Reconsideration of Applicability of the Davis-Bacon Act to the Veterans Administration's Lease of Medical Facilities

• Court: Department of Justice Office of Legal Counsel
• Decided: May 23, 1994
• Status: Published

Opinion

Reconsideration of Applicability of the Davis-Bacon Act to the Veterans Administration’s Lease of Medical Facilities

C o n tra ry to the v iew e x p re sse d in an e a rlie r o p in io n o f th e O ffice o f L egal C o u n se l, the p la in la n g u a g e o f the D a v is-B a c o n A ct d o e s not b a r its a p p lic a tio n to a lease c o n tra c t o n th e g ro u n d th a t such c o n tra c ts are p e r s e not c o n tra c ts fo r c o n stru ctio n . T h e a p p lic a b ility o f the D a v is-B a c o n A c t to any sp e c ific lease c o n tra c t c an b e d e te rm in e d o n ly by c o n sid e rin g the d e ta ils o f the p a rtic u la r c o n tra c t.

M ay 23, 1994

M e m o r a n d u m O p i n i o n f o r t h e S o l ic it o r D epa r tm en t o f L abo r and

T h e G eneral C o unsel D e p a r t m e n t o f V e t e r a n s A f f a ir s

At the request of the Attorney General, we have reviewed the principles and reasoning of a 1988 Office of Legal Counsel opinion concluding that the Davis- Bacon Act did not cover a contract entered into by the Veterans Administration (now Department of Veterans Affairs) (“VA”) for the long-term lease and con­ struction of a building to be used as an outpatient clinic. Applicability o f the Davis-Bacon A ct to the Veterans Adm inistration’s Lease o f M edical Facilities, 12 Op. O.L.C. 89 (1988) (“ 1988 O.L.C. Opinion,” or “ 1988 Opinion”). We have concluded that the 1988 Opinion erred in concluding that the plain language of the Davis-Bacon Act bars its application to any lease contract, whether or not the lease contract also calls for construction of a public work or public building. We believe that the applicability of the Davis-Bacon Act to any specific lease contract can be determined only by considering the facts of the particular contract.

I.

The 1988 O.L.C. opinion arose out of a dispute between the VA and the De­ partment of Labor. The VA had entered into a contract (the “Crown Point con­ tract”) with a developer for the long-term lease of space for use as a VA health clinic, in a building that the developer would build to house the clinic. In re Appli­ cability o f Davis-Bacon Act to Lease o f Space fo r Outpatient Clinic, Crown Point, Indiana, WAB Case No. 86-33, 1987 WL 247049, at 2 (W.A.B. June 26, 1987) (“ 1987 WAB Opinion”). The dispute concerned whether the contract was covered by the Davis-Bacon Act. That Act applies to

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 109 O pinions o f the O ffice o f L egal C ounsel

repair, including painting and decorating, of public buildings or public works . . . .

40 U.S.C. § 276a(a). The Act provides that such contracts shall include provisions that mechanics and laborers employed on these projects be paid prevailing wages to be determined by the Secretary o f Labor. Id. Although the Crown Point contract called for the lease of clinic space, it also included numerous provisions requiring that the building be constructed according to VA specifications, on a VA timetable, and subject to VA inspection. 1987 WAB Opinion at 4-5. Nonethe­ less, the VA had concluded that the Act did not apply to the Crown Point agree­ ment because it was a lease and, in the VA’s view, a lease is not a “contract. . . for construction” under the Act. Therefore, the contract contained no provisions man­ dating compliance with the prevailing wage requirements of the Davis-Bacon Act. Upon learning of VA’s plans, the Building and Construction Trades Department of the AFL-CIO requested a ruling from the Wage and Hour Administrator of the Department of Labor that the construction of the building was covered by the Davis-Bacon Act. The Administrator, applying the Wage Appeals Board’s (“WAB”) analysis in a similar case, agreed that the contract should have included Davis-Bacon prevailing wage provisions. See 1987 WAB Opinion at 1-2 (noting Administrator’s reliance on In re M ilitary Housing, Ft. Drum, WAB Case No. 85- 16 (Aug. 23, 1985)). The VA appealed to the WAB, which upheld the Adminis­ trator’s action. Id. However, the VA continued to resist the Department of Labor’s interpretation of the Act. While the AFL-CIO sought a court judgment to compel the VA to comply with the W AB’s decision, the VA sought an opinion from the Attorney General that the WAB had misread the law. The result was a court determination that the WAB decision was a reasonable interpretation of ambiguous language in the Act under Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), Building and Constr. Trades D e p ’t, AFL-CIO v. Turnage, 705 F. Supp. 5 (D.D.C. 1988), and an O.L.C. ruling that the WAB decision con­ flicted with the plain language of the Act (the 1988 Opinion). The Department of Justice did not appeal the Turnage case because of the confused procedural posture it presented, but instructed Labor to comply with the reasoning of the 1988 O.L.C. opinion in future cases. Letter for Jerry G. Thorn, Acting Solicitor, Department of Labor, from Douglas W. Kmiec, Assistant Attorney General, Office of Legal Counsel (Jan. 23, 1989). You have asked that we review our ruling in the 1988 Opinion that the plain language and legislative history of the Davis-Bacon Act indicate that the Act does not extend to leases. We have reviewed the prior opinion, solicited the views of affected executive departments, and conducted a thorough review of the legislative history, case law, and executive, judicial, and congressional interpretations of the Act. We have concluded that the portion of the 1988 Opinion that addressed the

110 Reconsideration o f A pplicability o f the D avis-B acon A ct lo the V eterans A dm inistration's Lease o f M edical F acilities

meaning of the Davis-Bacon Act was incorrect. We do not, however, address the question whether the particular contract at issue in that case was a contract for con­ struction of a public work within the meaning of the Davis-Bacon Act, because the decision not to appeal the ruling in the Turnage case has mooted the point. Nev­ ertheless, we can say that the fact that a contract is a lease is not the sole determi­ native factor in deciding whether that contract is also a contract for construction within the meaning of the Davis-Bacon Act.

II.

The 1988 OLC Opinion concluded that a lease-construction contract for a Vet­ erans Administration outpatient clinic was not a contract for construction of a pub­ lic building or public work within the meaning of the Davis-Bacon Act, because the plain meaning of the term “contract . . . for construction” could not be read to include a lease, even one that contemplated, and resulted in, the construction of a building for long-term public use. We do not think the question is so simple. The words “contract . . . for con­ struction . . . of public buildings or public works” do not plainly and precisely indi­ cate that a contract must include provisions dealing only with construction. Rather, the plain language would seem to require only that there be a contract, and that one of the things required by that contract be construction of a public work. This inter­ pretation of the Act is supported not only by its language, but also by the legisla­ tive history, by reference to the goals of the Act, by judicial and executive interpretation of the Act, and by the interpretation of similar language in related Acts.

A.

Since the 1988 Opinion rested on its reading of the plain language of the Act, we begin by setting forth that language. The Act provides that

[t]he 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 . . . 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 corre­ sponding classes of laborers and mechanics employed on projects of

111 O pinions o f the O ffice o f L egal C ounsel

a character similar to the contract work in the [area where] the work is to be performed . . . .

40 U.S.C. § 276a(a).' The 1988 Opinion concluded that this language “plainly and precisely” limited the A ct’s coverage to “construction contracts,” and thus could not be read to include a lease. 1988 Opinion at 93-94.2 While this may be true so far as it goes, we do not think the term “construction contract” sheds much light on the meaning of the more elaborate statutory term “contract . . . for construction, alteration, and/or repair, including painting and decorating.” In particular, we do not think the term “construction contract,” any more than the term “contract . . . for

1 A n e arlier v ersion o f the A ct provided for c o v erag e o f e v ery c o n tra c t in excess o f $5,000 in am o u n t, to w hich the U nited S tates or the D istrict of C o ­ lu m b ia is a party, w hich requires or in v o lv e s the em p lo y m ent o f laborers or m echanics in the c o n stru ctio n , alteration, an d /o r repair o f a n y public b u ild in g s o f the U nited Slates. D avis-B aco n A ct, ch . 4 1 1 , § 1, 4 6 Stat. 1494, 1494 (1931) S e e A rm and J Thieblot, Jr., P revailing Wage L e gislatio n . The D a v is-B a c o n Act, State "L ittle D avis-B acon ” A cts, the W alsh-H ealey Act, a nd the Service C o ntract A c t 31 (1 9 8 6 ) ( “T h ieb lo t”) T he A ct w as rev ised in 1935 to add coverage o f public w orks and o f p a in tin g and decorating contracts, to low er the c o n tra c t th resh o ld from $5,000 to $ 2 ,0 0 0 (to reflect the relatively sm all dollar value o f p ainting and decoratin g c o n tracts), to p ro v id e for predeterm ination o f w age rates by the D epartm ent o f Labor, and to provide fo r re m e d ie s fo r w orkers not paid the p ro p e r rates on covered contracts See S. R ep No. 74-1155 (1935), H R R ep N o. 7 4 -1 7 5 6 (1935); T h ieb lo t at 3, 28, 2 9 (discussing purpose o f A ct); id at 32-34 (discussin g 1935 am en d m en ts) T here is no suggestion in the legislative history that the sw itch from “c o n tract . w h ich requires o r involves the em p lo y m en t o f laborers or m echanics in . construction” to the current lan g u ag e o f “co n tract . . . fo r construction . . . w hich requires o r involves the em ploym ent o f me­ chanics an d /o r la b o re rs” w as intended to have an y narrow ing effect See, e.g , S R ep No. 1155; H R Rep No. 7 4 -1 7 5 6 T he A ct w as m o d ified again in 1964 to include fringe benefits in the calculation of prevailing w ages S ee S R ep. N o 88-963 (1964), rep rin ted in 1964 U .S .C C A N 2339; T hieblot at 34. T h e 7 4 th C o n g re ss — the sam e one that a m e n d ed the D avis-B acon A ct to include the language at issue here (A ct o f A ug. 30, 1935, ch 825, § I, 49 S tat 1011) — also passed the closely related M iller Act, 40 U S C § 2 7 0 a (A ct o f A ug 24, 1935, ch. 642, § 1, 49 Stat. 7 93). The M iller Act provides lhat contractors shall furnish b o n d s on “ any con tract, exceeding $25,000 in am ount, for the construction, alteration, or repair o f any p u b lic b u ild in g o r public w ork ” The lan g u ag e o f the M iller Act is a lm ost identical to that used in the 1935 am en d m en ts lo ihe D av is-B aco n Act th en being co n sid ered , and the M iller A ct originally included the sam e $ 2 ,0 0 0 th resh o ld as the 1935 D avis-B acon A ct T h ieb lo t at 37 n 40 , U niversities Research A s s 'n v. Coutit, 4 5 0 U .S 7 5 4 ,7 5 8 -5 9 (1981). See a lso S Rep No. 74-1155, at 4 , H.R Rep N o 74-1756, at 4, 5 (noting relatio n b e tw ee n D av is-B aco n am endm ents and the H eard Act (w hich the M iller Act replaced)) T h e n early identical language o f the M iller A c t has been applied lo c onstruction even o f public w orks that w ould be p riv ately ow ned, see, e g . U nited S ta tes ex rel N o land C o v Irw in, 316 U S 23 (1942) (construction o f H ow ard U niversity library), a n d to the relocation o f a privately-ow ned railroad that w ould be flooded by a federal d am , P eterso n v. United S ta te s , 119 F.2d 145 (6th C ir 1941) T hese cases focused on w hether the co n stru ctio n in q u estio n was o f a public w ork; ihere seem s to have been no challenge on the basis th a i the c o n tracts w ere not for construction The one difference in language betw een the M iller and D avis-B aco n A cts — lhat the Davis-Bacon A c t refers to c o n tracts “to w hich the U nited Stales or ihe D istrict o f C o lu m b ia is a p a rty ,” 4 0 U S C. § 276a(a), w hile the M iller A ct does not, see 4 0 U.S C § 270a(a) — is not sig n ific a n t in th is setting, since the U nited States is undeniably a party to the contract to build and lease the C row n Poini facility; the d ifficulty is tn d eterm in in g w hat sort o f contract that contract is. ■ T h e 1988 O p in io n does not indicate w here the new term “construction contracts” com es from. It is not a technical term d ra w n from case law interpreting the D avis-B acon A ct, or used elsew here as a m eans of explainin g w h at the A ct covers o r does not c o v e r R ather, it appears to be an im provised shorthand for the m ore ela b o ra te statu to ry language. We can see no ju stificatio n for using a shorthand phrase neither endorsed by C o n g re ss n or ex p la in ed in ihe case law to b u ttress a narrow reading o f the statutory language

112 Reconsideration o f A pplicability o f the D avis-B acon A ct to the Veterans A dm inistration s Lease o f M edical F acilities

construction,” unambiguously excludes a contract for the long-term lease of a building to be constructed to comply with the contract, especially when the con­ tracting agency contemplates the construction of a new building and includes sub­ stantial provisions concerning construction in the contract. Even prominent critics of the Act have conceded as much. See, e.g., Thieblot at 39 n.50 (“In some cir­ cumstances, privately financed construction may be subject to prevailing wage requirements if, for example, the facilities are specially constructed with the inten­ tion of leasing them to government occupants.”). To rule otherwise would leave substantial room for agencies to evade the requirements of the Act by contracting for long-term lease rather than outright ownership of public buildings and public works. The Crown Point lease provides a good illustration of the principle that a lease may look very much like a “contract . . . for construction.”3 According to the 1987 WAB Opinion, the Solicitation for Offer “specifically provides for lease of a building to be ‘constructed in accordance with VA specifications.’” Id. at 3. The requirements under the Solicitation include “preliminary plans and specifica­ tions; other working drawings; issuance of a building permit; completed construc­ tion documents; start of construction; completion of principal categories of work; phase completion; and final construction completion;” along with “name and expe­ rience of the proposed construction contractor,” and “evidence of award of the construction contract within 15 days of award.” Id. Under the terms of the Solici­ tation, the winning bidder would be required to submit construction progress re­ ports to the VA and to allow the VA to inspect the site. Id. All of these requirements indicate that while the contract was labeled a lease, it called for the construction of a building, at least as one expected means of satisfying the terms of the contract. To say that the contract is not “for construction” ignores what the contract itself says. In short, 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 prem­ ises on a temporary basis. “Plain language” is of little use in policing this border­ line.

1 T here can be no question that a lease is a contract, obliging each party to take certain actions S e e 1 A rthur Linton C orbin, C orbin on C o m m its Sfc 1 2-1 3 (rev ed , Joseph M Penllo, ed , 1993) (defining “ legal oblig atio n ” and “contract,” respectively); A la ska v. U nited States', 16 Cl Ct. 5 (1988) (docum ent need no t be labeled a contract to be a contract) The real question is w hether such a contract is “ for construction.'*

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B.

The legislative history and the purposes of the Act strongly support this inter­ pretation as well. The Act was passed in 1931, and amended in 1935, to ensure that contractors bidding on public works projects would not lower wages so as to be sure to make the lowest bid; and to permit government agencies, which were required to accept the lowest bids, to employ contractors who paid a “fair” wage rather than those who competed by reducing wage rates. S. Rep. No. 74-1155, (1935); H.R. Rep. No. 74-1756 (1935); S. Rep. No. 71-1445, at 1-2 (1931); H.R. Rep. No. 71-2453, at 1-2 (1931 );4 see also 74 Cong. Rec. 6505 (1931) (remarks of Rep. Welch). The sponsor, Representative Bacon, justified the bill by stating that the “Government must not be put in the position of helping to demoralize the local labor market.”5 The Davis-Bacon Act was passed during the Depression, when federal con­ struction accounted for a large portion of construction overall6 and workers des­ perate to take any job could be hired at wages far below those available in the past.7 The result was a concern that the federal public works program would not achieve its desired effect of assisting local communities in regaining prosperity, but instead would allow contractors — and indeed the government itself — to exploit

4 T h e se rep o rts staled that T h e F ederal G o v e rn m e n t has entered u p o n an extensive public bu ild in g program . intended [in part] . . to b en efit the U nited States at larg e through d istrib ution o f construction throughout the co m m u n ities o f the co u n try without fav o rin g any p articu lar section T h e Federal G o v ern m en t m ust, under th e law, aw ard its co n tracts to the low est responsible bid ­ d e r T h is has p rev en ted representatives o f the d ep artm en ts involved from requiring successful b idders to pay w ages to their employees com parable to the w ages paid for sim ilar labor by pri­ vate in d u stry in the v icin ity o f the b u ild in g projects un d er construction. [SJom e successful b id d ers have selfish ly im ported labor fro m distant localities and have exploited this labor at w ag es far b elow local w age rates T h is practice, w hich the Federal G overnm ent is now pow erless to stop, has resulted in a very u n ­ h ealth y situ atio n . Local artisans and m echanics, m any o f w hom are fam ily m en . . can not hope to co m p ete w ith this m igratory labor N o t only are local w orkm en affected, but qualified c o n ­ tra c to rs resid in g and d o in g business in th e section o f the co untry to w hich Federal buildings are a llo cated find it im possible to compete w ith the o u tsid e co n tractors, w ho base th eir estim ates for lab o r upon the low w ages they can pay to unattached, m igratory w orkm en . . . . S R ep. No. 7 1 -1 4 4 5 , at 1-2; H .R. Rep No. 7 1 -2 4 5 3 , at 1-2. 5 74 C o n g R ec. 6 5 1 0 (1 9 3 1 ). See also S. R ep No. 74 -1 1 5 5 , at 1-2, H .R Rep. N o. 74-1756, at 1 (both stating that the a m en d m en ts w ere needed to m ake the A ct m ore enforceable, because “ unscrupulous con­ tractors have taken ad v an tag e o f the w ide-spread unem ploym ent am ong the buildings crafts to exploit labor and to d ep riv e em p lo y ees o f the w ages to w h ich they w ere en titled under the law ’’); S. Rep. No. 88-963, at 1, 2 (1 9 6 4 ), r ep rin te d mi 1964 U S C C.A N 2 3 3 9 , 2340 (rev iew in g the purposes of the A ct), T hieb lo t at 3, 28, 29, 32-34 (rev ie w in g the p u rposes o f this and related acts and d iscussing the 1935 am endm ents). 6 See, e.g ., T h ieb lo t at 29, 29 n. 18 (betw een 1929 and 1933, pu blic construction rose from less than one- q u a rte r to m ore than o n e -h a lf o f all construction nationw ide); S Rep. No. 71-1445, at I (1931) (federal go vern m en t h a s em b a rk e d on new , large-scale public w orks co n stru ctio n program ); H R R ep N o. 71-2453, at 1 (1 9 3 1 ) (sa m e), 74 C ong. R ec 6 5 11 (1931) (rem arks o f Rep. B acon) (sam e). 7 See, e g , T h ieb lo t at 28 (indicating th a t average con stru ction w ages had fallen to h a lf their pre- D epression rates by 1931); 74 C ong Rec 6 5 1 0 (1931) (rem ark s o f Rep. Johnson hypothesizing w age reduc­ tion fro m $4 to $2 75 p er d ay )

114 Reconsideration o f A pplicability o f the D avis-B acon A ct to the Veterans A dm inistration's Lease o f M edical F acilities

desperate laborers, in some cases imported from other parts of the country.8 While Congress was presented with evidence that the loss of jobs to outsiders was rare, see 74 Cong. Rec. at 6506 (chart noting origins of workers on public building proj­ ects), the evidence before Congress also showed that it did occur. Representative Bacon, for example, who sponsored the bill in the House, saw a contract for a Vet­ erans’ Bureau hospital in his district go to an outside contractor who employed laborers from Alabama, “huddled in shacks living under most wretched conditions and being paid wages far below the standard,” 74 Cong. Rec. at 6510 (statement of Rep. LaGuardia). Meanwhile, unemployed workers in Representative Bacon’s own community apparently remained jobless, unable or unwilling to compete for jobs with those willing to accept the substandard conditions. This view of the purposes of the Act — that government should not act to de­ press labor conditions, but should ensure that government and government con­ tractors employ workers at fair wages — continues to prevail. See, e.g., Walsh v. Schlecht, 429 U.S. 401, 411 (1977) (Davis-Bacon protects workers, not contrac­ tors, setting a floor but not a ceiling for wage rates); United States v. Binghamton Constr. Co., 347 U.S. 171, 177 (1954) (same), Unity Bank <& Trust Co. v. United States, 756 F.2d 870, 873 (Fed. Cir. 1985) (same); Building and Constr. Trades D e p ’t, AFL-CIO v. Donovan, 712 F.2d 611, 613-14, 620-21 (D.C. Cir. 1983) (noting that Davis-Bacon was designed to counteract the potential effect of the government’s low-bid requirement on wages), cert, denied, 464 U.S. 1069 (1984).9 In view of these purposes, we believe that the device of lease-construction, at least to the extent that it is used to build public works outside the prevailing wage sys­ tem, lies well within the contours of the Act. Whether the government construction is paid for upfront or by means of a long-term lease is of no significance to workers

8 See. e g , S Rep No. 7 4 -1 155, at 2, H.R Rep No. 71-2453, at 2, 74 C ong Rec at 6510 Som e com - m entators have suggested that the purposes o f ihe Act w ere not al! benign and lhat som e o f ihe concern about outside labor m ay have been based on the fact that som e o f the new com petition for jo b s cam e from black w orkers See T hieblot at 30, David E Bernstein, Roots o f the ‘U n d e rc la ss’ The D ecline o j L aissez-F aire Jurispru d en ce a n d the R ise o f Racist L a b o r L e g isla tio n, 43 Am. U L Rev 85, 1 14-16 (1993) (arguing that D avis-B acon reinforced labor u nions’ discrim ination a g ain st black w orkers by elim inating nonunion w ork­ e rs ’ ability lo com pete by offering to work for low er w ages), 74 C ong. Rec at 6513 (rem arks o f Rep. A ll­ good). Indeed, ihe contract to build the V eterans' hospital in R epresentative B ac o n 's d istrict w ent lo an A labam a co n tracto r w ho b rought black laborers to Long Island to build the project B ernstein at 114, see also 74 C ong Rec. at 6513 (rem arks o f Rep A llgood, apparently concerning the project in R ep. B aco n ’s district) O th er C ongressm en, how ever, w ithout discussing the race o f the w orkers involved, argued that the im ported w orkers were being exploited by the substandard w age rates and w orking conditions. See, e.g , 74 C ong. Rec at 6 5 1 0 (rem arks o f Rep L aG uardia concerning the situation in Rep B aco n 's district) 9 See also T hieblot at 122-23 (quoting D avis-B acon W orks a n d W orks W ellr: A n Interview w ith Jorm er U.S. L a b o r S ecreta ry Ray M arshall, 3 B uilders Special Rep (M arch 7, 1981), in turn quoting Secretary M arshall as staling lhat ‘‘[i]he basic rationale for ihe D avis-B acon law is really quite sim ple It is based on the idea that the federal governm ent should not use ta x p a y ers’ m oney to undercut local area em ploym ent conditions [I]f the federal governm ent perm itted its construction dollars lo be used [in this way to] undercut prevailing pay standards[, w]e w ould be helping to drive dow n w ages in any com m unity in which such federal o r federally-assisted construction was taking place . ")

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who must take lower pay or to local contractors forced to compete by cutting labor costs. The effect on them is the same. While the public generally has an undeniable interest in paying as little as pos­ sible 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.

C.

The Department of Labor’s longstanding interpretation of the Davis-Bacon Act is designed to counteract just such evasion, and the views of the courts, Comptrol­ lers General, and Attorneys General, with few exceptions, support this interpreta­ tion of the Act. The Department of Labor consistently has taken the position that a contract is a contract for construction within the meaning of the Davis-Bacon Act “if more than an incidental amount of construction-type activity is involved in the performance of a government contract.” 1987 WAB Opinion at 2 (quoting In re Military Housing, Ft. Drum, WAB Case No. 85-16, at 4 (Aug. 23, 1985)). Similarly, the Federal Acquisition Regulations instruct agencies that Davis-Bacon wage rates should be included in nonconstruction contracts involving some construction work when “[t]he contract contains specific requirements for a substantial amount of construction work,” 48 C.F.R. § 22.402(b)(ii) (1994), 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)(iii). See also 29 C.F.R. § 4 .1 16(c)(2) (1994) (providing that Davis-Bacon wage rates shall apply in similar circumstances in contracts otherwise covered by the wage and hour provisions of the Service Contract Act). This interpretation has been approved by the Comptroller General. In re Fischer E n g’g & Maintenance Co., No. B-223359, 1986 WL 64093, at 2 (C.G. Sept. 16, 1986) (Davis-Bacon applies to lease-construction of military housing, so long as project is “clothed sufficiently with elements indicating that [it] indeed . . . serv[es] a public purpose”); In re D.E. Clarke, No. B-146824, 1975 WL 8417, at 1 (C.G. May 28, 1975) (contract is covered if it “essentially or substantially contem­ plates the performance of work described by the enumerated items”); 40 Comp. Gen. 565, 565, 567 (1961) (“[t]he test for determination of the applicability of the

116 R econsideration o f A pplicability o f the D avis-B acon A ct to the Veterans A dm inistration's Lease o f M edical Facilities

Davis-Bacon Act . . . is not the nature of the specific work but the nature of the contract, that is, whether the contract essentially or substantially contemplates the performance of work described by the enumerated items ‘construction, alteration, and/or repair, including painting and decorating’”; applying this standard to a con­ tract ostensibly dealing with “maintenance,” the Comptroller General ultimately determined that the work required was in fact maintenance rather than construc­ tion); 34 Comp. Gen. 697 (1955) (lease-purchase agreements fall within the Davis- Bacon and related Acts); 10 Comp. Gen. 461 (1931) (Act applies to temporary housing and other buildings erected for use during construction of the Hoover Dam). The 1988 O.L.C. Opinion, however, relied heavily on a 1962 Comptroller Gen­ eral opinion at odds with the Comptroller’s other cases, without discussing the more recent cases. In that opinion, the Comptroller General argued that leases are never contracts for the construction of public works. 42 Comp. Gen. 47 (1962). The 1962 opinion addressed the concept of lease and lease-option contracts in the abstract, and concluded that such contracts are not Davis-Bacon contracts because “of the basic distinction which exists between the procurement of a right to use improvements, even though constructed for that particular usage, and the actual procurement of such improvements.” Id. at 49. The opinion asserted that “the mere fact that construction work is prerequisite to supplying a public need or use does not give such work a Davis-Bacon status.” Id. In rejecting such a sweeping interpretation of the Davis-Bacon Act, the Comptroller General unnecessarily sug­ gested that no leases are covered unless the government ultimately acquires title to the work. In contrast, the Attorney General had already determined that acquisi­ tion of title was not necessary to bring a contract within the Davis-Bacon Act, Wage Law Applicable to Alley Dwelling Authority fo r the District o f Columbia, 38 Op. Att’y Gen. 229, 233 (1935); and the courts had reached the same conclusion in construing the nearly identical language of the closely related Miller Act, e.g., United States ex rel. Noland Co. v. Irwin, 316 U.S. 23 (1942) (construction of Howard University library). In a later opinion, the Comptroller General emphatically rejected the 1962 opinion’s reading of the statute, approving instead the Department of Labor’s analysis of a particular lease-construction contract similar to the one involved in the 1988 O.L.C. Opinion. In re Fischer Eng’g & Maintenance Co., No. B- 223359, 1986 WL 64093 (C.G. Sept. 26, 1986). The Fischer Engineering case emphasized that the 1962 opinion had addressed the issue only in the abstract. Even were we to regard the decisions of the Comptroller General as controlling, which we do not, we think the reasoning of the more recent Fischer Engineering case is both more consistent with other Comptroller General opinions and more accurate in its reading of the Act, because it is more attentive to the underlying intent of the Act.

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Similarly, the courts have identified the Davis-Bacon Act as a remedial statute that should be “liberally construed to effectuate its beneficent purposes.” E.g., Drivers Local Union No. 695 v. NLRB, 361 F.2d 547, 553 n.23 (D.C. Cir. 1966) (citing United States v. Binghamton Constr. Co., 347 U.S. 171, 177 (1954), for conclusion that statute is remedial). While the courts have not addressed the lease- construction contract situation directly, except in the Turnage case (which con­ cluded that the Crown Point contract was covered by the Davis-Bacon Act), they have made clear that public ownership is not essential for a finding that a contract is for construction of a public work under the related Miller Act. See, e.g., United States ex rel. N oland Co. v. Irwin, 316 U.S. 23 (1942) (Howard University li­ brary). This and similar cases did not even consider the possibility that the con­ tracts were not for construction; rather they focused on whether the construction was of a public work, defining the term as “including ‘any projects . . . carried on either directly by public authority or with public aid to serve the interests of the general public.’” Id. at 28, 30 (quoting the National Industrial Recovery Act’s definition of “public work” and applying it to a Miller Act bond case). The classic definition of a public work for purposes of the Depression-era labor statutes was set forth in the case of Peterson v. United States, 119 F.2d 145 (6th Cir. 1941), which stated that

The term “public work” as used in the [Miller Act] is without tech­ nical meaning and is to be understood in its plain, obvious and ra­ tional sense. The Congress was not dealing with mere technicalities in the passage of the Act in question. “Public work” as used in the act includes any work in which the United States is interested and which is done for the public and for which the United States is authorized to expend funds.

There is nothing in [Title Guaranty & Trust Co. v. Crane Co., 219 U.S. 24 (1910) (holding that ships are public works under predeces­ sor Heard Act, though not on public soil, because they are publicly owned)] from which an inference may be drawn that ownership was the sole criterion. To so circumscribe the act would destroy its purpose.

Id. at 147. See also 29 C.F.R. § 5.2(k) (1994) (project is a public work if it is “carried on directly by authority of or with funds of a Federal agency,” and “serve[s] the interest of the general public regardless of whether title thereof is in a Federal agency”). While Peterson and other cases do not address directly the question whether a lease-construction contract is covered by the Davis-Bacon Act, they do suggest that a technical reading of the Act that defeats its purpose is inconsistent with the text

118 Reconsideration o f A pplicability o f the D avis-B acon A ct to the Veterans A dm inistration's Lease o f M edical Facilities

as well as the purpose of the Act. See also Title Guaranty & Trust Co. v. Crane Co., 219 U.S. 24 (1910) (ships are public works under Heard Act though not af­ fixed to public property); Applicability o f Certain Acts to Construction, Alteration, and Repair o f Coast Guard Vessels, Boats, and Aircraft, 38 Op. Att’y Gen. 418 (1936) (same, under Davis-Bacon Act); Fidelity and Deposit Co. v. Harris, 360 F.2d 402, 408 (9th Cir. 1966) (construction of building for the Jet Propulsion Laboratory at the California Institute of Technology is a public work under the Miller Act); Autrey v. Williams and Dunlap, 343 F.2d 730, 734 (5th Cir. 1965) (Capehart Housing Act military housing project is a public work under Miller Act, “[although title . . . does not pass immediately to the United States, due to the novel financing plan” of the Capehart Act); United States ex rel. Gamerston & Green Lumber Co. v. Phoenix Assurance Co., 163 F. Supp. 713 (N.D. Cal. 1958) (Miiler Act applies to construction of post library at the Presidio, though paid for from nonappropriated funds).10 Finally, past Attorney General opinions also support a broad reading of the Act. See, e.g., Federal Aid Highway Program — Prevailing Wage Determination, 41 Op. Att’y Gen. 488, 500-01 (1960) (definition of mechanics and laborers under Davis-Bacon Act “is not to be given a niggardly construction” because the Act “is to be interpreted broadly to accomplish its purpose”); Wage Law Applicable to Alley Dwelling Authority fo r the District o f Columbia, 38 Op. Att’y Gen. 229, 233 (1935) (“broad construction” that Act covers buildings that may be resold to pri­ vate parties is “supported both by the language of the Act and by the apparent pur­

10 T he 1988 O pinion did not address the question w hether the clinic construction called for u n d e r the C row n Point contract fell w ithin the definition o f a “public buildm g[] or public w ork[]” for purposes o f the D avis-B acon Act, and the status o f the C row n Point contract is no longer a m atter o f dispute in light of Building a n d C onstr. Trades D e p ’t, A F L -C IO v Turnage, 705 F. Supp 5 (D D C 1988) (holding lhat lease- construction o f V eterans A dm inistration outpatient clinic u n d er the C row n Point contract was c o v e re d by D avis-B acon). W ith respect to the C row n Point contract, how ever, we w ould note that v eterans’ hospitals, w hen constructed under ordinary financing m echanism s, w ere am ong the principal public buildings that the drafters had in mind, see, e.g , 74 C ong. Rec 6510-11 (1931) (rem arks o f R ep B acon), id at 6 5 0 6 (chart), and unquestionably serve a public purpose Furtherm ore, it is w ell established that the governm ent n eed not have eith er initial o r perm anent title to a building for the construction project to be deem ed a public w ork (though governm ent-ow ned property presents an easier case) See, e.g.. W age Law A p p lica b le to A lley D w elling A u th o rity f o r the D istrict oj C olum bia, 38 Op. A tt'y G en 229 (1935) (housing constructed under D C. A lley D w elling A uthority Act o f 1934 is a public work even though it may later be sold to p rivate p a r­ ties), U nited States ex rel. N oland Co v. In vin , 316 U S. 23, 2 9-30 (1942) (construction o f H ow ard U n iv e r­ sity library is a public work under related M iller Act, though library w as to be the property o f a private university), P eterson v. U nited States, 1 19 F 2d 145 (6th C ir 1941) (relocation of privately-ow ned railw ay that w ould be flooded by federal d am is a public w ork) W e believe that, in general, the d eterm ination w hether a lease-construction contract calls for construction o f a public building or public work likely will depend on the details o f the p articu lar arrangem ent. T hese m ay include such factors as the length o f the lease, the extent o f governm ent involvem ent in the construction project, the extent to w hich the c onstruction will be used for private rather than public purposes, the extent to w hich the costs of construction will be fully paid for by the lease paym ents, and w hether the contract is w ritten as a lease solely to evade the requirem ents o f the D avis-B acon Act, a possibility contem plated by the d issen ter from the 1987 W AB O pinion. H ow ever, we further believe that the fact that a novel financing m echanism is em ployed should not in itself d efeat the reading o f such a contract as being a contract for construction o f a public building or public work.

119 Opinions o f th e Office o f L e g a l C ounsel

poses intended to be accomplished”). The sole exception to this trend is the 1988 O.L.C. Opinion. The 1988 Opinion quoted language from the 1935 and 1960 Attorney General opinions to suggest that the use of direct federal funds was an absolute requirement for Davis-Bacon coverage, citing a statement in the 1935 opinion that the Act ap­ plied to “buildings erected with funds supplied by the Congress,” 38 Op. Att’y Gen. at 233, and a statement in the 1960 opinion that it applied to “direct Federal construction,” 41 Op. Att’y Gen. at 495. Neither the opinions nor the quoted ex­ cerpts suggest that these are the only situations in which Davis-Bacon would apply. In both opinions, the Attorney General explicitly rejected narrow readings of the Act in favor of quite expansive ones, and used the “federal funds” concept to argue that a narrower reading would undermine the Act and the public goals it was de­ signed to serve. Neither opinion discussed lease-construction or any similar con­ struction financing mechanism, nor did either opinion suggest that the Act would not apply if the construction was not built with federal funds but instead was built under federal direction and later paid for with federal funds. A consideration of the context in which these opinions arose will illustrate the point. The 1935 opin­ ion involved construction and demolition of buildings under the D.C. Alley Dwelling Authority, which was empowered to tear down old buildings and con­ struct new ones to redevelop alleys in the District of Columbia. Because the Act contemplated that the new dwellings might later be leased or sold to private parties, it was contended that Davis-Bacon should not apply. Attorney General Cummings, however, determined that the prospect that the buildings would be sold did not detract from the public character o f the construction:

I approve the broad construction which has thus been placed upon the statute and regard it as supported both by the language of the Act and by the apparent purposes intended to be accomplished. Under this view buildings erected with funds supplied by the Con­ gress for the furtherance of public purposes are not to be distin­ guished, so as to affect the application of the statute, upon consideration of their character or the particular public purpose which their building is intended to further; nor do I regard it as controlling that some of them will be, or may be, conveyed for a consideration to private persons at some time after completion.

38 Op. Att’y Gen. at 233. The 1988 Opinion’s quote from the 1960 opinion is itself a quote from the leg­ islative history of the Federal Highway and Highway Revenue Acts of 1956, and was drawn from a section of the history urging that Davis-Bacon wage standards should apply not only to “direct Federal construction” — highways constructed by the government (without regard to financing mechanisms) — but also to highways

120 Reconsideration o f A pplicability o f the D avis-B acon A ct to the Veterans A d m in istra tio n 's Lease o f M edical F acilities

constructed by state and local governments, with federal financial assistance. 41 Op. Att’y Gen. at 495; H.R. Rep. No. 84-2022, at 12-13 (1956); 23 U.S.C. § 113 (successor Act). While the quoted legislative history indicates that the Congress thought that federally-aided nonfederal highway projects were not covered, this distinction is irrelevant to the question at issue here. Neither the 1960 opinion nor the Highway Act nor the quoted legislative history defines “direct Federal con­ struction” in such a way as to exclude lease-construction contracts. The only light these sources shed on the question of how lease-construction should be categorized is to emphasize that where the government is financially responsible for construc­ tion costs, the purposes of the Davis-Bacon Act may be implicated. Furthermore, this commentary was meant as background. The question at issue in the 1960 opinion was whether independent owner-operators of trucks on a Davis-Bacon project were nonetheless employee “mechanics and laborers,” subject to the Act’s prevailing wage requirement. The Attorney General concluded that they were, in part because a “niggardly construction” of the term “mechanics and laborers” would be inconsistent with the remedial purposes of the Act. 41 Op. Att’y Gen. at 500. In short, the cited Attorney General opinions interpreted the Davis-Bacon Act expansively to ensure that its beneficial purposes would not be evaded. Conse­ quently, we do not think that these opinions support the argument that particular financing mechanisms remove public construction projects, such as those paid for by long-term lease, from the Act.

D.

One final argument has been put forth to support the conclusion reached by the 1988 Opinion: that Congress, in other statutes, explicitly indicated that Davis- Bacon requirements would apply to particular lease contracts; and that these stat­ utes “indicate[] not only that Congress knows how to insure that leases are covered by the Davis-Bacon Act in those few situations where it so chooses, but also that section 276a(a) by itself does not include leases.” 1988 Opinion at 95. The pri­ mary statute relied upon is 39 U.S.C. § 410(d)(1), which states that

A lease agreement by the Postal Service for rent of net interior space in excess of 6,500 square feet in any building or facility, or part of a building or facility, to be occupied for purposes of the Postal Service shall include a provision that all laborers and me­ chanics employed in the construction, modification, alteration, re­ pair, painting, decoration, or other improvement of the building or space covered by the agreement, or improvement at the site . . . shall be paid [Davis-Bacon wage rates].

121 O pinions o f th e O ffice o f L e g a l C ounsel

This statute covers not just the lease-construction of entire buildings, but construc­ tion involved in short-term use o f relatively small amounts of space in larger buildings, including incidental construction and improvements beyond those cited in the Davis-Bacon Act. It would take a more expansive reading of the Davis- Bacon Act than Labor has urged in this case to match this coverage. In light of this, the House Report cited in the 1988 Opinion almost certainly was correct in concluding that the statute extended Davis-Bacon coverage. H.R. Rep. No. 91- 1104, at 27 (1970). Too, the Act was passed in 1970, before the Comptroller Gen­ eral reversed his 1962 decision that Davis-Bacon did not apply to leases. In view of these factors, we do not believe that this statute sheds much light on how Con­ gress intended Davis-Bacon to apply in other lease-construction settings.

III.

The Department of Labor also suggests that we should defer to its determination whether a particular contract is covered by Davis-Bacon, citing 29 C.F.R. §§ 5.13 and 7.1(d) (1994), Reorg. Plan No. 14 of 1950, 3 C.F.R. 1007 (1950), reprinted in 5 U.S.C. app. at 1261 (1988),11 and a variety of cases. While the authorities cited clearly indicate that Labor has authority to set wage rates, they do not indicate whether Labor’s resolution of legal questions relating to coverage disputes super­ cedes the Attorney General’s authority, under Executive Order No. 12146, 3 C.F.R. 409 (1979), to resolve legal disputes between executive branch agencies. Rather, these sources state that the contracting agency has the initial responsibility for determining coverage, see, e.g., Universities Research A ss’n v. Coutu, 450 U.S. 754, 759 n.6, 760 (1981); North G eorgia Building and Constr. Trades Council v. Goldschmidt, 621 F.2d 697, 703 (5th Cir. 1980); and that the Reorg. Plan and La­ bor Department regulations provide for review by Labor of contracting agencies’ coverage determinations. Reorg. Plan No. 14 of 1950; 29 C.F.R. §§ 5.13 and 7 .1(d); Coutu, 450 U.S. at 760; North Georgia, 621 F.2d at 704.12

11 R eorg Plan No. 14 provides In o rd er to assu re c o o rd in atio n of ad m in istratio n and co n sistency o f enforcem ent o f ihe labor stan d a rd s pro v isio n s o f e ac h o f the fo llo w in g Acts [in clu d ing the D avis-B acon A ci] by the F e d ­ eral agencies responsible for the adm inistration thereof, the Secretary o f Labor shall prescribe ap p ro p ria te stan d ard s, regulations, and procedures, w hich shall be observed by these agencies, and cau se lo b e m ade b y the D epartm ent o f Labor such in vestigations, with respect to co m p li­ ance w ith and e n fo rcem en t o f such labor standards, as he d eem s desirable 5 U .S C app at 1261 12 W hile Ihe N o rth G eo rg ia case also stales that the W age A ppeals B oard is “authorized [by 29 C F.R. § 7 1(d)] to act w ith finality on b eh alf of the S ecretary o f L ab o r” in review ing determ inauons m ade by agen­ cies in ap p ly in g the D av is-B aco n A ct, 621 F 2 d at 704, the q u o te d language indicates only that the W A B has final a u th o rity to act fo r the Secretary of L a b o r and does not indicate w hether, and lo w hai extent, the D e­ p a rtm e n t’s ex ercise o f that au th o rity is rev iew ab le by the A tto rney G eneral or by the courts. 29 C F R § 7 .1 (d ) say s only th a t the B oard “ shall act as fully and finally as m ight the Secretary o f Labor concerning such m a tte rs.”

122 Reconsideration o f A pplicability o f the D avis-B acon A ct to the Veterans A dm inistration ’s Lease o f M edical Facilities

It is true that Reorganization Plan No. 14 of 1950 seeks coordination of admini­ stration and consistency of enforcement of, among other statutes, the Davis-Bacon Act, and that the Plan places the principal authority for bringing about consistent administration of the statute with the Department of Labor. 5 U.S.C. app. at 1261. That authority, however, must be reconciled with the authority of the Attorney General to make final decisions for the executive branch on legal determinations under Executive Order No. 12146, which provides that the Attorney General may resolve “legal disputes” between executive agencies. See also 28 U.S.C. § 511 (“The Attorney General shall give [her] advice and opinion on questions of law when required by the President”) and 28 U.S.C. § 512 (“The head of an executive department may require the opinion of the Attorney General on questions of law arising in the administration of his department”). We believe that, read together, the Davis-Bacon Act, the Reorganization Plan, 28 U.S.C. §§ 511 and 512, and Executive Order No. 12146, while granting the primary responsibility for inter­ preting Davis-Bacon to Labor, also confer on the Attorney General, at the request of appropriate officials, the authority to review the general legal principles under­ lying certain of the Secretary’s decisions under the Act. Accord Application o f the Davis-Bacon Act to Urban Development Projects that Receive Partial Federal Funding, 11 Op. O.L.C. 92, 94-95 (1987) (Reorganization Plan 14 “speaks only to the respective functions of HUD [the contracting agency] and Labor in adminis­ tering [Davis-Bacon provisions of] the Housing and Community Development Act,” and “does not preclude either the head of a department from seeking, or the Attorney General from rendering, an opinion on a question of law arising in the administration of his department”).13

13 T h is view is consistent with prior decisions o f the A ttorney G eneral som etim es cited for the pro p o sitio n that Labor has final authority to interpret the D avis-B acon Act. Thus, for exam ple, in F ederal A id H ighw ay P rogram — P revailing Wage D e term in a tio n, 41 O p A tt’y G en. 488 (1960), the A ttorney G eneral agreed only lhat Labor has authority under the R eorganization Plan and the statute to determ ine w hether certain em ployees w ere 'la b o re rs or m echanics” w ithin the m eaning o f the D avis-B acon A ct — not w hether the contract itse lf was covered. Since this opinion resolved a dispute betw een the D epartm ents o f L abor and C om m erce o v er w hich o f those iw o agencies should m ake the determ ination, it did not fully ad d ress the question o f the extent o f the authority o f the D epartm ent o f Justice to review Labor D epartm ent legal d e te r­ m inations under the Act Sim ilarly, in O ffice o f Federal Procurem ent P olicy — A u th o rity to D eterm ine W hether the S ervice C on­ tract Act, W al.sh-H ealev Act, o r D avis-B acon A ct A p p lies to C lasses o f F ederal P rocurem ent C o ntracts, 43 O p. A tt’y G en 150 (1979), w hile the A ttorney G eneral did conclude thai the D epartm ent o f L abor had authority to m ake contract coverage determ inations under the W alsh-H ealey and Service-C ontract A cts that are ' ‘binding on the procurem ent agencies,” id at 161, and that the O ffice of Federal Procurem ent Policy does not have statutory authority to m ake coverage d eterm inations under those statutes, id , these statem ents do not underm ine the authority o f the A ttorney G eneral to review legal aspects o f interagency d isputes relat­ ing to coverage decisions made by the D epartm ent o f Labor Furtherm ore, the 1979 A ttorney G eneral o p in ­ ion m ade no such express determ ination concerning the S ecretary ’s authority to m ake final D avis-B acon coverage decisions, and indeed, no one had contended that D avis-B acon covered the p articular c o n tract at issue in that case. S e e id. at 151 W hile the 1979 opinion also stated that L abor has authority to m ake c o v ­ erage determ inations under ’‘the contract labor standards statu tes,” including D avis-B acon, id at 153, this statem en t does not address the disputed question: w hether this authority precludes the D epartm ent o f Justice from review ing such decisions, and n eith er the opinion nor the cases cited in support o f this passage indicate

123 Opinions o f th e Office o f L egal C ounsel

IV.

For these reasons, we conclude that the ruling of the 1988 O.L.C. Opinion that the plain language of the Davis-Bacon Act indicates that it can never apply to a lease that calls for construction of a public work was incorrect. We believe that the determination whether a particular lease-construction contract is a “contract. . . for construction” of a public building or public work within the meaning of the Davis- Bacon Act will depend upon the details of the particular agreement.

WALTER DELLINGER Assistant Attorney General Office o f Legal Counsel

that the A tto rn ey G eneral m ay not address leg al q uestions arising from Labor D epartm ent D avis-B acon coverag e d ecisions.