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DOL Increases Costs for Contractors and Taxpayers With Davis-Bacon Final Rule

August 9, 2023

On Aug. 8, the U.S. Department of Labor issued its final rule, Updating Davis-Bacon and Related Acts, making drastic revisions to existing regulations concerning government-determined prevailing wage rates that must be paid to construction workers on federal and federally assisted construction projects funded by taxpayers.

The new rule was hailed by Vice President Kamala Harris and Acting DOL Secretary Julie Su in a speech to union construction workers and leaders in Philadelphia, and the White House released a fact sheet on the new rule.

ABC issued a statement opposing the new rule, which was picked up by more than 700 publications, stating,

“This is yet another Biden administration handout to organized labor on the backs of taxpayers, small businesses and the free market,” said ABC Vice President of Regulatory, Labor, and State Affairs Ben Brubeck. “Unfortunately, the DOL’s final rule disregards the feedback of ABC contractors, construction industry stakeholders and thousands of small businesses urging the withdrawal of this unnecessary, costly and burdensome regulation. Instead, the DOL is moving forward with dramatic changes to prevailing wage regulations, reversing much-needed reforms that were established nearly 40 years ago, and unlawfully increasing the regulatory burden on small businesses, new industries and public works projects.” 

ABC also gave interviews to top-tier national media, generating sympathetic coverage in The Washington Examiner, Yahoo! News and dozens of local television stations. Overall, coverage was featured on MSN, The Washington Post, U.S. News and World Report and more, reaching millions of readers and viewers.

In May 2022, ABC submitted nearly 70 pages of comments on the DOL’s ABC-opposed March 2022 proposed rule, and its more than 50 significant changes, urging the DOL to withdraw the proposal. ABC’s comments detailed how the proposed rule violated existing law and would fail to fix the DOL’s unscientific wage determination process, rescind pro-taxpayer reforms made by the Reagan administration and increase regulatory burdens on small businesses, new industries and more public works projects.

ABC staff is still conducting thorough analysis on the more than 800-page final rule, but its initial review and this DOL chart confirm several key changes to existing regulations:

• Changing the definition of “prevailing wage” to a wage paid to at least 30% of workers surveyed in a locality, a reduction from the 50% threshold established during Reagan administration reforms enacted nearly 40 years ago
• Allowing the DOL to adopt state or local prevailing wage rates as DBA wage rates
• Making DBA requirements effective by “operation of law,” meaning even if a federal agency fails to include DBA clauses in a contract, contractors are still required to pay prevailing wages
• Adding new anti-retaliation provisions to DBA contracts

However, the DOL did modify a number of provisions of the proposed rule, in some cases directly referencing ABC’s comments in its decision to mitigate some of the rule’s harmful provisions, including:

• The proposed rule intended to expand DBA coverage to any off-site facility where a “significant portion of the building or work is constructed,” but the final rule recognized the unfeasible scope of this requirement and instead only covers off-site construction at sites specifically established or dedicated exclusively to a DBA project
• The proposed rule would have required compensation of delivery drivers at DBA wage rates for almost all on-site delivery work, even for only a few minutes, but the final rule instead exempts drivers spending minimal time on site from DBA

The final rule is effective 60 days following its publication in the Federal Register.

ABC is evaluating compliance, advocacy and litigation strategies.

ABC is offering a members-only webinar on Aug. 21 at 3 p.m. ET and will continue to provide additional resources to assist contractors in complying with these new regulations at abc.org/davisbacon.

The new rule is also opposed by key congressional leaders, including Senate Health, Education, Labor and Pensions Ranking Member Bill Cassidy, R-La., who blasted the Biden administration’s new rule, stating, “This is the last thing our country needs as families continue to live with the painful effects of the Biden administration’s inflation agenda.”

House Education and the Workforce Committee Chairwoman Virginia Foxx, R-N.C., also released a statement calling the new rule “wrong” and stating that it “will also drastically increase the costs of federal construction projects, leading to fewer completed infrastructure projects and a greater burden on taxpayers.”

Cassidy and Foxx have also questioned Su’s indefinite appointment without Senate confirmation in potential violation of the constitutional provision of advice and consent that could open any DOL action under Su’s leadership to legal challenges.

The 1931 Davis-Bacon Act and related regulations require contractors and subcontractors that perform work on federal and federally funded construction projects to pay a government-determined prevailing wage and benefit rate on an hourly basis to on-site construction workers. According to the DOL rulemaking, the Davis-Bacon Act and 71 active Related Acts collectively apply to an estimated $217 billion in federal and federally assisted construction spending per year—about 63% of all government construction put in place—and provide government-determined wage rates for an estimated 1.2 million U.S. construction workers.

The Congressional Budget Office estimates that repealing the 1930s-era Davis-Bacon Act would save the federal government $24.3 billion in spending between 2023 and 2032. A May 2022 study found that the Davis-Bacon Act costs taxpayers an extra $21 billion a year, increases the price tag of construction projects by at least 7.2% and inflates construction workforce wages by 20.2%, compared to local market averages, if the DOL calculated prevailing wages using modern and scientific methodology via the U.S. Bureau of Labor Statistics.

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