ICA CONSTRUCTION CORP., WAB No. 91-31 WAB Dec. 30, 1991)
[1] WAGE APPEALS BOARD
UNITED STATES DEPARTMENT OF LABOR
WASHINGTON, D. C.
In the Matter of:
ICA CONSTRUCTION WAB Case No. 91-31
CORPORATION and
TROPICAL VILLAGE, INC.
With respect to Wage Determination No. FL90-28, Modification
No. 1, published October 12, 1990, and its application to the
Tropical Village Project, Miami, Dade County, Florida
BEFORE: Charles E. Shearer, Jr., Chairman
Ruth E. Peters, Member
Stuart Rothman, Senior Member
APPEARANCES: Robert T. Kofman, Esquire and Richard I. Manas,
Esquire for Petitioners ICA Construction Corporation
and Tropical Village, Inc.
Wendy B. Bader, Esquire and Douglas J. Davidson,
Esquire for the Acting Administrator, Wage and Hour
Division
Terry R. Yellig, Esquire for the Building and
Construction Trades Department, AFL-CIO
DATED: December 30, 1991
DECISION AND ORDER
This matter is before the Wage Appeals Board on the petition
of ICA Construction Corporation ("ICA") and Tropical Village, Inc.,
seeking review of the Acting Administrator's ruling of August 20,
1991 applying Wage Determination No. FL90-28, including
Modification 1, to the Tropical Village project. An oral argument
was held on November 20, 1991. For the reasons stated below, the
ruling of the Acting Administrator is affirmed. [1]
[2] I. BACKGROUND
The Tropical Village project involves the construction of a
multifamily residence in Dade County, Florida. The financing of
the project was underwritten pursuant to a co-insurance agreement
between American Capital Resource ("ACR") and the U. S. Department
of Housing and Urban Development ("HUD") under provisions of
Section 221(d)(4) of the U. S. Housing Act, 12 U.S.C. [sec] 1715l,
pursuant to Section 244 of the National Housing Act, 12 U.S.C.
[sec] 1715z-9. Both of these statutes are Davis-Bacon related
statutes which contain Davis-Bacon labor standards provisions. 12
U.S.C. [sec] 1715c. HUD performed the required market analysis of
the project and granted a conditional market approval of the
project.
On December 22, 1989 ACR requested that the Labor Relations
Division of HUD obtain a prevailing wage determination for the
project. By letter dated January 29, 1990, HUD responded that
General Wage Decision No. FL90-28, issued for residential
construction in Dade County, Florida, applied to the project. ACR
then informed Tropical Village by letter dated February 6, 1990,
that Wage Decision No. FL90-28 applied to the project and forwarded
a copy of the wage determination and of the Supplementary
Conditions of the contract, which included the Davis-Bacon Labor
Standards provisions.
On October 12, 1990, the Department of Labor published
Modification 1 to Wage Decision No. FL90-28. By letter dated
October 24, 1990, HUD forwarded Modification 1 to ACR. ACR then
informed Tropical Village, by letter dated November 2, 1990, that
the "General Contractor will be obligated to utilize" the rates
contained in the modified wage determination.
On December 19, 1990, ICA entered into the construction
contract with Tropical Village Associates, Ltd. to build the
Tropical Village project. Also on December 19, Tropical Village
signed a mortgage note, agreeing to the terms of its loan from ACR.
The following day, HUD initially endorsed the mortgage note and
construction on the project began.
On February 1, 1991, Alfonso Espeleta, President of Tropical
Village, Inc., informed ACR that it disagreed with the
determination that Modification 1 to the Wage Decision applied to
the Tropical Village project and requested that ACR protest the
application of the modification.
On May 9, 1991, the Tropical Village Apartments, Ltd. sought
a determination that its Tropical Village project is subject to
Wage Determination FL90-28, published February 5, 1990, or in the
alternative, that the October 12, 1990 revisions to Wage
Determination FL90-28 do not apply to the project and cannot be
enforced because they were not adopted in accordance with
applicable [2][3] procedures and do not accurately reflect the
prevailing wage rates paid for the enumerated trades in Dade
County, Florida.
On August 20, 1991 Acting Administrator John R. Fraser
issued a ruling in which he reaffirmed that the modified wage
determination applied to the Tropical Village project. That is,
the Acting Administrator determined that the October 12, 1990
Modification 1 to Wage Decision No. 90-28 was applicable to the
project. He stated that pursuant to 29 C.F.R. 1.6(c)(3)(ii), a
wage determination shall be effective with respect to projects
assisted under the National Housing Act " `if notice of such
modification is published prior to the beginning of construction or
the date the mortgage is initially endorsed, whichever occurs
first.' " In this case, the Acting Administrator added,
Modification No. 1 was published on October 12, 1990; initial
endorsement for the Tropical Village project occurred on December
19, 1990; and construction began on December 20, 1990.
Accordingly, the Acting Administrator concluded, "[A]pplication of
Modification No. 1 to the project was clearly required."
The Acting Administrator also addressed the issue of
timeliness. He noted that HUD transmitted Modification No. 1 to
ACR on October 24, 1990, and that no one requested modification or
reconsideration of Modification No. 1 prior to initial endorsement
on December 19, 1990 or the beginning of construction on December
20, 1990. Pursuant to settled principles, the Acting Administrator
stated, a challenge to a wage determination must be made before
contract award or the beginning of construction. Here, he added,
there was no contract award as such, and construction began on
December 20, 1990. Therefore, he concluded, modifications to the
wage determination published after December 20 would not be
applicable to the project in question, and an appeal of the wage
determination after that date is not timely.
Finally, the Acting Administrator addressed the assertions
that Modification No. 1 does not accurately reflect the prevailing
wages for residential construction in Dade County, that the wage
schedule in Modification No. 1 was based on insufficient data, and
that wage data from the Miami Jewish Home was not properly used in
determining the rates set forth in Modification No. 1. The Acting
Administrator determined that payment data from work on an office
building that was part of the Miami Jewish Home complex should not
have been included in computing the electrician rate in
Modification No. 1. He stated that the current wage determination
for residential construction in Dade County would be modified to
contain a more accurate determination of the prevailing wage for
electricians, for application to future projects in the county.
The Acting Administrator further stated that the only legal basis
for applying a rate change retroactively is 29 C.F.R. 1.6(f), which
provides for correcting inadvertent clerical errors in wage
determinations. However, he added, that provision does not apply
here, because "[t]he error in this instance was based on incomplete
[3][4] information as to the multiple services provided by the
Jewish Home complex, not a clerical error in computing or listing
the wage rate."
II. DISCUSSION
A. Applicability of the modified wage determination to the
Tropical Village project
As noted by the Acting Administrator in his decision in this
matter, the procedures for wage determinations applicable to
projects financed under the National Housing Act are set forth at
29 C.F.R. 1.6(c)(3)(ii). The regulation provides:
In the case of projects assisted under the National
Housing Act, a modification shall be effective if notice
of such modification is published prior to the beginning
of construction or the date the mortgage is initially
endorsed, whichever occurs first.
Examination of the relevant events in this case makes it clear that
Modification No. 1 to Wage Decision No. FL90-28 is applicable to
the Tropical Village project pursuant to the terms of 29 C.F.R.
1.6(c)(3)(ii). Modification No. 1 was published on October 12,
1990. The Acting Administrator noted that the project mortgage was
initially endorsed on December 19, 1990, /FN1/ and construction
began on December 20, 1990. Thus, Modification No. 1 was published
before both the initial endorsement and the beginning of
construction and, pursuant to the terms of the regulation, is
applicable to the Tropical Village project.
Petitioners, however, contend that they were in some way
penalized because HUD delayed in approving the co-insurance loan
until December 1990 when modified rates for electricians were
designated, yet Petitioners were prepared to sign the agreement in
April 1990, when the original rates -- published in January 1990 --
were applicable.
Petitioners' contention that they were, in some manner,
penalized because all of the requirements were not in place when
Petitioners were prepared to sign is without merit. A mere review
of the time frame and sequence of events leading up to the
execution of the agreement in December 1990 shows there was ample
time to register a complaint about the modifications which were
issued in [4]
/FN1/ Counsel for the Acting Administrator clarified before the
Board that although Tropical Village signed the mortgage note on
December 19, 1990, HUD did not sign until December 20. However,
this one-day difference in date of initial endorsement does not
affect the outcome in this case. [4]
[5] October 1990. Petitioners chose to ignore the modification
and, in fact, entered into the agreement and began construction
knowing full well that Modification No. 1 was in effect.
The project was a Davis-Bacon Related Act project, a fact of
which Petitioners were well aware. Furthermore, Petitioners
acknowledged that they were provided with a copy of Modification
No. 1, but claimed that they did not realize the new rates would be
applicable to the Tropical Village project. But Petitioners also
acknowledged that "At that time, Tropical and ICA vigorously
disputed the applicability to the new wage determination and stated
that it would be appealed." In spite of this "warning" Petitioners
executed the agreement, began construction work and only after
nearly two months did they follow up on their "warning."
Petitioners assert that they were somehow "obligated" to sign
the closing documents because of the possibility of losing millions
of dollars. While Petitioners might well have felt "obligated" to
sign the documents, this "obligation" was one of their own choice.
At the time of the execution of the documents a business decision
had to be made. That decision was basically whether going ahead
with the project, with full knowledge that Modification No. 1 was
in effect, would yield them far greater returns than would their
walking away from the project. It was Petitioners' business
decision to go forward, and only after having the project underway
did they decide that they would pursue other options. The Board
will not second guess the business decision made by Petitioners,
but the Board is not convinced that Petitioners were somehow
"victimized" by the decision they chose to make.
Petitioners also seem to fault HUD for following a new
procedure. However, if Petitioners were going to benefit from the
HUD program, they were obligated to rely on and follow not old
procedures, but the procedures in effect at the time negotiations
were going on.
Petitioners also suggest both that the Secretary's
regulations do not adequately address the HUD co-insurance program,
and that there is an inconsistency between the Secretary's
regulations and the relevant statute -- 12 U.S.C. [sec] 1715c.
Contrary to Petitioners' assertion, however, the Secretary's
Davis-Bacon regulations expressly apply to matters arising under
the Related Acts, including the National Housing Act (see 29 C.F.R.
1.1; App. A to 29 C.F.R. Part 1). Furthermore, the regulations
regarding wage determinations explicitly set forth the procedures
to be followed regarding projects, such as the Tropical Village
project, funded under the National Housing Act. See 29 C.F.R.
1.6(c)(2)(B); 1.6(c)(3)(ii); 1.6(e); 1.6(g). The regulations,
being clear and explicit, are also a prerequisite upon which the
applicant/developer submits its loan or grant request. As for the
contention that there is a fatal inconsistency [5][6] between the
Secretary's regulations and the applicable statutory provision,
Petitioners have simply failed to demonstrate to the Board that any
such inconsistency exists.
B. The untimeliness of Petitioners' challenge to the wage
determination
The Board also agrees with the Acting Administrator that
Petitioners' challenge to the modified wage determination was
untimely. /FN2/ As the Acting Administrator stated, no one
requested modification or reconsideration of Modification No. 1
prior to initial endorsement or the start of construction.
Moreover, under settled principles established in Board precedent
and the Secretary's regulations, a challenge to a wage
determination must be made before contract award or the beginning
of construction. See e.g., Dairy Development, WAB Case No. 88-35
(Aug. 24, 1990). Thus, Petitioners' challenge to the modified wage
determination after the beginning of construction on the Tropical
Village project on December 20, 1990 was untimely.
Petitioners attempt to draw a distinction between
competitive bidding situations, where unfairness to other bidders
could result if post-award challenges to a wage determination were
allowed, and loan/grant projects, such as the Tropical Village
project in this case. However, the rationale underlying the DOL
regulations with respect to Related Acts grant and loan programs is
that, from the first day employment begins on a covered project,
the wages to be paid employees must not be less than the
predetermined prevailing wage. Thus, in characterizing the issue
as only a question of what is needed to achieve fairness between
competitive bidders, Petitioners overlook the fact that under the
purpose and express provisions of the Davis-Bacon and Related Acts,
employees are entitled to be paid the prevailing wage applicable in
the locality based on the most recent schedule as determined by the
Department of Labor before award or, in the loan/grant case, before
commitment or construction, whichever comes first.
Petitioners additionally claim that application of the modified
wage determination to the Tropical Village project violates their
due process rights under the Fifth Amendment because they were
denied an evidentiary hearing. However, the Board, as an
administrative tribunal, is not the appropriate forum for
resolution of constitutional issues. See Cleveland B. Sparrow,
Sr., WAB Case No. 86-18 (Sept. 15, 1986). In any event, it is
difficult to take seriously [6]
/FN2/ In addition to the provisions of 29 C.F.R. 1.6(c)(3)(ii),
set forth at p. 4, supra, another regulatory provision relevant to
the timeliness question is 29 C.F.R. 1.6(c)(3)(vi), which states
that ". . . a modification to an applicable general wage
determination, notice of which is published after contract award
(or after the beginning of construction where there is no contract
award) shall not be effective." [6]
[7] Petitioners' claim that they were not given the process to
which they were due when they failed to invoke, in a timely manner,
the appeal rights which were available to them under the
Secretary's regulations.
C. The adequacy of the Department of Labor's modified wage
determination
Petitioners attack the adequacy of the procedures and
methodology utilized by the Department of Labor in arriving at the
modified wage determination. Because, however, Petitioners'
challenge to the modified wage determination was untimely, those
contentions need not be addressed.
In his decision the Acting Administrator acknowledged one
error, noting that payment data from work on an office building
that was part of the Miami Jewish Home complex should not have been
used in computing the electrician wage rate in Modification No. 1.
The Acting Administrator stated that the wage determination would
be modified for application to future projects, but declined to
apply a modified electrician rate retroactively to the Tropical
Village project. The Acting Administrator reasoned that the only
basis for applying a rate change retroactively is 29 C.F.R. 1.6(d),
which provides for correction of inadvertent clerical errors.
However, he stated, the error in this matter did not involve a
clerical error in computing or listing the wage rate, but instead
was the result of incomplete information. In another set of
circumstances the Board might be tempted to examine the Acting
Administrator's interpretation of "clerical errors" as that term is
used in Section 1.6(d); but where, as here, interested parties had
ample notice and opportunity to challenge the applicable wage
determination yet failed to do so in a timely manner, the Board
cannot fault the Acting Administrator's determination that the
modified electrician rate should not be applied retroactively.
For all the foregoing reasons, the decision of the Acting
Administrator is affirmed.
Member Rothman, writing separately and concurring in the result
except as to the prevailing wage rate and benefits to be paid
electricians.
In this case the Board is called upon once again to decide
whether there is or should be for Davis-Bacon Act purposes a
distinction in principle between those cases in which construction
contractors bid on a competitive bid basis and [7][8] those cases
in which the amount of the federal financial commitment is arrived
at by noncompetitive bidding. /FN3/
ICA/Tropical Village would distinguish competitive bid cases
from cases in which a federal agency provides loans, grants or
guarantees to an applicant who is not competing for the work.
Specifically, we are concerned here with housing and urban
development programs under the National Housing Act.
ICA/Tropical Village believes that all competitive bidders must be
similarly situated with respect to estimating labor costs. No one
bidder, if successful, will be advantaged over another. But in the
loan/grant/guarantee noncompetitive bid situation under Davis-Bacon
Related Acts, no one is harmed because the sponsor/developer
submits its assistance application based upon the published
Davis-Bacon rate schedule in effect at the time the application was
initially prepared. If because of delays, the HUD commitment is
postponed into a different Davis-Bacon wage time frame, the
sponsor/developer has done nothing wrong. ICA/Tropical Village
further submits that the Department of Labor's rules and
regulations (Section 1.6) do not deal specifically with this kind
of noncompetitive loan and grant program; hence within the
regulation there is room for it to make this argument. This case
is also unique, says the Petitioner, because in a noncompetitive
bid situation the way in which co-insurers such as American Capital
Resource operated is said to have been changed by HUD contributing
to the delay.
ICA/Tropical Village further asserts that the question of
the competitive bidder vis-a-vis the noncompetitive bidder for
determining when a predetermined wage schedule takes hold in
Davis-Bacon Related Act situations is a novel question. The
question when the Davis-Bacon wage predetermined schedule becomes
applicable in loan and grant programs under the Davis-Bacon Related
Acts is as old as the Acts themselves. Contrary to the assertion
of Petitioners, the regulation, 29 C.F.R. 1.6(c)(3)(ii), is
explicit and unambiguous, the regulation being so explicitly clear
it is not the kind of question that would entangle federal agencies
administering loan, grant, and guarantee programs. The regulations
being clear are also a prerequisite upon which the
sponsor/developer submits its loan or grant request. The question
has been before the Board in Granite Builders, WAB Case No. 85-22
(Jan. 27, 1986); Kathy Court, Paradise Butte, CA, WAB Case No.
77-16 (Jan. 11, 1979); Dairy Development, Ltd., WAB Case No. 88-35
(Aug. 24, 1990). [8]
/FN3/ Not all federally funded public works of the United States
are determined through competitive bidding based on fully known in
advance plans, specifications and contract documents. There are
hybrid bidding practices with many variations. An example is the
case in which potential contractors are prequalified and the
federal contracting agency and the builder work together on design
and engineering to produce plans and specifications for the
project. [8]
[9] The Petitioners view the current wage predetermination as
only a question of what is needed to achieve fairness between
competitive bidders. Petitioner overlooks the purpose of the
Davis-Bacon Act that employees are entitled to be paid from the
first day of employment the prevailing wage applicable in the
locality based on the most recent schedule as determined by the
Department of Labor before award or, in the loan/grant case, before
commitment or construction, whichever occurs first. This rationale
is equally applicable to Federal Davis-Bacon agencies awarding
Davis-Bacon Act covered work on a competitive bid basis and for the
same reason it is applicable to Related Act cases. A bidder who
had estimated labor costs on a superseded schedule would have to
reestimate. The determination should be kept as current as it is
feasible to do so, hence, the 10-day modification rule. /FN4/
HUD approval and the closing with the coinsurer did not take
place until December 19, 1990. The coinsurer received the
Davis-Bacon modification from HUD by October 24, 1990 because the
loan application required that it be used. ICA/Tropical Village
had the October 12 modifications by November 2, 1990.
The Board cannot take into account alleged delays by a
federal loan and grant agency in processing a developer's
application. Such matters cannot be the concern of this Board.
The relationship between a coinsurer and an applicant/developer
also cannot be the concern of this Board. It should not be the
concern of the Department of Labor. Besides, there has been no
explanation in this case as to when the application here was ready
for approval.
ICA/Tropical Village did not, as required by regulation
Section 1.6(c)(3)(ii), seek review of the October 12, 1990
modification until February 1991, after construction had begun and
the coinsurer picked up from payroll data that the October 12
modification given to ICA/Tropical Village November 2, 1990 was not
being applied. The escrow of funds by ICA/Tropical Village at that
point as was the case could be relevant to whether the developer
should be placed on an ineligibility list. In my view, it should
not be. However, escrowing funds to make up the difference between
what was paid and should have been paid to employees is not
relevant to the disposition of this matter.
As part of its contention Petitioner claims it was deprived
of constitutional due process when denied an administrative hearing
after February 1991 on whether the modified rates were right or
wrong. In the case in which an employer subject to Davis-Bacon
reads the conditions of the bid or loan/grant application and
intends to comply with published wage predeterminations, such an
employer does not need to have deep knowledge of Davis-Bacon Act[9]
/FN4/ Sometimes Davis-Bacon wage predeterminations fall behind
changes in the prevailing wage structure in the locality, but that
is a different problem not at issue in this case. [9]
[10] regulations, practices and precedents. In the case of the
employer, large or small, subject to the Act, who is unwilling to
accept the terms and conditions of the bid documents or loan/grant
application, such an employer must make his challenge in accordance
with the Department of Labor's rules and regulations. Ignorance of
the Acts' requirements including the applicable DOL regulations is
not an excuse.
The DOL wage predetermination function is a part of the huge
procurement programs of the United States. It does not require an
administrative or adjudicatory hearing in every case. The wage
survey methodology is well settled and well established in the
industry. Administrative agencies do not normally resolve
constitutional claims and here also the Petitioner was not deprived
of constitutional due process when it failed to comply with the
explicit requirements of the regulations to seek review of the
survey in a timely manner.
ICA/Tropical Village makes still another contention.
Assuming the October 12 modification to be applicable, the
modification does not reflect the prevailing wage rates in the
Miami locality for residential construction four stories or less at
the time of the survey. This is specifically illustrated by one
wage predetermination. The Wage Hour Administrator acknowledged
that the electrician's wage rate was skewed because survey data
submitted by the local construction industry had included building
construction wages paid electricians on nonresidential housing.
The error was corrected but prospectively only.
The Department of Labor's rules and regulations dealing with
Davis-Bacon Act matters must by necessity establish overall guiding
rules, principles, and precepts. The Wage Appeals Board deals with
exceptional cases. In the appropriate exceptional case it may
grant relief. I would under the circumstances of this case direct
the Administrator to take a no enforcement position with respect to
wages and fringes paid to electricians on this project so long as
the rates and fringes paid were above $13.61, the corrected rate
the Administrator placed into effect on June 28, 1991. The
Administrator attributed the October 12, 1990 error of $2.19 to
"incomplete" data. But it was more than that. The determination
was seriously flawed due to the substantial inclusion of wage rates
for residential housing from a different category of work. The
wage survey evaluators did not detect the error. It was
inadvertent but nonetheless it significantly skewed the residential
housing electrician's rate. Whether it can described as a clerical
error or not, it was not a de minimis matter. The rate and fringes
provided cannot be said to have been reasonable based on the
category of work to which it applied -- residential housing. There
would have been no way under the circumstances for the petitioner
to have recognized that the Departmental error was due to including
wages paid a substantial number of building construction
electricians in the computation of a residential housing rate.
Though the ultimate challenge in this case was late, I would direct
the [10][11] Administrator to take a no enforcement position with
respect to payments to electricians above the rate of $13.61 which
was put into effect on June 28, 1991.
BY ORDER OF THE BOARD: [Members] Gerald F. Krizan, Esq., [] [11]
