DAIRY DEVELOPMENT, LTD., WAB No. 88-35 (WAB Aug. 24, 1990)
CCASE:
DAIRY DEVELOPMENT, LTD.
DDATE:
19900824
TTEXT:
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[1] WAGE APPEALS BOARD
UNITED STATES DEPARTMENT OF LABOR
WASHINGTON, D. C.
In the Matter of:
DAIRY DEVELOPMENT, LTD. WAB Case No. 88-35
FARM FRESH, INC.
CHANDLER, OK - UDAG
BEFORE: Jackson M. Andrews, Chairman
Ruth E. Peters, Member
Stuart Rothman, Member, Separate Opinion
DATED: August 24, 1990
DECISION OF THE WAGE APPEALS BOARD
Petitioners Dairy Development, Ltd., Farm Fresh, Inc., the
City of Chandler, Oklahoma, and Kan-Ark, Inc., are before the Wage
Appeals Board pursuant to 29 C.F.R., Section 7.9, seeking review of
the decision dated June 13, 1988 (Record OO), issued by the
Administrator, Wage and Hour Division in the above captioned
matter. The Administrator's decision is a final ruling issued
pursuant to 29 C.F.R., Section 5.13. The petition for review was
filed on July 11, 1988. The parties to this proceeding have
consented to disposition without oral argument. [1]
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[2]
I. BACKGROUND
The parties are in basic agreement as to the facts which have
given rise to this dispute. (FOOTNOTE 1) The Board bases its decision
upon the Petition for Review, the Statement for the Administrator,
Petitioners' Reply to the Administrator's statement, and the facts
contained in the record.
In her ruling, the Administrator first determined that the
construction of a dairy products manufacturing plant in Chandler
(Lincoln County), Oklahoma is subject to Davis-Bacon (FOOTNOTE 2)
prevailing wage labor standards requirements of the Housing and
Community Development Act of 1974, as amended (42 U.S.C. 5310;
"HCDA"). Further, the Administrator ruled that Petitioners'
challenge to the applicable wage determination was untimely.
Petitioners now seek review of both rulings.
The HCDA authorizes HUD to grant funds under the Urban
Development Action Grant program. On May 15, 1985, the City of
Chandler ("Chandler") applied to HUD for $3,250,000 in UDAG funds
to apply to construction of a dairy products manufacturing plant
(the "Plant") of almost 150,000 square feet (Record A). The
original grant application (FOOTNOTE 3) specified that the Plant included
dairy [2]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
(FOOTNOTE 1) It appears that the only fact-based disagreement is the
timeliness of Petitioners' challenge to the correctness of the
applicable wage determination in the proceeding before the
Administrator. Petition, p. 1.
(FOOTNOTE 2) 40 U.S.C. 276a et seq.
(FOOTNOTE 3) An amendment (Record GG) to the initial grant application was
subsequently submitted by Chandler on January 7, 1986 and was
approved by HUD on March 25, 1986 (Record C). This amendment is
discussed further, infra at p. 6. [2]
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[3] product processing equipment (Id.). The grant application
contains the following partial description of the Plant:
The proposed building is specially designed
and constructed to handle and care for the
milk products which will be produced. The
refrigeration systems, control systems, floor
and wall special finishes, detailed elevation
for gravity flow of product and drainage systems
are integral parts of the processing system.
[. . . ]. Equipment to be purchased for
operation of the plant includes stainless steel
tanks and vats, processing equipment, handling
systems, automated load out system, and a main
programmable control system. [. . .].
(Id.; emphasis supplied). Under the grant application, the total
estimated cost for the Plant project was $16,920,000; this amount
included $7,258,000 for construction of the building structure and
$6,006,000 for the purchase and installation of equipment (Id.).
The record demonstrates that the equipment to be purchased and
installed in the Plant consisted of 14 major items to be purchased
from several different vendors; the total approximate cost of this
equipment was $5,700,000 (Record JJ, KK). The Developer's
estimated budget for the Plant stated the approximate labor cost
for installation of the equipment to be $1,047,000 and further
indicated that the installation of equipment would be performed by
workers classified as ironworkers, pipefitters, millwrights, and
electricians (Id.). Petitioners have further stated that the
purchase price of four pieces of equipment (FOOTNOTE 4) included the cost
of labor for their installation (Record LL). [3]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
(FOOTNOTE 4) These items were the ice cream equipment and hardening
tunnel, the water filtering equipment, the material handling
equipment, and the boiler (and associated equipment). [3]
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[4] Contained in Chandler's May 15, 1985 grant application was the
certification that "[a]ll of the construction work will be subject
to the Davis-Bacon Act." The Mayor of Chandler signed and
submitted the application. Further, on May 24, 1985, Dairy
Services, Inc. (the general partner for the plant's developer)
submitted its assurance to Chandler that Davis-Bacon compliance
would be required of all contractors and subcontractors
constructing the Plant (Record A). By letter to the Chandler City
Manager, the President of Dairy Services, Inc. clearly stated:
This is to certify that during construction
of the plant in Chandler, financed in part
by UDAG, all contractors and subcontractors
will be required to comply with the Davis-
Bacon Act. Further, our contracts will
require that payroll reports must be
submitted to the City of Chandler to insure
compliance.
On June 21, 1985, HUD notified Chandler that the Plant
construction funded "wholly or in part by federal funds is subject
to labor standards regulations, including wage rates." (Record
R). (FOOTNOTE 5) In this communication, HUD specifically notified
Chandler, in pertinent part that:
When federal funds are used for any of
the following items Davis-Bacon wage
rates shall apply to all construction
work performed on the building or
property concerned: [. . . ] [*] payment for
the cost of equipment whose installation
requires payment of prevailing wages [*]
[. . .; emphasis supplied]. [4]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
(FOOTNOTE 5) Letter from Charles Ming, Manager, HUD, Oklahoma City Office
(Region VI) to the Honorable Robert James, Mayor of the City of
Chandler. [4]
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[5] HUD gave preliminary approval to Chandler's grant application
on August 5, 1985 (Record B). Subsequently, an agreement
committing $2,750,000 in UDAG funds was executed by HUD on November
18, 1985 and accepted by Chandler on December 30, 1985 (Id.). On
December 4, 1985 (prior to Chandler's acceptance of the UDAG fund
commitment), HUD provided Chandler with Wage Determination No.
OK85-4051 (dated November 29, 1985) for application to construction
of the Plant (Record D).
On December 31, 1985, Dairy Development contracted for the
Plant's construction with prime contractor Kan-Ark, Inc. (Record
K). Under this contract, the parties provided that "[a]n allowance
of $500,000 has been included for increased labor cost if the
project must be built under the provisions of the Davis-Bacon Act."
(Id.). That December 31 contract further stated that:
The Parties reserve the right to use the
lowest wages lawfully available. Any labor
cost savintgs [sic] resulting from a total
or partial relief from the effect of the
Davis-Bacon Act will enure to the benefit
of the Owner regardless of whether such savings
were obtained by the efforts of the Contractor
or Owner or both or neither, and any such savings
will reduce the Contract Sum to that extent.
(Id.).
As previously indicated (supra, note 4), on January 7, 1986,
Chandler applied for HUD approval of certain amendments to the UDAG
agreement, well after the agreement committing UDAG funds was
executed by HUD and accepted by Chandler. Among the requested
amendments was one to the effect that the UDAG funding would be
used only to purchase milk processing equipment for incorporation
[5]
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[6] into the project (Record GG). On March 25, 1986, HUD
approved the amendments, providing, among other things, that the
UDAG funds were to be utilized for "partial financing of the
capital equipment for the project." (Record C). However,
construction of the project had commenced on March 17, 1986 (Record
K), prior to HUD's approval of the amendment requested by Chandler.
Further, by letter dated March 28, 1986 (Record E), HUD
notified Chandler that the amendment to the grant agreement would
not alter the application of Davis-Bacon requirements to
construction of the Plant. (FOOTNOTE 6) Specifically, HUD's notice
stated:
There has been some confusion concerning
applicability of Davis-Bacon wage rates to
the construction of the Farm Fresh Dairy
Plant which is a part of the City's Urban
Development Action Grant (UDAG) Project.
The grant agreement between the City of
Chandler and the developer, Dairy Services,
Inc. included Davis-Bacon regulations and
their assurance of compliance. The UDAG grant
agreement is in the process of being amended
to transfer the use of UDAG funds from
construction of the building to purchase and
installation of equipment. This amendment will
not change Davis-Bacon wage rate requirements.
On March 24, l986 Petitioners submitted a request to the
Administrator's office challenging not only the applicability of
Davis-Bacon provisions to the Plant's construction but the
correctness of the wage rates in the (otherwise) applicable Wage
Determination No. OK85-4051 (Record D). As noted, the wage [6]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
(FOOTNOTE 6) Letter from Charles Ming, Manager, HUD Oklahoma City Office
(Region VI) to the Honorable Robert James, Mayor of the City of
Chandler. [6]
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[7] determination had been provided to Chandler by HUD on December
4, 1985.
On May 13, 1986, Chandler, the Chandler Industrial Corporation
and the developer entered into an agreement whereby Chandler (as
Grantee) agreed to loan UDAG funds to the developer. The developer,
in turn, agreed to construct the Plant in accordance with the terms
of the grant agreement (Record N).
II. THE PARTIES' CONTENTIONS
On behalf of the Administrator, the Solicitor of Labor argues
that Petitioners are contractually bound to comply with the Davis-
Bacon prevailing wage labor standards provisions by virtue of the
express assurances to that effect given by both Chandler, as
Grantee, and the developer, Dairy Development. In response,
Petitioners argue that their contractual agreement to pay laborers
and mechanics prevailing wages was conditional upon whether the
UDAG funds were granted for construction work on the Plant building
structure itself or for the acquisition of the equipment to be
installed in the Plant's processing and control systems. Petition,
pp. 1-2.
The Administrator further argues that, notwithstanding the
contract which clearly requires Davis-Bacon coverage in this case,
the construction of the Plant was subject to Davis-Bacon
requirements by operation of law, given the plain meaning of the
HCDA's statutory language and the interpretation of that statute by
the contracting agency (HUD) which administers the UDAG program
under the HCDA. Thus, the Administrator argues that all [7]
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[8]
construction of the Plant in this case is subject to coverage
because the UDAG funds "were authorized under the terms of the
grant agreement for the purchase of capital equipment, the purchase
price of some equipment items included the cost of installation,
and such installation involved substantial amounts of
construction." Administrator's Statement, p. 13.
In response to this argument, Petitioners characterize the
Administrator's position as "an example of ad hoc rule making by
the Agency." Petitioners' reply, p. 2. Further, the Petitioners
argue that the UDAG funds were "earmarked exclusively for use of
capital equipment acquisition . . . and kept segregated from the
remaining funds which were to be used for construction of the
project." Petition, p. 2.
Finally, the Administrator argue that the Petitioners'
challenge (dated March 24, 1986) to the correctness of Wage
Determination No. OK85-4051 was untimely, having occurred after the
start of construction on March 17, 1986. Petitioners respond that
their challenge was not untimely, given their contentions that a
challenge was not possible until after HUD had given "final
approval of the UDAG grant" and that the "final approval was held
up and delayed until such time as construction work had already
begun on the project." Petition, p. 2. [8]
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[9] III. DISCUSSION
A. COVERAGE UNDER THE TERMS OF SECTION
110 OF THE HOUSING AND COMMUNITY
DEVELOPMENT ACT OF 1974
Our analysis of the applicability of the prevailing wage
requirements of the Davis-Bacon Act to construction of the Chandler
dairy products manufacturing plant begins with an examination of
the terms of the relevant statutory provision, Section 110 of the
H[CD]A. As noted earlier, the HCDA authorizes HUD to grant funds
under the UDAG program. Section 110 of the HCDA addresses the
application of Davis-Bacon requirements to projects, such as the
Chandler dairy plant, that are financed with the assistance of UDAG
funds. Section 110 provides:
All laborers and mechanics employed by contractors or
subcontractors in the performance of [*] construction work
financed in whole or in part with assistance received under
this chapter [*] shall be paid wages at rates not less than
those prevailing on similar construction in the locality as
determined by the Secretary of Labor in accordance with the
Davis-Bacon Act, as amended (40 U.S.C. 276a-276-a-5).
[*Emphasis supplied.*]
The Administrator concluded that the Chandler dairy plant
project involves "construction work financed . . . in part" by UDAG
funds and, accordingly, that construction of the plant is subject
to Davis-Bacon requirements. Our review of the record likewise
leads us to conclude that the Chandler dairy plant project is
subject to Davis-Bacon prevailing wage requirements by operation of
Section 110 of the HCDA.
The record shows that the City of Chandler applied for a UDAG
grant to assist in the financing of a dairy products manufacturing
[9]
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[10] plant. Total estimated cost of the project was
$16,920,000, including $7,258,000 for construction of the building
structure and $6,006,000 for purchase and installation of
equipment. The total estimated cost of the 14 major equipment
items was $5,700,000. The developer's estimated budget for the
project listed the labor cost for installation of the equipment as
$1,047,000, and stated that the installation of equipment would be
performed by workers classified as ironworkers, pipefitters,
millwrights and electricians. The purchase price of four pieces of
equipment, according to petitioners' statements in the record,
included the cost of labor for their installation. The total labor
costs for installation of these four items is listed as $355,000
(Record JJ).
An agreement committing $2,750,000 in UDAG funds was executed
by HUD on November 18, 1985 and accepted by Chandler on December
30, 1985. Chandler, on January 7, 1986, applied for HUD approval
of some proposed amendments to the grant agreement, including a
proposal to the effect that the UDAG funds would be used only for
"acquisition and installation" of equipment (emphasis supplied)
(Record GG, Exhibit E). HUD, on March 25, 1986, approved an
amendment providing that the $2,750,000 in UDAG funds were to be
utilized for "partial financing of the equipment for the Project."
(Record C). Subsequently, by letter dated March 28, 1986, HUD
notified Chandler that "the grant agreement is in the process of
being amended to transfer the use of UDAG funds from construction
of the building to [*] purchase and installation of equipment.
This [10]
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[11] amendment will not change Davis-Bacon wage rate
requirements." [*] (Record E; [* emphasis supplied. *])
These facts lead ineluctably to the conclusion that the dairy
plant project involves "construction work" -- namely, the work
involved in installation of equipment in the plant -- financed with
the assistance of UDAG funds. The amount of work involved in
installing equipment in the dairy processing plant is substantial
-- the total labor cost is estimated at more than $1 million, and
involves work performed by ironworkers, pipefitters, millwrights
and electricians. Furthermore, the purchase price of four
equipment items included the cost of installation estimated at
$355,000; thus, installation of these four items alone involves a
substantial amount of work. In addition, the grant agreement was
amended in light of a Chandler request that references use of UDAG
funds for acquisition and installation of equipment, and the
amended grant agreement, which refers to use of UDAG funds for
"partial financing of the equipment" does not limit the use of UDAG
funds to equipment acquisition. Indeed, HUD's expressed
understanding of the amended agreement in its March 28, 1986 notice
to Chandler is that the amended grant agreement encompasses
purchase and installation of equipment.
In view of all these circumstances -- the substantial amount
of work involved in installation of the equipment, the inclusion of
the cost of installation in the purchase price of four equipment
items, the terms of Chandler's request for amendment of the grant
agreement, the language of the amended grant agreement, and HUD's
[11]
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[12] clearly expressed understanding of the effect of the
amended agreement -- the dairy processing plant project involves
"construction work financed . . . in part" by UDAG funds, and is
subject to Davis-Bacon requirements by operation of Section 110 of
the HCDA.
Petitioners contend that the UDAG funds were somehow
"earmarked" exclusively for capital equipment acquisition.
However, the record is simply devoid of any documentation to
support the claim that the UDAG funds were "earmarked" for use in
the purchase of equipment, and not for equipment installation.
Indeed, as discussed above, Chandler's request for amendment of the
grant agreement refers to use of funds for purchase and
installation of equipment, the terms of the amended agreement do
not limit the use of funds to equipment acquisition, and the
contracting agency's understanding is that the amended agreement
provides funds for purchase and installation of equipment. The
Board agrees with the Administrator that "[w]here the terms of the
grant permit the use of grant funds for construction work (here,
the installation of purchased equipment), any subsequent arbitrary
and unilateral action of the grantee or developer in 'earmarking'
the UDAG funds will not be recognized as defeating Davis-Bacon
coverage of construction of the project." (FOOTNOTE 7) [12]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
(FOOTNOTE 7) Given that the grant agreement permits the use of UDAG funds
for both purchase and installation of equipment, petitioners'
reliance (Petition, p. 2) on the August 6, 1987 opinion letter of
the Attorney General is misplaced. The Attorney General opined
that "Section 110 does not require the payment of prevailing wages
with respect to installation where [12] [FN7 CONTINUED ON 13]
federal funds are provided exclusively for the purchase of
equipment and not for its installation." Given the circumstances
described above, however, the dairy plant project is not a
situation "where federal funds are provided exclusively for the
purchase of equipment and not for its installation." [END FN7]
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[13] Petitioners additionally contend that the Administrator's
position is "an example of ad hoc rule making by the Agency."
(Petitioners' reply, p. 2). Petitioners have missed the point of
the Administrator's decision and of the essentially factual nature
of the Administrator's inquiry. The Administrator did not engage
in rule making at all, but simply applied the terms of Section 110
to the facts in the record to determine whether the dairy plant
project involves "construction work financed . . . in part" by UDAG
funds. Given all the surrounding factual circumstances discussed
above, the Board agrees with the Administrator that the project
does indeed involve "construction work" (FOOTNOTE 8) -- that is,
installation of equipment -- financed with the assistance of UDAG
funds. (FOOTNOTE 9) [13]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
(FOOTNOTE 8) The Davis-Bacon regulation which defines the term
"construction" explicitly includes appropriate installation of
equipment. See 29 C.F.R., Section 5.2(j).
(FOOTNOTE 9) The Administrator notes that HUD has taken the position in a
November 19, 1987 memorandum, in light of the Attorney General's
opinion letter, that:
where the purchase price of equipment, machinery or fixtures
includes their installation (i.e., the items are sold
"installed" and there is no separate charge for that
installation), Title I financing of that purchase/installation
would trigger Davis-Bacon requirements where the installation
involves more than an incidental amount of construction work.
While the Board is not bound by HUD's interpretation [13]
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[14] B. APPLICATION OF DAVIS-BACON
PREVAILING WAGE REQUIREMENTS
AS A MATTER OF CONTRACT
The Administrator also determined that wholly apart from
imposition of Davis-Bacon requirements by operation of Section 110,
"both the City and the developer contractually agreed to comply
with Davis-Bacon wage requirements in this instance." Upon
examination of the record, the Board agrees that petitioners are
contractually bound to comply with Davis-Bacon requirements. As a
starting point, we note that the grant application of the City of
Chandler included Chandler's certification that "[a]ll of the
construction work will be subject to the Davis-Bacon Act."
Furthermore, in May 1985 the developer's general partner submitted
its assurance to Chandler that Davis-Bacon compliance would be
required of all contractors and subcontractors constructing the
Plant. The amendment to the grant agreement did not remove
references to compliance with Davis-Bacon requirements. HUD's
March 28, 1986 letter, after amendment of the grant agreement,
informed petitioners that the amendment did not change the
applicability of Davis-Bacon requirements (Record E). Indeed,
HUD's letter made express reference to the fact that the grant
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
[FN9 CONTINUED ON 14] (Reorganization Plan No. 14 of 1950; 5 U.S.C.
App.), we do note that the factors cited by HUD in its memorandum
highlight the essentially factual nature of the determination as to
whether a particular project involves "construction work financed
in whole or in part" with the assistance of UDAG funds, thus
triggering Davis-Bacon requirements. As stated earlier, it is the
Board's view that this task requires an inquiry into all the
surrounding circumstances, as conducted by the Administrator in
this instance. [14][END FN9]
[14]
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[15] agreement "included Davis-Bacon regulations and [the
city's and the developer's] assurance of compliance." (Id.).
After being so advised, Chandler, the Chandler Industrial
Corporation and the developer entered into an agreement whereby
Chandler agreed to loan UDAG funds to the developer. The
developer, in turn, agreed to construct the plant in accordance
with the terms of the grant agreement.
In light of all these circumstances -- in particular, the
assurances in the grant documents of compliance with Davis-Bacon
requirements, and the acceptance of UDAG funds after being notified
by HUD that the amended grant agreement did not change the
applicability of Davis-Bacon requirements -- we agree that
petitioners are obligated as a matter of contract to comply with
Davis-Bacon requirements in connection with the dairy plant
project. Woodside Village v. Secretary of United States Department
of Labor, 611 F.2d 312 (9th Cir. 1980); Arbor Hill Rehabilitation
Project, WAB Case No. 87-4 (November 3, 1987).
C. THE UNTIMELINESS OF PETITIONERS'
CHALLENGE TO THE WAGE DETERMINATION
The final issue presented to the Board in this matter is
whether Petitioners' request for reconsideration of the wage rates
contained in Wage Determination No. OK85-4051 was untimely. The
record establishes and the Petitioners have not disputed that the
challenge dated March 26, 1986 (Record D) was untimely under the
applicable Department of Labor regulations at 29 C.F.R, Section
1.6(c)(3). The Plant construction commenced more than one week
[15]
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[16] prior to petitioners' submission of the request for
reconsideration. Petitioners do not dispute the fact that
construction of the Plant commenced on March 17, 1986 with "dirt
work", in preparation for the building of the Plant structure and
the installation of the equipment to follow (Record K). However,
Petitioners argue that their untimeliness should be overlooked
because the delay was not their of their doing, but rather, was
occasioned by HUD's purported delay in processing the amendments
which Petitioners had requested. The Board concludes that,
irrespective of whose "fault" occasioned the lateness of the March
24, 1986 challenge before the Administrator, the ultimate
responsibility for the untimeliness lies with Petitioners. (FOOTNOTE 10)
The Board is not persuaded that any "delay" on HUD's part as
to approval of the UDAG amendments mitigates the Petitioners' own
failure to challenge the substantive correctness of the applicable
wage determination. The private parties to the present UDAG
agreement had given their assurances that Davis-Bacon rates would
be paid in the construction of the Plant as early as May 24, 1985
(Record A). Moreover, HUD specifically informed Chandler on June
21, 1985 that the Davis-Bacon provisions would be applicable to the
construction of the Plant in this case (Record R). The record is
[16]
ÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ
(FOOTNOTE 10) The Board notes that, although HUD took more than three
months to approve the UDAG amendments, the record does not support
a finding that the delay in filing a challenge before the
Administrator was occasioned by HUD. The Petitioners clearly could
have filed their request for reconsideration of Wage Determination
No. OK85-4051 with the office of the Administrator regardless of
whether HUD had or had not approved the January 7, 1986 requested
amendments by the time construction had commenced on the
Plant. [16]
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[17] clear that the applicable wage determination was provided to
Chandler in a timely manner on December 4, 1985 (Record D). This
was more than three weeks prior to Chandler's acceptance of the
UDAG commitment of funds for the Plant on December 30, 1985.
Further, although the contract for construction was signed by
the respective parties on December 31, 1985, no construction was
performed on the Plant project until March 17, 1986. Thus,
Chandler and the other Petitioners in this matter had full notice
of the specific Davis-Bacon rates required to be paid in
constructing the Plant more than three months before the
commencement of construction activity. A timely challenge to the
prevailing wages listed in Wage Determination No. OK85-4051 could
therefore have been taken to the Administrator at any point during
this period of more than three months, regardless of HUD's
processing of the amendments to the original UDAG agreement. In
this respect, the controlling regulation is explicit that a
challenge could have been taken at any time after December 4, 1985
when the applicable wage determination was sent to Chandler, but
before the start of construction. 29 C.F.R., Section 1.6(c)(3).
It is well-established that the individual contracting
agencies are charged with an initial determination of Davis-Bacon
applicabil[i]ty. See Reorganization Plan No. 14 of 1950 (64 Stat.
1267; 5 U.S.C. App.). In this case, HUD clearly and repeatedly
informed Petitioners that Davis-Bacon labor standards would apply
to this grant. It is, in any event, also well-established that the
final determination of such matters is that of the Secretary of
[17]
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[18] Labor alone. North Georgia Bldg. & Const. Trades v.
Goldschmidt, 621 F.2d 697, 701-02 (5th Cir. 1980); Arbor Hill
Rehabilitation Project, supra.
The Board acknowledges the fact that the Department's
regulations regarding the timeliness of wage determination
challenges are strict. Nevertheless, the principle that challenges
to wage determinations must be made in a timely fashion is well-
founded, being both reasonable and indispensable to the even-handed
enforcement of the Davis-Bacon and related Acts.
The Board has consistently ruled that in order for a challenge
to be considered timely, it is a prerequisite that such action be
taken prior to contract award, or the start of construction where
there is no contract award. In the absence of such a timeliness
rule, one of the basic purposes of the Davis-Bacon and Related Acts
would be rendered meaningless. This was previously emphasized by
the Board when it stated:
One of the purposes of the Davis-Bacon Act
is to protect laborers and mechanics by
assuring that contractors know in advance
of bidding what their approximate labor
costs would be. Universities Research
Association v. Coutu, 450 U.S. 754, 776
(1981). The wage determination process
generally removes wages as a method of
cutting the contract price to obtain a
contract and places bidders on a relatively
even competitive footing regarding wages
paid by placing a floor thereunder.
M.A. Mortenson Company, WAB Case No. 87-50 (February 17, 1989), at
p. 6.
It is vital to ensure that contractors competing for
federally-assisted construction contracts know their required labor
[18]
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[19] costs in advance of bidding. Manifest injustice to
bidders would result if the successful bidder on a project could
challenge his contract's wage determination rates after all other
competitors were excluded from participation.
The timeliness requirements are among the Board's longest-
standing precedents concerning challenges to wage determinations
and the Board has consistently endorsed the restriction against
challenges which are untimely. Gananda Development Corporation,
WAB Case Nos. 73-13 and 73-14 (May 14, 1977); Jordan & Nobles
Construction Company, WAB Case No. 81-18 (August 19, 1983); Kapetan
Incorporated, WAB Case No. 87-33 (September 2, 1988); M.A.
Mortenson, supra at 6-7.
The Department of Labor has promulgated regulations which
mandate timely challenges. In this regard, the provisions at 29
C.F.R., Section 1.6(c)(3)(1983) have codified the Board's rulings
regarding the requirement for timeliness. Specifically, this
regulation, in pertinent part, mandates that:
All actions modifying a general wage
determination shall be effective with
respect to any project to which the
determination applies, [*] if published
before contract award ( or the start
of construction where there is no contract
award) [*] except as follows: [The
regulations proceed, listing certain
exceptions and specifications which
are not applicable here.]
(vi) Modification or supersedeas wage
determinations to an applicable general
wage determination published after contract
award [*] (or after the beginning of [19]
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[20] construction where there is no contract
award) shall not be effective. [*]
Id.; [*] emphasis supplied [*].
In this case, Petitioners were clearly bound to meet the
standard of timeliness in 29 C.F.R., Section 1.6(c)(3).
Accordingly, the Board affirms the Administrator's ruling that
Petitioners challenge to Wage Determination No. OK85-4051 was
untimely.
The decision of the Wage and Hour Administrator in her letter
of June 13, l988 is affirmed. The petition is dismissed.
- - -
Opinion of Member Rothman
The Administrator's final ruling, contained in her letter to
Petitioners dated June 13, l988 states: "A review of these facts
leads us to conclude that the project involves 'construction work
financed . . . in part by UDAG funds and therefore construction of
the dairy processing plant is covered by the Davis-Bacon labor
standards provisions of the Housing and Community Development Act."
Also, "The UDAG grant agreement authorized the use of UDAG funds
for partial financing of equipment, without specifying purchase or
installation."
As discussed above, the contract price included the cost of
installation for some of this equipment. Where the terms of the
grant permit the use of grant funds for construction work (here,
the installation of purchased equipment), any subsequent arbitrary
and unilateral action by the grantee or developer in 'earmarking'
the UDAG funds solely for equipment purchase will not be recognized
[20]
~21
[21] to defeat Davis-Bacon coverage of construction of the
project.
Equally, if not more importantly, the Administrator's letter
of June 13, l988 states, "Moreover, both the City and the developer
contractually agreed to comply with Davis-Bacon wage requirements
in this instance", and further ". . . in doing so, the developer
agreed to construct the dairy processing plant in accordance with
the terms of the grant agreement, which explicitly required
compliance with the Davis-Bacon prevailing wage requirements for
'all of the construction work.'" HUD had advised the city, the
developer, and the contractor that Davis-Bacon requirements had not
changed by its amendment that the $2,750,000 grant was to be used
for equipment purchase.
A UDAG grant in a particular case may be exclusively earmarked
for equipment purchases only and where that is the clear
unequivocal intent and purpose expressed in advance, such exclusive
earmarking would not make the construction of the project subject
to the Davis-Bacon Act. The Board in this case, however, concludes
that in view of the parties' agreement that the Davis-Bacon Act
will be applicable to all construction, it was not the intent of
HUD at the time the grant was made or of the grantee in accepting
the grant to drop a curtain between the use of the granted monies
for equipment purchases as distinguished from construction. The
express requirement was never changed by HUD in this case. The
Administrator points to the factor that certain of the equipment
purchased included on-site installation by the vendor. This
bolsters the Administrator's position, but that is not the main
[21]
~22
[22] point upon which the decision of the Administrator is
affirmed. In the case in which HUD makes a deal with the grantee
exclusively dedicating granted funds for equipment procurement
only, such determination must be made clearly and unequivocally by
HUD before construction begins and must be expressed as a term and
condition of the grant. I believe it will be the rare case where
such a clear cut determination would be made. It must be clear cut
however to offer guidance that HUD and the Administrator can follow
in the administration of the Davis-Bacon Act.
Unless it can be said without equivocation that HUD entered
into the loan arrangement with its eyes wide open that the grantee
did not intend to comply with the Davis-Bacon Act for construction
but was seeking funds solely for equipment purchases, the
Administrator is not in a position to conclude that the Davis-Bacon
Act is not applicable.
Once UDAG funds are committed to the grantee on the basis that
the grantee has agreed that the construction work will be subject
to the Davis-Bacon Act in whole or in part, the grantee cannot
thereafter reallocate funds in such a way as to result in removal
of the construction of the project from Davis-Bacon coverage.
HUD and the grantee/developers made the initial deals to get
the UDAG grant based on a project subject to Davis-Bacon Act
coverage. It effectuates the public purposes of the Davis-Bacon
Act that the deal be lived up to. HUD's suggestion that the Davis-
Bacon Related Acts (DBRA) requirements be put aside in this case
are unpersuasive in view of the repeated HUD admonitions to the
[22]
~23
[23] grantees that the DBRA requirements would apply to the
construction.
The Petitioners contend that the Davis-Bacon wage
predetermination schedules were much higher than the actual
prevailing wages in the locality. Petitioners present no specific
survey data that this was the case, but under the circumstances of
this case, such contention, supported by a survey or not, is
inappropriate. An attack upon the accuracy of particular
classifications in a wage schedule is something that must be done
in connection with the award of the construction contract.
In the case in which an award is not made on a competitive bid
basis, but is the subject of negotiation, as it is in a number of
DBRA programs, the attack upon the published Davis-Bacon
predetermined wage schedules should be brought to the attention of
the Department of Labor as a part of the ongoing negotiations with
respect to the particular funding. Here the Board upon the review
of the record is satisfied that the grantees were aware of the
Davis-Bacon Act requirements in such negotiations and agreed to
their application in the construction of the project.
The contention of the Petitioners that the grant agreements
were entered into with HUD on an understanding that maybe the
Davis-Bacon wage schedule would apply and maybe it would not, and
that that was something that remained to be seen or worked out, is
not a permissible basis upon which a government agency making loans
or grants can predicate the giving of federal funds by loan or
grant and expect the government agency or the Administrator to be
[23]
~24
[24] able to make the necessary Davis-Bacon decisions. Suffice
it to say that my examination of the record in this case convinces
me that HUD did not do so in this case.
Petitioners claim there has been a procedural lack of due
process in violation of the Administrative Procedures Act. The
Administrator contends that the petition was not timely filed. I
reject both contentions. The Wage Appeals Board should cut through
the procedural arguments on both sides and resolve the issue in
this case on whether the Administrator in considering its merits
reached the correct decision.
The Board's decision in Muskogee Shopping Mall, WAB 85-26, and
the dissent therein are not apropos this case, nor is the majority
view in Arbor Hill Rehabilitation Project, supra, pertinent here.
- - -
BY ORDER OF THE BOARD:
__________________________
GERALD F. KRIZAN, ESQ., Executive Secretary
Wage Appeals Board [24]
