In April 1998 the Bureau of Land Management issued a solicitation inviting bids for a leased facility in Phoenix, Arizona. See generally Solicitation Package, Administrative Record (AR) Tab D. BLM identified the solicitation as a 15-year lease, with a "firm" lease period of 10 years, i.e., the government could terminate the lease after the first 10 years. Id. at 13. The solicitation specified precisely the geographic boundaries of the area within Phoenix that would be acceptable to BLM, and described the size and architectural design of the project with significant, particularized detail:

(a) BLM has a requirement for approximately 19,000 square feet of rentable space.

Offers must be for space located in a quality building of sound and substantial construction . . . have potential for efficient layout, and be within a square footage range for a minimum of 18,475 to a maximum of 19,000 occupiable square feet of office and warehouse space, comprised of the following:

Office Space: A minimum of 11,975 to a maximum of 12,000 occupiable square feet.

Fire Support Space: A minimum of 1,400 to a maximum of 1,500 occupiable space.

Warehouse Space: A minimum of 5,100 to a maximum of 5,500 occupiable space.

Wareyard: 70,000 square feet.

Secured Parking Spaces: 41 secured and covered parking spaces for government vehicles to be included within the 70,000 square foot wareyard.

A total of 95 parking spaces comprised of:

20 spaces for visitors
75 spaces for employees

(b) The design of the space offered should demonstrate modern architectural design. The designer is challenged to create a unique solution responsive to the program, setting and context of the project.

The facade of the building shall be of high quality, durable material acceptable to the Contracting Officer. The massing of the building should be varied and offer architectural relief. The building should be compatible with its surroundings. Overall, the building should project a professional and aesthetically pleasing appearance including an attractive, well defined main entrance.

• Metal buildings and/or metal building exteriors are not acceptable
• Metal architectural panels are not acceptable.

Id. at 11.

   Even when issuing the solicitation, BLM recognized that the construction work required for the project might be covered by the Davis-Bacon Act, with the solicitation including the following clause:

Before award, a review of the apparent low offer will be conducted to determine if the provisions of the Davis-Bacon Act are applicable. If so, all offerors will be provided with an opportunity to revise their offered amounts to include the provisions of the Davis-Bacon Act.

Id. at 15.

   From the offers received, BLM decided to award the lease contract to Federal Builders, LLC, which proposed to build a new facility to meet BLM's needs.

   The agency proceeded to examine the Davis-Bacon Act coverage issue. In 1994, the Wage and Hour Administrator had issued All Agency Memorandum (AAM) 176, which addressed the application of the Davis-Bacon Act to "buildings constructed and/or altered for lease by the Federal government" in light of various opinions of the courts and the Wage Appeals Board, as well as a May 1994 Opinion published by the Justice Department's Office of Legal Counsel (discussed infra). Relying on the AAM 176 materials, on February 8, 1999, BLM's procurement branch issued a formal "Findings and Determination" in which the agency concluded that the Davis-Bacon Act did not apply to the new building. AR Tab G. The contract was awarded to Federal Builders on February 10, 1999.

   In October 1999 BLM was contacted by CANDO (California-Arizona-Nevada District Office), a "non-profit, labor management contract compliance organization concerned with the payment of prevailing wages to workers employed on public works contracts," making a FOIA request for a copy of BLM's "Findings and Determination." AR Tab F. BLM promptly provided the requested materials. AR Tab G. After reviewing BLM's analysis, CANDO contacted the Wage and Hour Division's San Francisco office, challenging BLM's determination that the Phoenix project was not subject to Davis-Bacon Act coverage. AR Tab E. The coverage question was referred to the Division's headquarters office in Washington, D.C. Id.

   The Division contacted BLM, requesting additional information about the project. AR Tab C. BLM responded in February 2000, providing the contract documents. In a cover letter addressed to the Division, BLM explained its view that the construction work required under the Phoenix office/warehouse lease project was not covered by the Davis-Bacon Act. AR Tab D. The Wage and Hour Administrator disagreed, and on August 14, 2000, issued a final decision letter finding that the BLM's Phoenix field office project was subject to the Act. AR Tab A. This appeal followed.

   We have jurisdiction under the Davis-Bacon Act, 40 U.S.C.A. §276a; Reorganization Plan No. 14 of 1950, 5 U.S.C.A. Appendix (West 1986) (assigning to the Secretary of Labor responsibility for developing government-wide policies, interpretations and procedures to implement the Davis-Bacon Act and the Related Acts); and 29 C.F.R. §§7.1(b), 7.9 (2000).

   The Board's review of decisions issued by the Administrator is in the nature of an appellate proceeding, and the Board "will not hear matters de novo except upon a showing of extraordinary circumstances." 29 C.F.R. §7.1(e). We assess the Administrator's rulings to determine whether they are consistent with the statute and regulations, and are a reasonable exercise of the discretion delegated to the Administrator to implement and enforce the Davis-Bacon Act. Miami Elevator Co., ARB Nos. 98-086/97-145, slip op. at 16 (Apr. 25, 2000) (citing Dep't of the Army, ARB Nos. 98-120/121/122 (Dec. 22, 1999), under the parallel prevailing wage statute applicable to federal service procurements, the Service Contract Act, 41 U.S.C.A. §351 et seq. (1987)).

   In this Discussion, we review first the legal context in which this case arises, i.e., the statute, regulations, and decisional background. We then turn to the specific arguments raised by the parties in this case.

A. Legal context.

   The Davis-Bacon Act provides that

(a) The advertised specifications for every contract in excess of $2,000, to which the United States or the District of Columbia is a party, for construction, alteration, and/or repair, including painting and decorating, of public buildings or public works of the United States or the District of Columbia . . . and which requires or involves the employment of mechanics and/or laborers shall contain a provision stating the minimum wages to be paid various classes of laborers and mechanics which shall be based upon the wages that will be determined by the Secretary of Labor to be prevailing for the corresponding classes of laborers and mechanics employed on projects of a character similar to the contract work in the city, town, village, or other civil subdivision of the State in which the work is to be performed . . . .

40 U.S.C.A. §276a(a). When a Federal agency enters directly into a contract with a construction firm to construct a public building or public work that will be owned by the Federal government, the application of the Act ordinarily is clear. However, when agencies use other financing or contractual vehicles for acquiring spaces or structures that will be used for public purposes (e.g., leases), the question of Davis-Bacon coverage becomes more complicated.

   Our predecessor agency, the Wage Appeals Board, first examined the application of the Davis-Bacon Act to leased facilities in Military Housing, Ft. Drum, New York, WAB No. 85-16 (Aug. 23, 1985) ("Ft. Drum"). In that case, the Department of Defense (DOD) had invited proposals to build between 600-800 housing units for military personnel and their families. The houses would be built by private developers on private land, and the developers would retain title to the properties. However, the homes would be built to government specifications, and the government would lease them for a term of 20 years.

   The question of Davis-Bacon coverage was raised, and the Deputy Administrator of the Wage and Hour Division determined that the Act did not apply to construction of the leased housing. The building trades unions appealed.

Ft. Drum, slip op. at 9-10.

   The Board also rejected the Deputy Administrator's view that privately owned structures could not be "public buildings of the United States" under the Davis-Bacon Act:

Id. at 11-13 (footnotes omitted). The Ft. Drum Board similarly was unmoved by the argument that the housing units might lose their "public character" at the

expiration of the Army's 20-year lease and revert to private uses in the hands of their private owner/developers:

[A]ny structure constructed pursuant to the direct authority of a Federal agency, or with Federal funds, for the public benefit, may well be converted to a private use at some time in the future. The fact that the Department of the Army is only assured of the use and benefit of the Ft. Drum housing for 20 years does not diminish the "public" nature of these structures.

Id. at 17.

   The question of Davis-Bacon coverage of leased construction was revisited by the Wage Appeals Board in Outpatient Clinic, Crown Point, Indiana, WAB No. 86-33 (June 26, 1987) (Crown Point), involving a privately-owned building constructed to Veterans Administration (VA) specifications as part of a 15-year lease arrangement. Using essentially the same analysis applied in the Ft. Drum case, the Board majority similarly concluded (a) that the lease contemplated substantial construction activity and therefore was a "contract for construction" within the terms of the Davis-Bacon Act, and (b) that the VA clinic was a "public building" within the Secretary's definition at 29 C.F.R. 5.2(k).

Bacon Act will depend upon the details of the particular agreement." Reconsideration of Applicability of the Davis-Bacon Act to the Veterans Administration's Lease of Medical Facilities, 18 U.S. Op. Off. Legal Counsel 109 (May 23, 1994) ("1994 OLC Opinion") at 124. "To regard all lease-construction contracts as outside the scope of the Davis-Bacon Act is contrary to the plain language of the Act: many such leases are in fact contracts that call for the construction of a public work. The difficulty is in determining whether a particular lease is really a contract for construction of a public building or public work, or just a contract to secure the use of private premises on a temporary basis." Id. at 113.

   The Wage and Hour Administrator forwarded the 1994 OLC Opinion to procurement agencies as an attachment to AAM 176, accompanied by copies of the Wage Appeals Board's Ft. Drum and Crown Point decisions and the district court's decision in Building and Construction Trades Dep't, AFL-CIO v. Turnage. In her guidance memo to the agencies, the Administrator quoted the following text from the 1994 OLC Opinion:

. . . [F]actors to be considered in determining whether a lease/construction contract calls for construction of a public building or public work may include "[the] length of the lease, the extent of government involvement in the construction project [such as whether the building is being built to Government requirements and whether the Government has the right to inspect the progress of the work], the extent to which the construction will be used for private rather than public purposes, the extent to which the costs of construction will be fully paid for by the lease payments, and whether the contract is written as a lease solely to evade the requirements of the Davis-Bacon Act."

public work, or building or work financed in whole or in part from Federal funds or in accordance with guarantees of a Federal agency or financed from funds obtained by pledge of any contract of a Federal agency to make a loan, grant or annual contribution . . ." 29 C.F.R. §5.5(a). And under the Federal Acquisition Regulations, contracting agencies must include Davis-Bacon wage rates in nonconstruction contracts involving some construction work when "[t]he contract contains specific requirements for a substantial amount of construction work exceeding the monetary threshold for application of the Davis-Bacon Act" which is "physically or functionally separate from, and is capable of being performed on a segregated basis from, the other work required by the contract." 48 C.F.R. §22.402(b)(ii), (iii) (2000).

B. Application of these principles to the BLM's Phoenix field office project.

   Against this legal backdrop, it is clear that the BLM's Phoenix field office lease with Federal Builders is a "contract . . . to which the United States . . . is a party, for construction . . . of [a] public building" within the meaning of the Davis-Bacon Act, and therefore subject to the Act's prevailing wage requirements. The contract contemplates substantial new construction activity for the public's benefit, i.e., BLM's occupancy for an extended period.

   BLM offers a series of arguments opposing Davis-Bacon coverage, but we find each of them unpersuasive.

   One argument relates to the length of the lease term. BLM notes that the 1994 OLC Opinion states that a building constructed pursuant to a (hypothetical) 99-year lease by a Federal agency would be covered by the Davis-Bacon Act. Juxtaposing this very long hypothetical lease with the much shorter 15-year lease of the Phoenix facility, BLM asserts that the field office lease falls outside the range of coverage contemplated by the 1994 OLC Opinion and AAM 176. But in seizing on the hypothetical reference to a 99-year lease, BLM removes the statement from its full context:

    While the public generally has an undeniable interest in paying as little as possible for the construction of public works, the purpose of the Davis-Bacon Act was precisely to subordinate that interest to the extent necessary to set minimum wage standards for such construction work. If an agency decides to construct a public work not just acquire a privately-owned building that agency cannot evade the purposes of this country's labor laws by clever drafting. This does not mean that construction related to any lease is "construction, alteration and/or repair" of a public work within the meaning of the Act but neither can the "plain language" of the Act be read as declaring that a 99-year lease of a brand new building that would never otherwise have been built is not the construction of a public work. The answer in any particular case will depend on the facts.

1994 OLC Opinion at 116 (emphasis supplied). Thus the reference to a "99-year lease" was not offered by OLC as a "standard" by which to judge Davis-Bacon

coverage, but as a relatively extreme illustration used to make the unremarkable point that long-term leases of custom-built facilities are a common technique used by enterprises (including governments) to acquire new buildings. The lease at issue in the Ft. Drum case was for a term of 20 years; in Crown Point, 15 years (with an additional 5-year option). The term of the BLM's Phoenix lease is 15 years, with the right to terminate after 10 years. This slightly shorter term is a difference merely in degree, not in substance.

   Another argument relates to the fact that upon the conclusion of the lease term, the Phoenix building may no longer be used by the Government. BLM declares that "Most of the buildings that BLM vacates at the end of a lease term are used for commercial activities such as car sales or heavy equipment sales," and that "Over the [40 year] life of the building, the use of the building will be for private use much more than public use." BLM Petition at 2, 3. Here again, our focus must be on the substantive use of the property under the contract itself, because the "ultimate" use of the property which is largely a matter of speculation is of little decisional significance. After all, even a building directly constructed and owned by the Federal government may be relinquished at some point, as the Wage Appeals Board explicitly noted in the Ft. Drum case. See p. 8, supra. To paraphrase the Ft. Drum Board, the fact that BLM is only assured of the use and benefit of the Phoenix field office for 15 years does not diminish the "public" nature of this structure.

   Similarly, BLM attempts to raise doubt whether the Phoenix lease is a "contract for construction" by distancing itself from control over the construction activity, arguing that its contract with Federal Builders merely expresses various performance goals for the leased structures without establishing particular specifications. We disagree. Davis-Bacon coverage does not depend on the contracting agency exercising complete authority over the building that will be leased; indeed, in its Ft. Drum decision the Wage Appeals Board determined that the Act applied to a lease construction contract even while explicitly recognizing that the developers had some flexibility with regard to building design, materials and equipment. Ft. Drum at 15. But BLM's argument on this point also fails because it conflicts with the record in this case: the contract with Federal Builders includes extensive materials that are best described as construction specifications for the project (plus attachments). See AR Tab D, Lease Contract at 63-97. In addition, we note that BLM specifically reserved the right to make construction inspections of the project. Id. at 97.

[BLM] Findings and Determination, AR Tab G. In our view, the fact that BLM will essentially pay almost the full cost of construction during the first 10 years of the building's 40-year useful life strongly supports the Administrator's conclusion that the BLM lease is a contract for construction of a public building under the Act and regulations, even though title does not vest in the Federal government. 29 C.F.R. §5.2(k).

   In summary, we find the circumstances of the BLM's lease of newly-constructed facilities in Phoenix, Arizona, to be similar in all material respects to the leases considered by the Wage Appeals Board in the Ft. Drum and Crown Point cases.

The lease is a contract for construction of a public building, and therefore subject to the Davis-Bacon Act. The Petition for Review is DENIED.

   SO ORDERED.

      PAUL GREENBERG
      Chair

      CYNTHIA L. ATTWOOD
      Member