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Federal Judge Rules that Davis-Bacon Act Does Not Apply to Privately Funded Project on Public Land

Posted Apr 02, 2014
Benjamin D. Greenbergview author profile and contact info

On Monday, Judge Amy Berman Jackson of the U.S. District Court for the District of Columbia issued a 34 page decision in District of Columbia v. Department of Labor, et al, ruling as a matter of first impression that a privately funded, occupied, and maintained project that sits on a parcel of land owned by the District of Columbia (the “CityCenterDC Project”), was not a “public work” within the meaning of the Davis-Bacon Act (“DBA”).  The opinion provides useful guidance regarding what constitutes a public works project under the DBA.

The decision overruled the Department of Labor Administrative Review Board’s (“ARB”) previous determination that the project was a “public work.”  The ARB’s determination was based on the District’s involvement in planning and oversight, and in light of the public benefits that would flow from the development, including employment opportunities for residents, affordable housing units, new sidewalks, pedestrian-friendly areas, and increasing revenue for the District.  

The CityCenterDC Project resulted from a recommendation by a task force convened by the District that the old Washington Convention Center be transformed into a “mixed-used urban neighborhood.”  An RFP was then issued for a master development partner to undertake the Project, with whom the government could collaborate over a protracted period of time to develop the area.  Following selection of a master developer, the District required the developer to create a master plan for the development, subject to its approval, for which the District provided a number of components that were required to be included in the development, such as rental and for-sale residential units, public parking, and a boutique hotel.  The District was also given approval rights over architects, engineers, and contractors; permitted to inspect the Project books and records; and given the right to terminate the agreement for any uncured events of default.  To implement the development agreement, the District entered into three concurrent 99 year leases with the developers. 

The developers filed suit in U.S. District Court and moved for summary judgment, arguing that the ARB’s determination was in conflict with the plain language of the DBA, was arbitrary and capricious, and should be set aside under the Administrative Procedure Act (5 U.S.C. § 706).

The court analyzed the DBA, which states in part:

The advertised specifications for every contract in excess of $2,000, to which the Federal Government or the District of Columbia is a party, for construction . . . of public buildings and public works of the Government or the District of Columbia . . . and which requires or involves the employment of mechanics or laborers shall contain a provision stating the minimum wages to be paid various classes of laborers and mechanics.

40 U.S.C. § 3142(a).  The DBA requires that such contracts contain minimum wage provisions based on the prevailing wage rates set by the Secretary of Labor.  Id. § 3142(b). 

In granting the developers’ summary judgment motion, the court ruled that the plain and obvious meaning of the terms “public buildings” and “public works” do not encompass a “boutique hotel, a private office building, a condominium or an apartment building, even an apartment building that reserves units to be rented—by private landlords to private tenants—at more affordable rates.”  Judge Jackson reasoned that the text, history, and purpose of the DBA reveal that Congress used the term “public work” in its traditional sense; work that is either funded by public dollars or used by the public.  Further, the Act implies it is only triggered when the Government exercises its procurement power.  Therefore, the DBA is not applicable, and workers are not required to be paid prevailing wages on the CityCenterDC Project which is currently underway.

Judge Jackson’s decision provides a helpful framework for analyzing the applicability of the DBA to a project and provides guidance as to how the DOL and courts will likely weigh in on similar projects that are privately funded, occupied, and maintained on public land.  However, the decision distinguishes the CityCenterDC Project from a more typical public-private partnership involving either or both public funding and/or government occupancy and maintenance of the project at completion.  In the latter instance, the DOL and courts are more likely to find the DBA is applicable.

President Obama Signs Executive Order Raising Pay for Employees of Federal Government Contractors

Posted Feb 13, 2014
Benjamin D. Greenbergview author profile and contact info

As promised in his State of the Union Address, President Obama signed an Executive Order yesterday raising the hourly minimum wage to $10.10 for employees of federal government contractors and subcontractors.  This change will go into effect on January 1, 2015, and shall apply to covered contracts where the solicitation has been issued on or after that date.  Beginning on January 1, 2016, and annually thereafter, the Executive Order requires the hourly minimum wage paid to federal government contractors to increase by the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers.  This amount will be published by the Secretary of Labor at least 90 days before it will take effect.

The Executive Order calls for the Secretary of Labor to issue regulations by October 1, 2014 to effect its implementation.  Among other things, the regulations will establish the process for resolving disputes regarding whether a contractor has paid the applicable minimum wage, as the Executive Order explicitly does not create any rights under the Contract Disputes Act.

Accordingly, government contractors should be aware of this change in wage law for future contracts.  Importantly, and as noted in Section 2(c) of the Executive Order, this change does not excuse compliance with higher wages established by state or federal prevailing wage laws.  This includes compliance with the Service Contract Act and Davis-Bacon Act wage laws.

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