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I have a firm fixed price construction contract with no options. The contractor has a classification that was not contained in wage determination. The SF 1444 was submitted to the DOL. The DOL denied the request and responded with an approved rate much higher than the rate proposed by the contractor. The DOL states that the contractor must pay the applicable rate to the start of performance of the craft but does not state that the contractor is allowed an equitable adjustment.

Is the contractor allowed an equitable adjustment for this much higher rate?

Any help would be greatly appreciated. Thank you.

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I know in a Firm Fixed Price contract the contractor assumes the risk with price increases. I am asking my question because I have been getting conflicting information from people I work with.

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I did. I just didn't know if this was really considered a modification to a Wage Determination. This really isn't changing the wage determination, it is adding a classification that wasn't listed in the wage determination. Maybe I am making this harder than it really is.

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C Culham,

Ask a Professor seems to have your same view: https://dap.dau.mil/aap/pages/qdetails.aspx?cgiSubjectAreaID=3&cgiQuestionID=22941

The Air Force doesn't have the same view. See the bottom of page 12 of their Davis-Bacon Desktop Guide:

http://www.google.com/url?sa=t&rct=j&q=&esrc=s&frm=1&source=web&cd=10&cad=rja&uact=8&ved=0CGoQFjAJ&url=http%3A%2F%2Fww3.safaq.hq.af.mil%2Fshared%2Fmedia%2Fdocument%2FAFD-080711-076.doc&ei=gpReU9OlNYTgsATz_4D4CQ&usg=AFQjCNFprFBAalV_om2Z5_ADOzFc79qvoQ It says that no adjustment is made to contract price regardless of the nature of the DOL's response.

This is the reason why I am so confused as to what I should do.

I don't work for the Air Force, I work for the VA, however, I would think that the response for this topic would be the same no matter who you worked for.

Meg

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I might be suspicious of a contractor whose rate of pay for the omitted rate is significantly below the wage determination rate. What information do you have to prove he really pays the lower rate, rather than he noticed a defect in the wage determination and is trying to take advantage of it?

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The contractor had a reasonable basis for why they proposed the rate they did. The contractor proposed the hourly rate from the prevailing wages for the county the work was being performed in. This was the rate posted to the Office of the Labor Commissioner for the State.

I can prove that the contractor was paying the rate proposed as I have been receiving the certified payroll before the DOL added the classification to the Wage Determination at a higher rate.

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MegB,

You ask, "Is the contractor allowed an equitable adjustment for this much higher rate?"

You don't have to answer this question now, unless you just want to give the contractor a gift of an equitable adjustment before the contractor even asked for one (and substantiated it).

If the contractor is entitled to an equitable adjustment, the contractor will tell you -- the contractor will cite chapter and verse -- the contractor might cite a contract clause that proves its entitlement, or it might make a claim under the contract's Disputes clause. Either way, isn't the burden on the contractor to make its case?

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Is the contractor allowed an equitable adjustment for this much higher rate?

Sure, if you decide to allow it. However, they are not entitled to it and you are not required to pay it. It may not seem fair, but that's the way it is.

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Unless the Contracting Officer actually changes the contract, then there is no "change" to the contract and no basis for entitlement. The contractor could have pursued this prior to award, but instead took a chance. So contractually this is on them as unfair as it may seem. I had a similiar thing happen in a SCA situation, and that was the outcome.

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TAP,

What exaclty was told to the contractor? Too bad so sad, you should have pursued this before award?

What I am having a hard time with is that I am dealing with a SDVOSB who will be potentially out of $30K. $30K is not that big of a deal for a large business, but it is a big deal to a small one.

On a side note: One of my co-workers recently had a contractor submit an SF1444 during the solicitation phase. My co-worker submitted the SF1444 to the DOL and was told by the DOL that they wouldn't process the request until the award was made. In her situation, the contractor was pursuing this prior to award and was told to wait.

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Meg – Sorry but I was away for a day. Having read the further discussion in the thread and done some additional research I think you are in fact left to whatever the CO would like to determine in this particular case.

In my research of the word “modification” as it applies to the FAR 22.404-6 reference trying to determine its definition is confusing at best. I do not believe it has a specific meaning relating to the whole of FAR Part 22.4 nor to the specifics of the related DOL 29 CFR that covers Davis Bacon. I say this noting that “all written actions” is used in the 22.404-6 reference as well as “modification”.

Reading through the posts I would agree that you it appears that you have a “Additional Classification” as provided for FAR 22.406-3 and this subpart of the FAR does not address the equitable adjustment matter but it does call the DOL’s final decision an “action”.

In the end I believe you are left to determining whether you think the additional classification action is applicable as a “written action” of FAR 22.404-6. If you believe to be then the FAR seems specific that you “shall” modify the contract to include the new classification and if you do so then you “shall” equitably adjust the contract price (REF: 22.404-6(B)(5)).

The other route, as has been suggested, is to sit back and wait for the possible request for adjustment from the contractor and address then, but you are back to the matter of determining whether a equitable adjustment is due. I completely understand those that say that the contractor is responsible for cost of the additional classification and have used that position in the past myself. However as every case has its own facts and circumstances this is that area of CO discretion in my view.

Overall I would offer that it is a confusing area that even the courts cannot come to full agreement on. Case in point is this reference I recalled but had to dig to find. I would not hold to it being a determining factor because it is not spot on but is simply supportive of the varied responses you are getting here. https://law.resource.org/pub/us/case/reporter/F2/925/925.F2d.1425.90-1185.html

Sorry I could not be of more help.

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A “conformance” per FAR 52.222-6 Davis-Bacon Act approves additional classifications. It does not change the contract or add a new wage determination. Theoretically the conformance process just enforces © (1) (iii) below ensuring the contractor pays a reasonable rate in compliance with the clause.

“…©(1) The Contracting Officer shall require that any class of laborers or mechanics which is not listed in the wage determination and which is to be employed under the contract shall be classified in conformance with the wage determination. The Contracting Officer shall approve an additional classification and wage rate and fringe benefits therefor only when all the following criteria have been met:

… (iii) The proposed wage rate, including any bona fide fringe benefits, bears a reasonable relationship to the wage rates contained in the wage determination.”

The contractor in my case was told this was between them and DOL. They could dispute it with DOL, but felt it was in their best interest to agree instead so they had to eat the costs. They were a SDVOSB as well, and the amount was over $50K.

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I have never worked with Davis-Bacon, so you will need to check this analysis. It seems to me you start with the Davis-Bacon Act clause, 52.222-6, and go to paragraph ( c ), which describes what to do if there is a class of laborers or mechanics which is not listed in the wage determination. Once you get the correct wage, either by agreement between the contractor and the laborers and mechanics IAW ( c )(2) or the DOL IAW ( c )(3), it becomes the wage for the contract from the first day on which work is performed in the classification (which I think is from the beginning of the contract, not when the wage determination is made a part of the contract). There is no provision for an equitable adjustment. Since this is not a modification to an existing wage determination as described in FAR 22.404-6, the equitable adjustment provided under that section would not apply (BTW, how is this equitable adjustment included in the contract?). The KR may well be SOL.

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I had this happen on a DBA covered contract as well. What I told the 8(a) contractor was:

“See the attached response from the US Department of Labor to your request for an additional classification and wage rate to General Decision Number XXXXXX, contract XXXXXX-XX-X-XXXX. As stated in the letter, the conformed rate for "Glazier" is $12.92 per hour. This is the minimum wage for all workers performing in this classification under this contract. This conformed wage rate will be paid retroactively to the first day work was performed in this classification. No contract modification or price adjustment shall occur as a result of this conformance.”

They had proposed a wage rate of $10.00 and all were in agreement, but DOL said $12.92 per hour.

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The contractor had a reasonable basis for why they proposed the rate they did. The contractor proposed the hourly rate from the prevailing wages for the county the work was being performed in. This was the rate posted to the Office of the Labor Commissioner for the State.

I can prove that the contractor was paying the rate proposed as I have been receiving the certified payroll before the DOL added the classification to the Wage Determination at a higher rate.

Does the proposed (denied) wage rate, including any bona fide fringe benefits, bear a reasonable relationship to the wage rates contained in the contract's wage determination in accordance with 29 CFR 5.5 (a) (1) (ii)(A)(3)? That may have a bearing upon the DOL's position. Did the contractor appeal the decision to DOL?

The Government's defense regarding risk for additional classifications not included in the contract wage decision (in the absence of erroneous representation by the contracting agency of the character of the work) might be that that "...any failure on its part to investigate the local conditions that affect the cost of the work would not relieve it of the obligation to perform the work without additional expense to the government" pursuant to contract clause 52.236-3, Site Investigation and Conditions Affecting the Work. See note 3 of Emerald Maintenance, Inc. vs. US, 925 F.2d 1425, Feb. 12, 1991, cited in Carl's post 15 above at https://law.resource.org/pub/us/case/reporter/F2/925/925.F2d.1425.90-1185.html

By the way, did I just miss this above but what advice did you get from your legal counsel? Were they among the people you work with who gave you information? Surely the VA must have legal counsel who specialize in construction contract labor issues. I assume that attorney's are involved in each Board/Court decision involving VA construction contracts.

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The contractor had a reasonable basis for why they proposed the rate they did. The contractor proposed the hourly rate from the prevailing wages for the county the work was being performed in. This was the rate posted to the Office of the Labor Commissioner for the State.

I can prove that the contractor was paying the rate proposed as I have been receiving the certified payroll before the DOL added the classification to the Wage Determination at a higher rate.

To me, local prevailing wage rates aren't necessarily persuasive in establishing a reasonable basis for proposed D-B wage rates. How do the contractor's other labor categories using the rates posted to the Office of the Labor Commissioner for the State compare with the D-B wage rates for those categories?

Although this was over 35 years ago, I had several experiences as a consulting engineer working with municipalities in Wisconsin, where we directly compared D-B wage rates with State Prevailing Wage Rates for the same type of construction. I think that Wisconsin used a cross-section or average of both union and non-union firms while DOL was then using only Union wages.

The US Department of Labor's Davis-Bacon Wage Rates were consistently higher than the Wisconsin Department of Labor's Prevailing Wage Rates. We were required to use D-B Wage Decisions for any Federally funded work in the geographic areas that we were also doing the same type of work that used local government funding. The locally funded public works were subject to Wis. prevailing wage rates.

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Guest Vern Edwards

I have a firm fixed price construction contract with no options. The contractor has a classification that was not contained in wage determination. The SF 1444 was submitted to the DOL. The DOL denied the request and responded with an approved rate much higher than the rate proposed by the contractor. The DOL states that the contractor must pay the applicable rate to the start of performance of the craft but does not state that the contractor is allowed an equitable adjustment.

Is the contractor allowed an equitable adjustment for this much higher rate?

Any help would be greatly appreciated. Thank you.

The contractor is not entitled to a price adjustment. TAP is right. The case law for Davis-Bacon is the same as it is for the Service Contract Act.

Here is a 1994 GSBCA decision that directly addresses the question at hand with respect to the Davis-Bacon Act: Merit Construction Co. v. GSA, GSBCA 12426, 94-3 BCA ¶ 26969. The contractor requested an additional classification at $7.26 an hour and DOL required $9.59 an hour. The contractor sought a price adjustment:

The contract clearly set forth the procedures to be followed for paying laborers and mechanics under the contract, and stated a procedure if the contractor employed a class of laborer or mechanic not specified in the labor determination included in the contract documents. All laborers and mechanics employed by the contractor were required to be paid the full amount of wages and bona fide fringe benefits computed at rates not less than those contained in the wage determination attached to the contract, regardless of any contractual relationship which may be alleged to exist between the contractor and such laborers and mechanics. If the contractor was to employ a class of laborers or mechanics for which no wage rate was listed, such class was required to be classified “in conformance with the wage determination.” Finding 2. The classification of pipe/duct insulators was accomplished by submission of appellant and the contracting officer to the DOL of a request for authorization of additional classification and rate, and by the DOL's determination of a minimum hourly rate of $9.59.

The effect of the DOL's determination on appellant's contract rights was simply to require appellant to pay the pipe/duct insulators the wage determined by the DOL, as required by the contract -- computed at rates not less than those contained in the wage determination or subsequently determined by the DOL for classes of laborers not listed in the wage determination. Appellant's paying its pipe/duct insulators the hourly wage determined by the DOL was neither a change to the contract nor a breach of contract which would entitle appellant to relief.

See Bruntel, The Service Contract Act (Federal Publications, 2007):

The difficulty with conforming rates is that a contractor must attempt to second-guess the Administrator because the Administrator could determine that a higher wage rate and level of benefits than the contractor bid is appropriate. If that occurs, the contractor must pay that higher rate without a contract price adjustment. Sterling Services, Inc., ASBCA No. 40475, 91-2 BCA ¶ 23,714 (absent an agreement between the parties, the contractor was not entitled to a price increase for higher rates required to be paid in the base year of the contract; however, the contractor could obtain a price increase for wage rates payable on an option year). Therefore, if possible, the contractor should attempt before bidding to obtain a clarified wage determination that includes the omitted classifications.
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Thank you all for your responses. The attorney I have been working with spoke with the VA Office of Administrative Law who contacted the DOL and the following was stated :Yes, they will need to issue a mod to the contract incorporating the correct wage rate and ensure the contractor pays the applicable rate retroactive to the beginning of the contract performance period. This also means the contracting officer will have to negotiate an equitable adjustment with the contractor.

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Guest Vern Edwards

Some attorney spoke with some VA person who spoke with some DOL person.

Did anyone ask that no-name DOL person for backup for his or her assertions?

No.

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I agree with Vern and Tap, disagree with the DOL person. I asked earlier if the proposed wage rate is closely related to those in the wage decision. Just because a contractor has been paying for a class of labor based upon State rates doesn't mean that it closely correlates with the DBA rates. I'm guessing that the other State rates are probably also lower than the ones in the DOL wage decision. I don't remember ever issuing a mod or reviewing one from one of our field offices to pay more to incorporate a specific wage rate. Not to say that it hasn't been done But I remember seeing the process used without paying for higher rates than those proposed. But a contractor estimating a construction project should review the DBA rates for each classification that it will use. The firm is charged with having an awareness of the local labor market availability and if a significant classification is missing , I would think that it would be at least careful before bidding to ensure that it finds out how much to include to cover itself.

There have been two DBA cases cited in this thread so far that indicate no price adjustment is due under similar circumstances.

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