Determining Which Labor Standards Apply

In many cases, the determination of the applicable labor standard statute is straightforward. The following section discusses circumstances where the determination can be more nuanced, as well as circumstances when more than one statute may apply.

DISTINGUISHING BETWEEN PCA AND SCA

• The Walsh-Healey Public Contracts Act (PCA) applies to federal contracts in excess of $15,000 for the manufacture or furnishing of materials, supplies, articles or equipment.
• Manufacturing includes contracts principally for remanufacturing of equipment that is so extensive as to be equivalent to manufacturing. Thus, PCA applies to:
  • Major overhaul, in a facility owned or operated by the contractor, of an item, equipment, or materiel that is degraded or inoperable and which is required to be substantially torn down into its individual component parts to be reworked, rehabilitated, altered, and/or replaced, and reassembled (usually commingling the disassembled parts with inventory parts) to furnish a rebuilt item or piece of equipment restored to its original life expectancy or nearly so by manufacturing processes similar to those used in manufacturing the item or equipment; or,
  • Major modification, in a facility owned or operated by the contractor, of an item, equipment, or materiel that is wholly or partially obsolete, and is required to be substantially torn down, have outmoded parts replaced, and then be rebuilt or reassembled, so that the contract work results in a substantially modified item in a usable and serviceable condition.

    29 CFR 4.117(b)(1), (b)(2).

• In contrast, the McNamara-O’Hara Service Contract Act (SCA) covers contracts for repair of damaged or broken equipment that does not require such complete teardown, overhaul and rebuild of the item(s), equipment, or materiel; and contracts for periodic and routine maintenance, preservation, care, adjustment, upkeep, or servicing of equipment to keep it in usable, serviceable, working order. 29 CFR 4.117(b)(3).
  • Such contracts typically are billed on an hourly rate basis – labor plus materials and parts.
  • A contract principally for work listed at 29 CFR 4.117(b)(3) is subject to SCA (not PCA). Examples of such work include:
    • repair of an automobile, truck, or other vehicle, aerospace, air conditioning and refrigeration equipment, and ground powered industrial or vehicular equipment; repair of office equipment; and inspecting, testing, calibration, painting, packaging, lubrication, tune-up, or replacement of internal parts of such equipment;
    • repair of electronic equipment or appliances; inspecting, testing, calibration, painting, packaging, lubrication, tune-up, or replacement of internal parts of equipment (if not exempt under 29 CFR 4.123(e)); and reupholstering, reconditioning, repairing, and refinishing furniture;
    • WHD will decide on application of SCA or PCA to a similar type of contract not addressed in 29 CFR 4.117(b)(1)-(3) on a case-by-case basis. 29 CFR 4.117(b)(4).
• “Any work required to be done in accordance” with PCA provisions is exempt from SCA requirements.
  • This SCA exemption, at 41 USC 6702(b)(2), applies to “work,” i.e., specifications or requirements, rather than “contracts,” subject to the PCA.
  • The purpose of the SCA exemption of work subject to the PCA is to eliminate possible overlapping of the differing labor standards of the two laws.
  • If the principal purpose of a contract is the manufacture or furnishing of materials, supplies, etc., rather than the furnishing of services of the character referred to in the SCA, there is no overlap because such a contract is covered only by PCA and is not covered by the SCA.

    29 CFR 4.117(a).

• PCA applicability to work under a SCA contract
  • A procurement that requires tangible items to be supplied to the Government or the contractor as a part of the service furnished is covered by SCA so long as the contract is primarily for services and the furnishing of such tangible items is of secondary importance. 29 CFR 4.131(a). (The use or furnishing of such items may be an important element in the furnishing of the services called for by the contract.)
  • On the other hand, if as a matter of convenience in procurement, the service specifications are combined in a single contract document with specifications for the procurement of different or unrelated items, and the principal purpose of the contract is for services warranting SCA coverage, SCA would apply to the service specifications, but PCA would apply to specifications, if any, requiring the manufacture or furnishing of materials, supplies, articles or equipment to the Government. 29 CFR 4.132.

DISTINGUISHING BETWEEN SCA AND DBA

An important coverage concern is distinguishing Davis-Bacon Act (DBA) and SCA work under federal contracts. This is particularly important because federal contracting agencies are responsible for designating application of DBA and SCA requirements to different work under single contracts. The potential for cost adjustment changes for the agency, as well as administrative inconvenience for the agency and its contractor(s), also may result from failure to apply the DBA and SCA labor standards appropriately.

SCA-covered maintenance work vs. DBA-covered repair work

• Although alterations and repairs, including renovation and rehabilitation, are construction work covered by the DBA, routine maintenance and preventative work is a service covered by the SCA, assuming all other SCA coverage requirements are met.
• Factors indicating that the work to be performed is SCA-covered maintenance work include, but are not limited to:
  • The work is routinely scheduled and continuous or recurring.
  • The work is needed to keep the building or work in its current condition so that it may continue to be used.
  • The work does not improve the current condition or function of the building or work.
  • The items of work may be completed relatively quickly.
  • The skills needed for the work are not typical of the construction trade.
• Factors indicating that the work to be performed is DBA-covered repair work include, but are not limited to:
  • The work involves the restoration or improvement of a building or work by replacement, overhaul, or reprocessing of constituent parts or materials.
  • The work generally improves the building or work, either by fixing something that is not functioning properly or by improving upon the building or work’s existing condition.
  • The work is not continuous or recurring, but involves the correction of individual problems or defects as separate and segregable incidents.
  • The work improves the building or work’s structural strength, stability, safety, capacity, efficiency, or usefulness.
  • The individual items of work take more time to complete.
  • The skills needed for the work are typical of the construction trades.

Demolition and removal activities

• SCA applies where the contract is for the demolition or dismantling of buildings or other structures, and no further construction activity is contemplated at that site.
• DBA applies where:
  • Demolition and removal activities in and of themselves constitute construction, alteration, or repair of a public building or work.
    • For example, removal of asbestos or paint from a facility that will not be demolished is covered by Davis-Bacon —even if subsequent reinsulating or repainting is not considered—because the asbestos or paint removal is an “alteration” of the facility. See AAM 153.
    • Similarly, Davis-Bacon labor standards apply to certain hazardous waste removal contracts, because “[s]ubstantial excavation of contaminated soils followed by restoration of the environment” is “construction work” under the DBA. See AAMs 155 and 190.
  • Future construction that will be subject to the Davis-Bacon labor standards is contemplated at the location where the demolition occurs—either because the demolition is part of a contract for such construction or because such construction is contemplated as part of a future contract.
  • Where otherwise required by statute.
• Whether future construction at the site is already contemplated at the time of the demolition is a fact-specific determination. Factors to be considered include, but are not limited to:
  • the existence of engineering or architectural plans or surveys of the site;
  • the allocation of, or an application for, federal assistance for construction;
  • contract negotiations or bid solicitations;
  • the stated intent of the relevant government officials; and
  • the disposition of the site after demolition.
• 29 CFR 5.2, 88 FR 57526, 57602, and AAM 190 further discuss the application of the Davis-Bacon labor standards to demolition contracts.

Drilling

• Drilling will generally be considered construction covered under the DBA, assuming all other requirements are met, when:
  • The drilling is directly related and incidental to, or an integral part of, a construction project. For example, soil boring prior to or during construction for the purpose of setting foundations is generally considered to be construction.
  • The results of the drilling will themselves be buildings or works. For example, the drilling of water wells or oil and gas wells, or the drilling of test wells with the expectation that they may later be converted to water wells, oil wells, or other works, will generally be considered covered construction.
• Drilling will generally be considered to be a service covered under the SCA, assuming all other requirements are met, when:
  • The drilling is for a purpose other than part of construction, such as exploratory drilling to obtain data to be used in engineering studies. 29 CFR 4.130(a)(16).
  • The drilling is to obtain data to be used in planning a construction project where the construction has not been authorized or for which no funds have been appropriated.
  • The drilling is to create a temporary well or hole to obtain samples of water, soils, etc., for testing purposes. However, drilling performed to create a permanent or semi-permanent well site for obtaining data over an extended period of time would constitute the construction of a public work, and would be covered construction under the DBA.
• The plugging of oil or gas wells and the removal of related above-ground equipment would be covered by the DBA if the work is an alteration or repair necessary to improve the safety of the site or when it is performed prior to further construction (including restoration) at the site, no matter whether the work is characterized as demolition (i.e., the dismantling of the above-ground equipment) incidental to construction, or well drilling.

Activities performed prior to the completion of the construction project

• An important factor in determining whether work is subject to DBA or SCA coverage is whether the activity is undertaken as part of a construction project prior to its completion.
• The DBA applies when cleanup, landscaping, carpet laying, and drapery installation activities are undertaken as an integral part of or in conjunction with new construction, such as under a construction contract where they precede and are conditional to acceptance of a building or public work by the owner.
• The SCA applies when the same activities are performed after the construction contractor and subcontractors have finished and left the site, and the contracting agency has accepted the building.

HYBRID CONTRACTS

• Because Davis-Bacon coverage may apply when a federal contract requires more than an incidental amount of construction, where other coverage requirements are met, it is possible for construction work on other types of contracts, such as supply or service contracts, to be covered under the DBA.
• Davis-Bacon coverage will apply when such contracts require substantial and segregable construction work, and other coverage requirements are met.
• 29 CFR 4.116(c)(2) – Davis-Bacon coverage will generally apply to construction work performed on an SCA-covered contract where:
  • The contract requires substantial amounts of construction work or it is ascertainable that a substantial amount of construction work will be necessary for the performance of the contract; and
  • The construction work is physically or functionally separate from, and as a practical matter is capable of being performed on a segregated basis from, the other work called for by the contract.
  • In determining whether construction work is substantial, the focus is on the type and quantity of construction work to be performed, not merely on the total value of construction work as compared to the total value of the contract.
• FAR 48 CFR 22.402(b) – Davis-Bacon coverage will generally apply to construction work to be performed as part of nonconstruction contracts (supply, service, research and development, etc.) if:
  • The construction work is to be performed on a public building or public work;
  • The contract contains specific requirements for a substantial amount of construction work exceeding the monetary threshold for application of the Davis-Bacon Act (the word substantial relates to the type and quantity of construction work to be performed and not merely to the total value of construction work as compared to the total value of the contract); and
  • The construction work is physically or functionally separate from, and is capable of being performed on a segregated basis from, the other work required by the contract.
    • Construction work is not segregable if it is so merged with nonconstruction work, or so fragmented in terms of the locations or time spans in which it is to be performed, that it is not capable of being segregated as a separate contractual requirement.
    • Note that this does not mean that the work must be as conveniently awarded in a separate contract, only that it can be separately identified in the contract.

Contracts requiring PCA and DBA

• If a PCA-covered contract involves substantial and segregable construction, such construction will typically be subject to Davis-Bacon coverage. This will frequently occur when the contract calls for installation of the supplied goods or materials.
• Factors to be considered when determining whether installation work requires substantial and segregable construction include, but are not limited to:
  • the nature of the prime contract work;
  • the type of work performed by the workers performing the installation on the project site (i.e., the techniques, materials, and equipment used and the skills called for in its performance);
  • the extent to which the installation requires structural modifications (i.e., widening entrances, relocating walls, or installing wiring); and
  • the cost of the installation work.
• Examples of PCA contracts that would also be subject to DBA coverage include:
  • A contract for the supply and installation of a security system that requires replacement of existing conduit, laying cable, and tearing out and replacing walls.
  • A contract for the supply and installation of modular furniture or energy-efficient lighting fixtures that requires:
    • Bolting furniture or fixtures to floors, walls and/or ceilings;
    • Modifying walls, floors and/or ceilings to accommodate shelving;
    • Installing electrical connections for desk area outlets; or
    • Installing new ballasts and/or lighting fixtures.
  • A contract that provides for the supply and installation of equipment requiring construction activity, such as:
    • Reconfiguration or alteration of building space;
    • Upgrade to utilities; or
    • Bolting or affixing equipment to floors, walls and/or ceiling.

Contracts Requiring SCA and DBA

• The DBA similarly applies to an SCA-covered contract principally for the furnishing of services in the United States through the use of service employees if a substantial amount of construction work is also necessary for performance of the contract and the construction work is physically or functionally segregable from the other contract work.
• Examples of SCA contracts that would also be subject to DBA coverage include:
  • A contract for furnishing cafeteria and food services that includes requirements to renovate and paint the cafeteria and kitchen.
  • A base maintenance and support contract that provides services for operation of a military base and also requires substantial and segregable construction work orders such as painting base housing and buildings, refinishing floors, or reroofing buildings.
• Questions sometimes arise as to whether the work required under an individual work order, task order or service call on a hybrid SCA/DBA contract is for SCA maintenance or DBA alteration or repairs.
• The factors discussed above should also be applied when determining whether the work order, task order or service call should be considered maintenance or repairs.
  • Additionally, contracting agencies have provided guidance on when work orders or task orders on such contracts are covered under the DBA. For example, DFARS provides the following guidance where the distinction is unclear:
    • Individual service calls or orders which will require a total of 32 or more work-hours to perform shall be considered to be repair work subject to the DBA. DFARS 48 CFR 222.402-70(d)(1).
    • Painting work of 200 square feet or more to be performed under an individual service call or order shall be considered to be subject to the DBA regardless of the total work-hours required. DFARS 48 CFR 222.402-70(d)(3).
    • Also, contracting officers may not avoid application of the DBA by splitting individual tasks between orders or contracts. DFARS 48 CFR 222.402-70(f).

DISPUTES CONCERNING COVERAGE DETERMINATIONS

• The contracting agency has the initial responsibility for determining the labor standards statutes applicable to a contract. This is important because many federal agency procurement officials are responsible, in the first instance, to designate application of PCA, DBA, and/or SCA requirements appropriately to federal contracts and multiple work elements of contracts that warrant the application of different labor standards. (See FAR 48 CFR subparts 22.3, 22.4, 22.6, 22.10, and 22.12.)
  • Agency procurement personnel and contracting officers should seek guidance from their agency labor advisors when there are questions regarding coverage determinations.
  • In addition, WHD may provide compliance assistance regarding appropriate application of the federal prevailing wage statutes.
  • If an agency is found to have erred in its determination(s), substantial cost adjustment expenses and administrative burdens may result from such a failure to apply the PCA, DBA and SCA labor standards appropriately. For example, see FAR 48 CFR 22.404-6(b)(5), 22.404-9 and 22.1015.
  • WHD has the authority to issue final determinations on coverage. Each final ruling is based on the facts of a specific situation and how those facts relate to the coverage principles set forth by regulation, statute, and pertinent case law.
  • In making coverage determinations, WHD generally solicits input from interested parties.
  • Final WHD rulings may be appealed to the Administrative Review Board (ARB) under 29 CFR part 7 for Davis-Bacon and Related Act cases, and 29 CFR part 8 for SCA cases.
  • The members of the ARB are appointed by the Secretary of Labor to review final rulings and interpretations on wage determinations, coverage, and enforcement issues under the DBRA and SCA. The Board has been delegated authority and assigned responsibility to act for the Secretary of Labor in such matters.