of eight Presidents and fifteen Secretaries of Labor of many political and ideological persuasions, those interpretations and those regulations stood without substantive alteration. During that period none of the administrators effected the kinds of fundamental changes that are brought about by the regulations adopted two months ago;..."% i ' Judge iGreenel observ d that i"when‘lan:l agency yabruptly changes a long—standing administra ive position, regardless of the context, it may be expected at a minimum to show that the earlier understanding of the statute was wrong or that experience has proved it to be defective." Secretary . Donovan, the C'OL1I"t contended, f'has (10118 neither“; his primary reliance throughout has been on cost and cost savings -- matters neither of novel experience nor of special expertise, but well known to and considered by the gesngress as early as l93l." Greene pointed out that "[t]he basic purpose of ‘-ne Davis-Bacon Act is to protect the wages of construction workers even if the effect is to increase the costs of construction to the federal’ government." The Congress, he observed, "enacted the statute which embodied that philosophy; it later further strengthened that law; and it never repealed, modified, or weakened it an any way." Finally, he remarked: "It is not for the Court to judge whether the basic policy decision to prefer wage floors over expense to the government was or is wise. More to the point, it is not for the Secretary of Labor or his subordinates to make that judgment. Under our constitutional system, policy decisions are not made by government administrators; theyp are made by the Congress." For all of these reasons, Judge Greene concluded, "the Court finds that plaintiffs have shown a strong likelihood of success on the merits," the preliminary injunction being granted. In addition, as a further support for its action, the Court notedE the great confusion that would result, both for contractors and for public agencies, were the regulations to be allowed to take affect and, subsequently, to be set aside. workers would suffer wage losses which would not, effectively, be retrieveable. Finally, since the old regulation had been in place for "well over forty years," Judge Greene declared that he fould see no urgent reason for allowing the regulations to take effect until €\jgal appeals had been heard and a final judgment reached. (BNA/DLR, July 23, l982, pp. AAl-AA4, and Dl—D6.) CRS-l6 IB8l038 UPDATE-ll/19/82 LEGISLATION TO EFFECT ADMINISTRATIVE REFORM: S. 2929 The temporary injunction issued by Judge Greene seemed to preclude, f the moment, significant revision of the Davis-Bacon regulations through normal administrative procedures. On Sept. V17, 1982, declaring that the Davis-Bacon Act had "long outlived its usefulness‘ and currently is so ioutmoded that it cannot be' administered fairly absent statutory change," Senator Nickles introduced S. 2929 —- a bill to achieve by statute changes what the Department could not then achieve through rulemaking. Joining nNick1es as co-sponsors of the legislation were Senators East, Grassley, Hawkins, Humphrey, Laxalt, Matting1y,, and Thurmond. In an introductory statement, Nickles noted his own concern that "if the Congress delays action» on DavisLBacon until this legal dispute is finally resolved by the courts, then additional years will pass and several billion dollars more will be wasted on inaccurate wage determinations." fls Senator Nickles explained the provisions of S. 2929, the measure would first, set statutorily, for .the Afirst time, a specific formula for determination of a locally prev iling wage for “ Davis-Bacon purposes (substituting the "50 percent ru1e".or a weighted average for the "30 percent rule" currently ,in use); second, establish by ‘statute ' that wage determinations must be limited to corresponding work "in the urban.'or~ rural civil subdivision of‘the State in which the work is to be performed, or in the District of Columbia if the work is to be performed there" -- thus, effectively eliminating importation of wage rates; third, make specific statutory provision for a classification of "helper" Sunder, the Act; and, fourth, to raise the current $2,000 threshold for Davis-Bacon coverage to $100,000. The bill was read twice and referred to the Committee onitabor and Human resources. 1 SENATE ACTION The Military COI1StI'L1CtiOI1 Authorization During the 96th Congress (in l979), the Senate Armed Services Committee voted to exempt $1.4 billion worth of military construction from Davis-Bacon coverage. The vehicle for that action was the Military Construction Authorization Act of 1980. when the measure reached the floor, it was referred to the Senate Committee on Labor and Human Resources which, in turn, recommended that full Davis-Bacon coverage be retained. The full Senate disagreed. Though it voted to retain general Davis-Bacon coverage, it raised the dollar volume threshhold and made other limiting amendments. The Authorization then went to conference where the full strength of the Davis-Bacon Act was restored. The conference report was approved by the Senate, Nov. 9, 1979, on a voice vote. This final action was regarded as a victory for organized labor and for supporters of the Davis-Bacon prevailing wage concept. In the 97th Congress (1981), a similar contest took place. On Nov. 5, 1981, the Senate took up consideration of S. 1408, the Military Construction Authorization Act of 1982. The Senate Armed Services Committee reported 1408 with a provision to exempt military construction from Davis-Bacon coverage. Senator Henry M. Jackson (D-wash.) then proposed an amendment to reverse the position taken by the Committee and to retain full Davis-Bacon coverage for military construction projects. After extended debate, the CRS-l7 IB8lO38 UPDATE-ll/l9/82 Jackson Amendment was agreed to by a vote of 55 yeas to 42 nays. L The vote seems to have been something of a test of strength on the ;vis—Bacon issue overall. During the debate, considerable attention was igiven to the position of the Reagan Administration on the issue. Senator Jackson read into the record two communications of special significance. Thea first was a letter from Deputy Secretary of Defense Frank Carlucci addressed to the Senator and dated September 19, l98l. It read in part: "The potential savings from complete waiver of the Act would be little different from the savings resulting from proper administrative reform. ,we estimate the savings to be about $70 million for the Defense Department in fiscal year l982. _These savings were reflected in our amended budget. ' ."Our estimate assumes that about eight percent of direct labor cost would be saved through waiver or reform. Direct labor constitutes about 30 percent of the $2.9 billion construction program. I believe that savings larger than eight percent may be unachievable. A $400 million savings is completely unrealistic." , I The second was'a letter from Budget Director David Stockman to Franz June, President of the Associated Builders and Contractors, Inc.,I dated ‘Oct. '27, l98l. pit readi "In response to your request for clarification .of. the, Administration's position with regard to the‘David+Bacon Act, I would like to reconfirm the President's stated position that he will not seek repeal of Davis-Bacon. "Amendments to the Military Construction Bill have been proposed which ,,uld waive the applicability-of the Davis-Bacon Act and "related acts" to military construction. Our position of not seeking repeal of Davis-Bacon applies to related acts and would apply to the proposed amendments. "The Department of Labor, at the President's direction, has developed and proposed administrative changes [noted just above in this Issue Brief], designed to improve the administration of the Davis-Bacon Act and reduce costs." (Quoted in full, Congressional Record, Nov. 5, l98l, p. Sl2936.) Supporters of Davis-Bacon, throughout the debate, made pointed reference to the position of the Administration, the impact of which seemed to be to undercut the repeal effort. Despite the floor vote, however, opponents of Davis-Bacon seem willing to continue the effort toward administrative reform and, ultimately, repeal. Urgent Supplemental Appropriations, l982 On May 25, l982, during Senate floor consideration of H.R. 5922, the Urgent Supplemental Appropriations, 1982, Senator William Armstrong (R-Colo.) offered an amendment requiring that "none of the funds appropriated by this Act may be used for enforcement of the Davis-Bacon Act" or of the various Davis-Bacon provisions in program legislation. Expressing his preference for repeal of the Davis-Bacon Act which he termed "a bad piece of legislation," Senator Armstrong pointed to the alleged inflationary impact of the Act, sssing his amendment as a way "to save money." In support of his proposal, the Senator cited studies by the General Accounting Office and the Congressional Budget Office, together with comments from the U.S. Chamber of Commerce. 2 CRS-l8 ‘ IB8lO38 UPDATE-ll/l9/82 Senator Howard Baker (R-Tenn.) objected to the Armstrong amendment charging that it would endanger the entire bill by opening a challenge ‘ non-germaneness. He suggested that Senator Armstrong "makei his point and then withdraw the amendment." Armstrong declined the request for withdrawal and, shortly, Baker moved to table the proposal. Without a call of the roll, the motion to table was agreed to. (Congressional Record, May 25, 1982, pp. S5028-S6032.) Continuing Appropriations Resolution, FY83 (H.J.Res. 599) On Sept. 29, 1982, during floor debate on H.J.Res; 599, (the Continuing Appropriations Resolution, FY83, Senator Don Nickles (R-Okla.) offered an amendment (essentially S. 2929, discussed above) to effect through legislation certain of the changes/reforms in the administration of the Davis-Bacon Act proposed by the Department of Labor through a rulemaking procedure -— but, at that point, enjoined by the U.S. District Court of the District of Columbia. »The Nickles proposal was, in‘ effect, a means of circumventing the action of the Court. ‘ Senator Nickles opened by explaining that his proposal was "not to repeal the Davis-Bacon Act as we moved on previously last year; but it is to 'reformg the Davis-Bacon Act and that reform is long overdue." The specific areas of reform urged by the Senator included: ‘first, to "prohibit the present practice of importing urban wage rates, high big-city wage rates into the rural areas;" second, to "increase the so—called 30-percent rule to 50% or, say, the majority;" third, to allow for a class of helpers for Davis-Bacon «wage determination purposes; and, fourth, to increase the dollar vo1V“e threshold for Davis-Bacon coverage from the current level of $2,000 J $100,000. The several changes, the Senator affirmed, "will save something like $3.5 billion over a 5-year period." Senator Edward Kennedy (D—Mass.), noting Senator Nickles’ observations concerning inflated construction costs flowing from the Davis-Bacon Act, affirmed: "There is absolutely no credible evidence that Davis~Bacon is inflationary or that Davis-Bacon wage rates are set too high." Coversely, he noted: "I am convinced that any amendment to or reduction of Davis-Bacon protection will result in increased overall construction costs and cost overruns." Senator Nickles then proceeded to review the deficiencies in what he continued to term "the inflationary Davis-Bacon Act," explaining the substance of his proposed amendment without further interruption. On a motion by Senator Mark Hatfield (R-Ore.), the amendment offered by Senator Nickles was tabled by a vote of 52 yeas to 44 nays. (CR, Sept. 29, 1982, PP. Sl2600-Sl2603.) Hearings On Apr. 28 and 29, 1981, the Senate Subcommittee on Labor, chaired by Senator Don Nickles (R—Ok1a.), conducted oversight hearings on the Davis-Bacon Act. The lead witness was Lester A. Fettig, former Administrator, Office of Federal Procurement Policy, Office of Management and Budget -— an independent consultant at the time of the hearing. Fettig had chaired the Interagency Task Force (1978-1979) which had reviewed Federal contract wage laws, noted above. A copy of the "OPTIONS PAPER: INTERAGE~ N REVIEW OF CONTRACT WAGE LAWS," appears in the transcript of the hearing,g together with Fettig's prepared statement and responses under questioning. Other witnesses included Robert Georgine, Presidenti of the Building and Construction Trades, AFL-CIO, Robert Thompson, chairman, Labor Relations CRS-19 IB8lO38 UPDATE~ll/19/82 Committee, Chamber of Commerce of the United States, and spokespersons from) the public and private sectors. On Feb. 2, 1982, the Senate Small Business Subcommittee on Government Procurement, chaired by Senator Nickles, conducted a one-day hearing focusing upon the impact of the Davis-Bacon Act upon small businesses. Opening the session, Senator Nickles observed: "I believe that small business and the Davis+Bacon Act don't mix." Among those testifying was Professor Martha Norby Fraundort, an economist from Oregon.State University, who,presented data from a study, "Effect of the Davis-Bacon Act on Construction Costs in Non—metropo1itan Areas of»the United States," conducted at Oregon State under a grant from the AmericanlFarm Bureau Federation (AFBF). A summary of the study was presented for the hearing1 record. Several_ of the witnesses discussed the appropriateness of' the current $2,000 coverage threshold triggering application of the Act for Federal construction and related contract . Daniel Mundy, legislative director nor the AFL-CIO Building and ‘Construc ion Trades Department, "testified against (any increase in the threshol (Feb. 2, 1982, DLR, A-9). Other witnesses urged an increase of the threshold, lone contractor suggesting a $2 million threshold. Other suggestionslranged from $100,000 to $1 million. « HOUSE ACTION National Development Investment Act (H.R. 6100) On Apr. 28, 1982, as part of a series of hearings, the Subcommittees on Economic Development (House Committee on Public Works and Transflortaion) :35 _on Economic Stabilization (House Committee on Banking, Finan e and Urban Jfairs) took testimony on the Davis-Baccn provision of H.R. 6100, proposed local public works, and investment legislation. Chaired by Congressman James Oberstar (D-Minn.), the joint session heard testimony from Dan Mundy, Director of Legislation, Building and Constructiomfi Trades Department, AFL-CIO, and from C. H. Fields, Assistant Director, National Affairs Division, American Farm Bureau Federation, respectively in favor of and in opposition to the Davis-Bacon Act. Mundy and Fields largely reiterated views which they had expressed in February of 1982 before the Senate Small Business Subcommittee on Government Procurement (see above). In addition, an industry panel appeared in opposition to the Davis-Bacon Act and its inclusion in H.R. 6100. Section 309 of the proposed legislation would make all projects conducted under H.R. 6100 subject to the prevailing wage standards of the Davis-Bacon Act. On May 4, the Subcommittee on Economic Development (having shared jurisdiction over H.R. 6100) met for markup. Congressman John Hammerschmidt (R—Ark.) offered an amendment for himself and for Congressman Thomas Hagedorn (R-Minn.) which would have (a) raised the dollar volume threshhold for coverage under the Davis-Bacon provisions of H.R. 6100 to $1,000,000 from the current level of $2,000 and (b) would have provided for an experimental program of construction, supervised and monitored by the Department of Commerce, which would have tested variations in Davis-Bacon and non-Davis-Bacon covered work. On a voice vote, the Hammerschmidt/Hagedorn amendment was defeated. On a motion by Congressman Bob Edgar (D—Pa.), H.R. 6100 was approved, as amended in other respects by the Subcommittee, and ordered to be reported to the full Committee on Public works and Transportation. On August 12, the House took up consideration of H.R. 6100 (the National Development Investment Act), one provision of which would extend (in revised form) the life of the Economic Development Administration (EDA) for three CRS-20 IB8lO38 UPDATE-ll/19/82 years. During floor debate, Congressman Hagedorn offered an amendment to establish a dual system of bidding on EDA contract construction. Under the Hagedorn proposal, bids could be submitted both with and without concern f the Davis—Bacon Act. Any non-Davis-Bacon bid at least ten percent lower thans the lowest bid including Bavis-Bacon provisions would be honored. On a recorded vote, the Hagedorn proposal was defeated (140 ayes to 237 nays), sDavis-Bacon coverage remaining in place in H.R. 6lOO. Defense Industrial Base Revitalization Act (H.R. 5540) On Feb. lo, l982, Congressman James Blanchard (D-Mich.), with others, introduced H.R. 5540, the "Defense Industrial Base Revitalization Act." The report of the House Committee on Education and Labor, May 17, l982, explained that the measure "provides financial assistance in the form of loans, loan guarantees, purchase agreements and price guarantees to high priority, small and medium-sized businesses which are necessary to the‘ defense industrial base to enable'them to modernize and upgrade their plant and equipment." It also provides for a program "to train workers in them skills which are required in the high-priority industries determined to be necessary to the defense industrial base" and establishes a system of grants to "schools of engineering and other institutions of higher education in order to provide .state-of-theéart training.of professional, scientific and technical personnel needed,in the industries necessary to the defense industraial base." Section I 2(m)(l) of the bill provides -- "All laborers and mechanics employed for, the construction, repair, or alteration of any project, or the installation off equipment (emphasis added), funded, in whole or in part, by a guarantee, ;loan, or grant entered into pursuant to this section" shall be paid wages not less than those provided for under the Davis-Bacon Act. - r In separate views, appended to the Committee's report, Congressman John Erlenborn (R-Ill.), with others, pointed to the "numerous labor standards" included in the bill "which are either vague, unnecessary, or ‘otherwise inappropriate." Perhaps the "most galling," they note, "is extension of the Davis-Bacon Act." Aside from fundamental objection to the Davis—Bacon Act, per se, the several MGIIIDEFS EXPFESSGC1 concern: fiI'St, that the language in. the bill would broaden the scope of Davis-Bacon coverage to include "all laborers and mechanics employed on a project," even those "employees of the direct recipient of Federal assistance not in a contractual relationship with the Federal government," and, second, that the Davis-Bacon protections would extend to workers involved in the installation of equipment. They point out:s "Currently, installation of equipment is covered only if incident to other covered activity -- construction, alteration, or repair; it enjoys no independent basis of coverage." During House floor consideration of H.R. 5540 on Sept. 23, 1982, an amendment was offered by Congressman Bruce Vento (D-Minn.) to strike from the bill the phrase "or the installation of equipment." He described his amendment, apparently the result of prior agreement among the various parties at interest, as an effort to clarify the language of the bill and to assure that the Davis-Bacon Act would not be extended into new areas of coverage. Congressman George Miller (D-Calif.) asked if the Vento amendment would have the effect of exempting all installation of equipment from coverage by the Davis-Bacon provision. Vento affirmed that it would not, noting that the Act "applies to jobsite installation of equipment." During'the colloquy, Ve 3 and Miller established that the impact of the Vento amendment would not alter the historical coverage of the Davis-Bacon Act. Congressman Blanchard accepted the Vento amendment, adding his own point of clarification: "Davis-Bacon coverage will extend to those projects assisted by direct loans, CRS-21 IB8lO38 UPDATE-ll/l9/82 loan guarantees, and grants. it will not ~- and I should" repeat —-- not extend to projects assisted by purchase agreements and price guarantees." Prior to a vote on the Vento amendment, Congressman Erlenborn offered an amendment as a substitute that would have had the effect of totally striking Davis-Bacon coverage from H.R. 5540. Upon objection by Mr. Vento, the Erlenborn substitute was ruled out-of-order, and the Vento amendment was agreed to. Congressman Erlenborn thereupon reintroduced his amendment for separate ,consideration. Addressing the first minority concern, noted above, Mr. Erlenborn argued that the Davis+Bacon provisions of H.R. 5540 would extend the measure beyond historic patterns to include employees of a firm with no contractual relations with the Federal Government. He noted that the Davis—Bacon provisions would be extended to cover "employees of colleges and universities" and "employees of State and local governments as well through grants to State boards of vocational education." And, he suggested, coverage could be extended to certain "off-site" construction activities. Following a brief period of, discussion, the Erlenborn amendment was ldefeated on a recorded vote of 162 ayes to 189 nays. (CR, Sept.~ 23, 1982, I pp. H7s29—H7534.), LEGISLATION During the 95th and 96th Congresses; the Davis-Bacon Act was a focus of .tense, though unseccessffil, legislative interest. Early in the 97th Congress, nume ous bills were introduced suggesting revision or repeal of the Act. Represengative of the legislation offered in the 97th Congress (but, by no means a com lete listing) are the following. 0‘ H.R. 48 (Asnbrook) Repeals the Davis-Bacon Act and strikes, in effect, the Davis-Bacon provisions which have been added, through the years, to more than fifty %Federal program statutes. Introduced on Jan. 5, 1981; referred to the Committee on Education and Labor. H.R. 276 (Hansen of Idaho) Amends the Davis-Bacon Act by raising the dollar volume trigger from $2,000 to $40,000, by redefining the several classes of mechanics and laborers, by further defining the territorial areas for which wage rates would be determined, by establishing under statute a Federal Appeals Board to hear Davis-Bacon cases, and in other ways. Introduced on Jan. 5, 1981; referred to the Committee on Education and Labor. H.R. 3708 (Wolf) Amends the Urban Mass Transportation Act of 1964 concerning the applicability of the Davis-Bacon Act to construction contracts financed with sistance of loans or. grants made to the Washington Metropolitan Area Transit Authority under the Urban Mass Transportation Act of 1964. Introduced May 27, 1981; and referred'to the Committee on Public works and Transportation. CRS-22 IB8lO38 UPDATE-ll/l9/82 H.J.Res. 277 (Wolf) Grants the consent and approval of the Congress to the States of Virginia and Maryland, and to the District of Columbia, to amend the Washington Metropolitan Area Transit regulation compact to delete the requirement that laborers and mechanics employed by contractors and subcontractors in the construction, alteration, or repair of projects undertaken by the Washington Metropolitan Area Transit Authority be paid wages in conformity with Davis-Bacon standards. Introduced June 2, l98l; and referred jointly to the Committees on the Judiciary and the District of Columbia. S. 3 (Pryor) Amends the Copeland "Anti—Kickback" Act of l934, by striking the weekly reporting requirement under the Act and replacing it with a simple declaration with respect to the wages paid during the contract or subcontract period. the contract or sub-contract period. Introduced Jan. 5, l98l; referredi to the Committee on Governmental Affairs. s. 2929 (Nickles) ' ‘I Amends the Davis-Bacon Act by providing a. specific formula for the determination of "prevailing wages," bans the importation of wage rates, recognizes the classification of "helper" for Davis-Bacon wage determination purposes, and raises the dollar volume threshold for, Davis-Bacon coverage from $2,000 to $100,000. Introduced Sept. 17, l982; and referred to the Committee on Labor and Human Resources. HEARINGS U.S. Congress. Senate. Subcommittee on Government Procurement of the Committee on Small Business. The Impact of the Davis-Bacon Threshold on Small Business Construction Contractors. Hearings, 97th Congress, 2nd session. Feb. 2, I982. Washington, U.s. Govt. Print. Off., l982. 243 p. Subcommittee on Labor of the Committee on Labor and Human Resources. Oversight on the Davis-Bacon Act. Hearings, 97th Congress, lst session. April 28 and 29, l98l. Washington, U.S. Govt. Print. Off., 1981. 580 p. ——--- House. Subcommittee on Economic Development, Committee on Public Works and Transportation, and subcommittee on Economic Stabilization, Committee on Banking, Finance and Urban Affairs. Joint Hearings on the Public Works and Economic Development Act and the Appalachian Regional Development Act. Hearings, 97th Congress, 2d session. Apr. 27-29, 1982. Washington, U.S. Govt. Print. Off., 481 p. 1982. The required declaration would be made at the beginning and close of CRS-23 IB8lO38 UPDATE-ll/19/82 {LTHRONOLOGY or EVENTS O9/29/82 -- 09/23/82 -- O9/l7/82 -- O8/l2/82 -- O8/lo/82 -- O7/22/s2 -- O6/24/82 -- O6/l1/82 -- During floor consideration of H.J.Res. 599, the FY83 Continuing Appropriations Resolution, the Senate voted (52 ayes to 44 nays) to table an amendment offered by Sen. Nickles (R—Okla.) to mandate certain reforms in the administration of the Davis-Bacon Act (essentially, the substance of S. 2929, noted above). During floor consideration of H.R. 5540, the "Defense Industrial Base Revitalization Act," the House adopted an amendment by Congressman Bruce Vento (D-Minn.) to delete Davis-Bacon coverage for persons involved in the "installation of,equipment," set forth as a clarifying amendment, while rejecting an amendement by Congressman John Erlenborn (R-Ill.) that would have deleted Davis-Bacon coverage fro ‘ ( ." ‘V I " , ' I , I ‘. . I Sen. Nickles (R-Okla) introduced 3. 2929, which would effect through legislation many of the changes in the administration of the Davis-Bacon Act earlier proposed by the Department of Labor by rulemaking procedures. The proposals of the Department are currently undergoing challenge in the courts. The House rejected, by a vote of l4O ayes to 237 nays, an amendment offered by Congressman Tom Hagedorn (R—Minn.) which would have allowed, under certain circumstances, exemption of local public works, funded under H.R. 6100 (the National Development Investment Act), from Davis-Bacon prevailing wage standards. The "open shop" Associated Builders and Contractors, filed a "friend-of-the—court" brief in support of the Department of Labor in the suit brought by organized labor to block enforcement of the final Davis-Bacon regulations. Also filed were statements of support for the Department by several academic scholars. Judge Harold Greene, U.S. District Court for the District of Columbia, granted a preliminary injunction against implementation of the proposed Davis-Bacon regulations, resulting in deferral of implementation of the regulations by the Department of Labor. New panel members were named by Secretary Raymond Donovan to the Wage Appeals Board (responsible for Davis-Bacon and Copeland Act appeals) and sworn in. This action revitalizes the Board which had been in a "period of inactivity" since late l980. The Building and Construction Trades Department, AFL-CIO, with the International Brotherhood of O5/28/82i=- 05/25/82 -- o5/17/82‘-- 05/04/82 -- 04/29/82 -- O4/28/82 -- 04/05/82 -- 03/30/82 -- 1982" ‘coverage was retained in the measure as reported. loffered by Congressman John Hammerschmidt CRS-24 IB8l038 Teamsters and various other trade union bodies, filed suit in the U.S. District Court for the District of Columbia to block implementation of the final regulations issued by the Department of Labor, dealing with the Davis-Bacon and related statutes. The Department of Labor published its final regulations in the Federal Register. The regulations are given an effective date of July 27, l982. A The Senate, by a voice vote, agreed to table an -amendment offered by Senator William Armstrong (R-Colo.) to the "Urgent Supplemental Appropriations,‘ (H.R. 5922) which would have precluded the use of funds, under the Supplemental, for enforcement‘ ‘:of the Davis-Bacon Act or of Davis-Bacon provisions of program‘legislation.' J » H.R. 6100 was reported from the House Committee on Public works and Transportation. Davis-Bacon, The vote for retention of Davis-Bacon coverage was 25. J yeas to lo nays. M ’ ‘- ' i , 1, 0 House Subcommittee on Economic Development, during a markup session on H.R. 6l00, rejected an amendment (R-Ark.) to raise the thfieshhold for Davis-Bacon covered construction un er the proposed legislation from $2,000 to $1,003,000, and to create a program of ! experimentation with construction costs under Davis-Bacon and in Davis-Bacon free construction. H.R.bql00 was ordered reported to the full Committee on Public works and Transportation. The President's Commission on Housing, President Reagan in June of l98l, issued its final report, recommending that "housing construction and related infrastructure work should be excluded from coverage under the Davis-Bacon Act (p. XXXIV). created by (Committee on and Economic Stabilization Finance and Urban Affairs) conducted joint hearings on H.R. 6l00, local public works and investment legislation. In part, the focus of the hearing was inclusion of a Davis-Bacon provision in the proposed legislation. James Oberstar (D. Minn.) chaired the joint hearing. House Subcommittees on Economic Development Public Works and Transportation) (Committee on Banking, President Reagan, addressing the annual legislative conference of the AFL-CIO's Building and Construction Trades Department at the Washington, D.C., Hilton, affirmed that he "has not and will not" seek repeal of the David-Bacon Act. (BNA/DLR, Apr. 5, l982, p. All; and the New York times, Apr. 6, l982, p. A17.) Idaho Governor John V. Evans vetoed a State measure UPDATE-ll/l9/82) O3/24/82 -~ O2/O2/82 -- 1/05/Bl fr O8/l4/8l -- O4/28-29/81 O3/O9/8l —~ O3/O3/81 -- Ol/16/81 -- CRS-25 IB8lO38 UPDATE-ll/l9/82 (B. B5 822) that would have repealed Idaho's "little Davis+Bacon" prevailing wage law. "Some form of prevailing wage statute has been on the books in Idaho since l9ll." (BNA/DLR, Mar. 30, l982, p. A9.) The House Banking Subcommittee on Economic Stabilization voted to add to H.R. 5540, "The Defense Industrial Base Revitalization Act," a provision specifically bringing construction }performed under the legislation under coverage of the Davis-Bacon Act. The Davis-Bacon amendment was offered by Congressman Bruce Vento (D-Minn.). The amendment was approved in the Subcommittee by a vote of l4 yeas to 7 nays -- one Republican voting with the Democratic majority. The Senate Small Business Subcommittee on Government Procurement, chaired by Senator Don Nickles (R-Okla.), conducted one day of hearings on the impact of the Davis-Bacon,Act upon small businesses. %The Senate, onla roll-call vote ofx55 yeas to 42 nays agreed to a amendment offered by Senator Jackson to S. l408, the Military Construction Authorization Act of l982, sustaining Davis-Bacon coverage for military construction projects. The Senate Armed Services Committee had voted to delete such coverage. ‘The Department of Labor published in the Federal Register proposed new guidelines for the administration of the Davis-Bacon Act and the Service Contract Act, calling for public comment through Oct. l3, l98l. The earlier regulations, proposed on Jan. 16, l98l, by the Carter Administration (but never given effect), were permanently withdrawn. -— Senate Committee chaired by Senator conducted hearings on the (oversight). The Senate Subcommittee on Labor, on Labor and Human Resources, Don Nickles (R-Okla.), Davis-Bacon Act Governor Bruce King of New Mexico vetoed a legislative measure repealing the New Mexico Public works Minimum wage Law (the State's "little Davis-Bacon Act"). Thus, the act remains on the books. The Utah State Legislature overrode a veto by the State's governor of legislation to repeal the Utah "little Davis-Bacon Act." Thus, the measure has been repealed. The Carter Administration published in the Federal Register proposed changes in the regulations governing the Davis-Bacon Act and the Service Contract Act. [In order that the Reagan Administration might review the impact of the proposed regulations, the effective date for the regulations has been deferred.] CRS-26 .4 IB8lO38 UPDATE-ll/19/82 ADDITIONAL REFERENCE SOURCES AFL-CIO. 1The Davis-Bacon Act: It Works to Build America. Published by the Building and Construction Trades Department, AFL-CIO. pseptember 1979, 82 pp. Bourdon, Clinton C. and Raymond E. Levitt. Union and Open—Shop Construction. Lexington, Mass.: D.C. Heath and Company, 1980. (See chapter 6, "The Impact of the Davis+Bacon Act," pp. 91-103.) T ‘ A Comptroller General of the United States. The Davis-Bacon Act Should Be Repealed. Washington:i General Accounting Office, Apr. 27, 1979. 276 pp. ’ Goldfarb,fRobert s. and John F. Morrall III. "The Davis-Bacon Act:C An Appraisal of Recent Studies," Industrial and ,Labor Relations Review._ January 1981, pp 191-206. 1 I Gould, John P. and George Bittlingmayer." The Economics of the Davis-Bacon Act; An Analysis of Prevailing-Wage Laws. Washington: American Enterprise Institute for Public Policy Research, 1980. 89 pp. Thieblot, Armand J., Jr. The Davis-Bacon Act. Philadelphia: The University of Pfnnsylvania, the Wharton School, Industrial Researchfiunit. 1975. 239 pp. U.S. Library of Congress. Congressional Research Service. Copeland Anti-Kickback Act: Elimination of Weekly Wage Reporting Requirements” Background and Pro-Con Analysis. [by] Mary Jane Bolle. Washington, Oct. 1, 1979. 36 p. ——--- The Davis-Bacon Act: history, administration, pro and con arguments, and congressional proposals. [by] Joseph F. Fulton. Washington, July 11, 1978. 64 p. Report 78'l5lE. Wolk, Stuart Rodney. "Davis-Bacon: Labor's anachronism." 1974. Labor law journal, v. 25, no. 7, July 1974: 404-407.