United States Army, ARB No. 96-133 (ARB July 17,
1997)
U.S. Department of Labor
Administrative Review Board
200 Constitution Avenue, N.W.
Washington, DC 20210
ARB Case No. 96-133
DATE: July 17, 1997
In the Matter of:
The United States Army
With respect to application of
All Agency Memorandum No. 157
under administration of the Davis-Bacon
and Related Acts
BEFORE: THE ADMINISTRATIVE REVIEW BOARD
FINAL DECISION AND ORDER
This case is before the Board pursuant to the Davis-Bacon and Related
Acts (DBA), 40 U.S.C. § 276a et seq. (1994). See 29 C.F.R.
Part 7 (1996). On May 24, 1996, the United States Army filed a Petition for Review of a May
2, 1996 final ruling that was issued by the Administrator of the Wage and Hour Division,
United States Department of Labor. For the reasons stated below, we deny the Petition for
Review and affirm the Administrator's ruling.
BACKGROUND
On October 23, 1992, the International Brotherhood of Teamsters
(Teamsters Union) wrote to the national office of the Department of Labor (DOL) and
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complained that the Army had failed to include the current DBA wage determination in a
multi-year Maintenance Operations Contract at Rock Island Arsenal, Illinois, with the option
year beginning November 1, 1992. Tab L. The Union explained that the same problem had
occurred previously at the Rock Island Arsenal and that DOL had investigated and found a
violation. The Union stated that, if necessary, it would request another DOL investigation.
On November 23, 1992, the Deputy Assistant Administrator of the
Wage and Hour Division responded that the Army's actions were improper. DOL's
November 1992 letter to the Army states:
According to the information provided, the contract is subject to the
McNamara-O'Hara Service Contract Act (SCA), but also involves substantial
and segregate construction work to which the provisions of the Davis-Bacon Act
are applicable. Although your agency updated the SCA wage determination for
the new option period, it appears that you failed to incorporate a new or revised
Davis-Bacon wage determination effective on the date the option was exercised.
As you know, the Davis-Bacon Act applies to "every
contract in excess of $2,000, to which the United States
or the District of Columbia is a party, for the construction, alteration,
and/or repair, including painting and decorating, of public buildings or
public works." (Emphasis added). It is the Department's position
that multi-year contracts that contain option provisions by which a
contracting agency may extend the term of the contract require inclusion
of a current wage determination when the option is exercised. As
explained in section 4.145(a) of the SCA regulations, 29 CFR Part 4, to
exercise such an option requires a contractor to perform work for a
period of time for which it would not have been obligated -- and for
which the government would not have been required to pay -- under the
terms of the original contract. Once a contract option is exercised, then
the additional period becomes a new contract for Davis-Bacon purposes
as well as for SCA purposes. All such new contracts must contain a
current Davis-Bacon wage determination. (See section 4.143(b) of
Regulations, Part 4, and section 1.6 of Regulations, 29 CFR Part 1.)
In this regard, please take action to incorporate a revised Davis-Bacon
wage determination, effective for the applicable option period in the
referenced contract and in any current and future contracts similarly
affected. This action will ensure that the employees receive the benefits
to which they are entitled under the law. In addition, please provide us
with a report of your action in this matter.
1 In November 1992,
the contractor in this multi-year contract was Serv-Air, Inc. Tab
L. In or about January 1996, the Raytheon Corporation purchased
Serv-Air, Inc. and succeeded as contractor. Tabs F, D.
2 The Army
raised this issue as an intervenor in Modernization of John F.
Kennedy Federal Building, WAB Case No. 94-09, Aug. 19, 1994,
and the Board declined to rule on the Army's allegation because the
contract itself stated that current wage rates would be
incorporated at the time of exercise of an option.
3 In view of
our ruling that AAM 157 is an interpretative rule, it is
unnecessary to address the Construction Trades Department's
alternative argument.