M.A. MORTENSON CO., WAB No. 87-50 (WAB Feb. 17, 1989)
[1] WAGE APPEALS BOARD
UNITED STATES DEPARTMENT OF LABOR
WASHINGTON, D.C.
In the Matter of
M.A. MORTENSON COMPANY WAB Case No. 87-50
Veterans Administration Replacement
Hospital, Minneapolis, Minnesota
Contract No. V 101C-1366 Dated: February 17,1989
BEFORE: Jackson M. Andrews, Chairman, Thomas X. Dunn, Member and
Stuart Rothman, Member /FN1/
DECISION OF THE WAGE APPEALS BOARD
This case is before the Wage Appeals Board on the petition of
M.A. Mortenson Company (hereinafter Mortenson or Petitioner)
seeking review of a final decision of the Administrator, Wage and
Hour Division, of the U.S. Department of Labor. The Administrator
in her decision dated September 28, 1987, refused to approve
additional classifications and wage rates for final cleanup work in
connection with construction of a Replacement Hospital for the
Veterans Administration in Minneapolis, Minnesota.
Petitioner was awarded a contract by the Veterans
Administration for construction of an energy center and maintenance
building and finishing of a hospital building at the Replacement
Medical Center on September 28, 1984. In the fall of 1986,
Mortenson subcontracted the final cleanup work [1]
/FN1/ Member Rothman did not participate in the decision. [1]
[2] on the project to a firm employing union cleaner laborers.
In the time period between the contract award on September 28, 1984
and the time when Mortenson subcontracted the cleanup work, the
Laborers' District Council of Minnesota and North Dakota Cleaning
Services Agreement was negotiated between the union and contractors
performing this type of work. Mortenson's subcontractor for final
cleanup work (Maintenance Experts, Inc.) became a signatory to this
agreement on November 14, 1986. It is this agreement which
provides wages rates in three categories of cleanup workers
as follows:
Basic Hourly Rate Fringe Benefit
Cleaner I $5.50 None
Cleaner II 7.50 $1.30
Foreman 8.50 1.30
Mortenson requested the Wage and Hour Division to add these
classifications and wage rates by the additional classification
procedures to the wage determination for the VA hospital project.
The Administrator's authority to approve additional
classifications and wage rates is contained in Regulations, 29 CFR
Sec. 5.5(a)(1)(ii)(A) which provides as follows:
(ii)(A) The contracting officer shall require that any
class of laborers and mechanics which is not listed in
the wage determination and which is to be employed under
the contract shall be classified in conformance with the
wage determination. The contracting officer shall
approve an additional classification and wage rate and
fringe [2][3] benefit therefor only when the following
criteria have been met: (1) The work to be performed by
the classification requested is not performed by a
classification in the wage determination; and (2) The
classification is utilized in the area by the
construction industry; and (3) The proposed wage rate,
including any bona fide fringe benefits, bears a
reasonable relationship to the wage rates contained in
the wage determination.
Both the Petitioner and Wage and Hour agree that at the time
the contract was awarded in September, 1984, final cleanup work was
performed by laborers, class 1, a classification included in the
applicable wage determination. The wage rate for this
classification is $14.00 per hour plus $2.60 for fringe benefits.
The Administrator's denial of Petitioner's request for the
addition of the cleaner classification is based upon the fact that
a classification which performs the work in question is already
included in the original wage determination applicable to the
project, and as provided by the Regulation quoted above, the
Administrator considers that this fact precludes her from approving
the classifications and wage rates the Petitioner requested.
The Board considered this appeal on the basis of the Petition
for Review and Reply Brief filed on behalf of the Petitioner and
the Statement on behalf of the Administrator and the record of the
appeal before the Wage and Hour Division filed with the Board by
the Solicitor of Labor. The parties to this appeal did not request
an oral argument [3][4] before the Board.
It appears to the Board that there are two issues in this
appeal. The first is whether the Administrator correctly applied
the regulation which sets forth the three criteria which must be
met for additional conforming classifications, wage rates and
fringe benefits to be added to a wage determination pursuant to
which a construction project has been bid and awarded. The second
is whether the uniqueness of this fact situation demands a
different application of those criteria in order to avoid an unjust
result.
All three criteria required by 29 CFR Sec. 5.5(a)(1)(ii)(A)
must be met in order for new conforming classifications to be
approved. The Administrator argues that the request for conforming
classifications herein fails to meet the first criteria: that the
work to be performed by the new classifications (Cleaner I, Cleaner
II and Foreman) is no longer performed by laborers, class 1 as
provided in the original wage determination. While the Board
recognizes that a wholly new collective bargaining agreement,
entered into two years subsequent to the start of construction on
this contract, has changed the prevailing wage rate for this type
of work, and that this change should be reflected in current wage
determinations for this area, the Board is not persuaded that the
Administrator's position that unskilled [4][5] laborers, as
provided under the original determination, still perform such work,
is unreasonable.
As to the second criteria that the classification is utilized
in the area by the construction industry, there is no dispute that
the new classifications became the area practice as of the date of
subcontracting of the final cleanup work (July, 1986) - nor is
there dispute that "Prior to the summer of 1986, local cleaning
subcontractors used either union unskilled or general laborer or
nonunion laborers to perform final cleanup work" /FN2/ - the
laborer, class 1 classification and rate in the original wage
determination. However, the new classifications were not in use
when this contract was bid, awarded, and the work was done. See
Petition of Jack Picoult, WAB 68-09 (December 19, 1968) and
Determination of the Wage Rates Applicable to the Dredging
Subcontract for Interstate Highway Project I-95-1(14) 84, WAB 69-03
(June 20, 1969).
The third criteria is that the proposed wage rate must bear a
"reasonable relationship" to the wage rates contained in the
original wage determination. The proposed new wage rates range
from 33% (for Cleaner I) of the rate for laborer, class 1 in the
original determination, 53% (for Cleaner II), to 59% (for Foreman).
The Board holds that wages which range from 1/3 to 3/5 of the
original prevailing rate for the work, [5]
/FN2/ M.A. Mortenson's Vice President, Ralph M. McCoy affidavit,
p. 3. [5]
[6] do not bear such a clearly reasonable relationship to those
in the determination under which the contract was bid to compel
their approval and inclusion for use on this construction project.
Thus the request for new classifications and wage rates fails to
meet any of the three criteria, where for approval all three
criteria must be met.
The second issue before the Board is the question of whether,
because of the unique situation herein, a different application of
the criteria of Sec. 5.5(a)(1)(ii)(A), should be invoked in the
public interest, the interest of fairness, or to avoid an unjust
result.
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.
It would be inconsistent with that purpose to reverse the
Administrator and thereby give the Petitioner a post-facto
advantage over all others who bid this job, and this would be
neither just, nor in the public interest. Requiring reductions of
up to 66% in wage rates for one bidder who is a signatory to such
subsequent collective bargaining agreement [6][7] long after the
bid was awarded, would give unfair competitive advantage to that
contractor over all other bidders who based their bids upon the
wage determination included as part of the original bid process.
Petitioner argues that because it acts in good faith pursuant
to a new collective bargaining agreement which has become the
prevailing practice in the area, equity demands that the new
classifications and rates be accepted in order to resolve
Petitioner's "dilemma". Assuming arguendo the exact fact
situation, only where the new wage rates had tripled, application
of Petitioner['] argument would require this Board to mandate new
rates far in excess of those required under the original contract.
It is well understood that wage determinations included in bid
documents are not guarantees that contractors can obtain labor at
those rates (See U.S. v. Binghampton, 347 U.S. 171 at 178 (1954).
But, for the Department of Labor [*] to require [*] a contractor to
pay such newly negotiated rates as part of his contractual
obligation to the government when adequate labor may be otherwise
contractually and legally available to him at or near the
originally predetermined contract rate, would neither resolve the
Petitioner's dilemma, nor yield a fair result. [*Emphasis in
original*] It would instead create a situation in which the
Petitioner would be hostage to future changes in collectively
bargained wage agreements, whether or not the Petitioner was bound
by any such agreement, and without any relation to [7][8] whether
other qualified labor was available, or to whether the new rates
bore any "reasonable relationship" to rates in the original
determination. Such a result would reintroduce labor costs as a
primary element of the competition for Government work, a result
clearly violating the intention of the Davis-Bacon and related
Acts. It would further subject every contractor to financial risks
far less certain than the normal fluctuations in the cost of wages
in the market for construction work. Such a result would not be
consistent with forty-seven years of the administration of
Davis-Bacon, nor produce either equity or fairness.
The Wage Appeals Board therefore affirms the decision of the
Administrator, and dismisses the petition herein.
BY ORDER OF THE BOARD
Craig Bulger, Esquire, Executive Secretary
Wage Appeals Board [8]
