WAIS Document Retrieval

[Federal Register: December 3, 1999 (Volume 64, Number 232)]
[Proposed Rules]
[Page 67985-67990]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr03de99-40]

[[Page 67985]]

_______________________________________________________________________

Part IV

Department of Defense

General Services Administration

National Aeronautics and Space Administration
_______________________________________________________________________

48 CFR Parts 1, 22, and 52

Federal Acquisition Regulation; Application of the Davis-Bacon Act to
Construction Contracts With Options To Extend the Term of the Contract;
Proposed Rule

[[Page 67986]]

DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 1, 22, and 52

[FAR Case 1997-613]
RIN 9000-AI47

Federal Acquisition Regulation; Application of the Davis-Bacon
Act to Construction Contracts With Options To Extend the Term of the
Contract

AGENCIES: Department of Defense (DoD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: The Civilian Agency Acquisition Council and the Defense
Acquisition Regulations Council (Councils) are proposing to amend the
Federal Acquisition Regulation (FAR) to implement the requirement of
Department of Labor (DoL) All Agency Memorandum No. 157 (AAM 157), as
clarified in the Federal Register on November 20, 1998. The rule
requires incorporation of the current Davis-Bacon Act wage
determination at the exercise of each option period in construction
contracts.

DATES: Comments should be submitted on or before February 1, 2000 to be
considered in the formulation of a final rule.

ADDRESSES: Interested parties should submit written comments to:
General Services Administration, FAR Secretariat (MVRS), 1800 F Street,
NW, Room 4035, ATTN: Laurie Duarte, Washington, DC 20405. Address e-
mail comments submitted via the Internet to: farcase.1997-613@gsa.gov.
Please submit comments only and cite FAR case 1997-613 in all
correspondence related to this case.

FOR FURTHER INFORMATION CONTACT: The FAR Secretariat, Room 4035, GS
Building, Washington, DC 20405, at (202) 501-4755 for information
pertaining to status or publication schedules. For clarification of
content, contact Mr. Jack O'Neill, Procurement Analyst, at (202) 501-
3856. Please cite FAR case 1997-613.

SUPPLEMENTARY INFORMATION:

A. Background

This proposed rule provides for incorporation of the current Davis-
Bacon Act wage determination at the exercise of each option to extend
the term of a contract for construction, or a contract that includes
substantial and segregable construction work. Unlike the Service
Contract Act, the Davis-Bacon Act and its implementing regulations do
not include any provisions to require incorporation of new or revised
wage determinations at the exercise of each contract option period.
On December 9, 1992, DoL issued AAM 157, which required
incorporation of a current Davis-Bacon Act wage determination at the
exercise of each option period in construction contracts containing
options to extend the term of the contract. Following several years of
controversy regarding the authority of DoL to issue AAM 157, DoL
Administrative Review Board confirmed on July 17, 1997, the authority
of the DoL Administrator's ruling that a current Davis-Bacon Act wage
determination must be incorporated at the exercise of an option to
extend the term of the contract. The Review Board also directed DoL to
clarify the language of AAM 157 and to republish the memorandum in the
Federal Register. The Acting Administrator published the clarification
in the Federal Register at 63 FR 64542, November 20, 1998.
This rule was not subject to Office of Management and Budget review
under Section 6(b) of Executive Order 12866, Regulatory Planning and
Review, dated September 30, 1993. This rule is not a major rule under 5
U.S.C. 804.

B. Regulatory Flexibility Act

The changes may have a significant economic impact on a substantial
number of small entities within the meaning of the Regulatory
Flexibility Act, 5 U.S.C. 601 et seq., because the rule will apply to
any contractor, including a small business, that enters into a contract
for construction, or a contract that includes substantial and
segregable construction work, that contains option provisions to extend
the term of the contract. Therefore, the Councils have prepared an
Initial Regulatory Flexibility Analysis. It is summarized as follows:

The proposed rule provides four alternative methods of adjusting
the contract price when exercising the option to extend the term of
the contract.
1. No adjustment in contract price (because the option prices
may include an amount to cover estimated increases);
2. Price adjustment based on a separately specified pricing
method, such as application of a coefficient to an annually
published unit pricing book incorporated at option exercise;
3. A percentage price adjustment, based on a published economic
indicator; and
4. A price adjustment based on a specific calculation to reflect
the actual increase or decrease in wages and fringe benefits as a
result of incorporation of the new wage determination.
The last method, applying calculations similar to the
calculations of price adjustments in contracts subject to the
Service Contract Act, removes the risk to the contractor, but
imposes some reporting requirements, to provide the required
information upon which to base the price adjustment. However, the
contractor is already required to keep payroll records upon which
the calculations are based, so the burden is not significant. Data
for fiscal year 1998 indicates the Government awarded 229
indefinite-delivery construction contracts, of which 121 were
awarded to small businesses. Nearly all construction contracts with
options to extend the term are indefinite-delivery contracts and
most indefinite-delivery contracts have options to extend the term.
Although there is no database to determine the number of contracts
for other than construction that have substantial and segregable
construction requirement, we estimate 225 prime contractors and 675
subcontractors, of which approximately 50 percent are small
businesses.

The FAR Secretariat has submitted a copy of the IRFA to the Chief
Counsel for Advocacy of the Small Business Administration. Interested
parties may obtain a copy from the FAR Secretariat. The Councils will
consider comments from small entities concerning the affected FAR
subparts in accordance with 5 U.S.C. 610. Interested parties must
submit such comments separately and should cite 5 U.S.C 601, et seq.
FAR Case 1997-613, in correspondence.

C. Paperwork Reduction Act

The Paperwork Reduction Act (Pub. L. 104-13) applies because the
proposed rule contains information collection requirements.
Accordingly, the FAR Secretariat submitted a request for approval of a
new information collection requirement concerning application of the
Davis-Bacon Act to construction contracts with options to extend the
term of the contract to the Office of Management and Budget under 44
U.S.C. 3501, et seq.

Annual Reporting Burden

We estimate the public reporting burden for this collection of
information is 90 hours per response, including the time for reviewing
instructions, searching existing data sources, gathering and
maintaining the data needed, and completing and reviewing the
collection of information.
We estimate the annual reporting burden is as follows: Respondents:
900; Responses per respondent: 1; Total annual responses: 900;
Preparation hours per response: 90; and Total response burden hours:
81,000.

[[Page 67987]]

D. Request for Comments Regarding Paperwork Burden

Comments regarding this burden estimate or any other aspect of the
collection of information, including suggestions for reducing this
burden should be submitted to: FAR Desk Officer, OMB, Room 10102, NEOB,
Washington, DC 20503, and a copy to the General Services
Administration, FAR Secretariat (MVR), 1800 F Street, NW, Room 4035,
Washington, DC 20405.
Requester may obtain a copy of the justification from the General
Services Administration, FAR Secretariat (MVR), Room 4035, Washington,
DC 20405, telephone (202) 208-7312. Please cite OMB control number
9000-00XX, FAR Case 1997-613, Application of the Davis-Bacon Act to
Construction Contracts with Options to Extend the Term of the Contract,
in all correspondence.

List of Subjects in 48 CFR Parts 1, 22, and 52

Government procurement.

Dated: November 29, 1999.
Edward C. Loeb,
Director, Federal Acquisition Policy Division.

Therefore, DoD, GSA, and NASA propose that 48 CFR Parts 1, 22, and
52 be amended as set forth below:
1. The authority citation for 48 CFR Parts 1, 22, and 52 continues
to read as follows:

Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42
U.S.C. 2473(c).

PART 1--FEDERAL ACQUISITION REGULATIONS SYSTEM

2. Amend section 1.106 in the table following the introductory
paragraph by adding an entry to read as follows:

1.106 OMB approval under the Paperwork Reduction Act.

* * * * *

------------------------------------------------------------------------
OMB Control
FAR segment No.
------------------------------------------------------------------------

* * * * *
52.222-32.................................................. 9000-0154

* * * * *
------------------------------------------------------------------------

PART 22--APPLICATION OF LABOR LAWS TO GOVERNMENT ACQUISITIONS

3. Amend section 22.404-1(a)(1) by revising the third sentence; and
paragraph (b) by revising the fourth sentence to read as follows:

22.404-1 Types of wage determinations.

(a) General wage determinations. (1) * * * Once incorporated in a
contract, a general wage determination normally remains effective for
the life of the contract, unless the contracting officer exercises an
option to extend the term of the contract (see 22.404-12). * * *
(b) * * * Once incorporated in a contract, a project wage
determination normally remains effective for the life of the contract,
unless the contracting officer exercises an option to extend the term
of the contract (see 22.404-12).
4. Revise section 22.404-2(a) to read as follows:

22.404-2 General requirements.

(a) The contracting officer must incorporate only the appropriate
wage determinations in solicitations and contracts and must designate
the work to which each determination or part thereof applies. The
contracting officer must not include project wage determinations in
contracts or options other than those for which they are issued. When
exercising an option to extend the term of a contract, the contracting
officer must select the most current wage determination from the same
schedule as the wage determination in effect at award, unless the type
of construction in the option period is significantly different from
the type of construction in the preceding contract period.
* * * * *
5. In section 22.404-3, revise the last sentence of paragraph (c);
remove paragraph (d); and redesignate paragraph (e) as (d) to read as
follows:

22.404-3 Procedures for requesting wage determinations.

* * * * *
(c) * * * Accordingly, agencies should submit requests to the
Department of Labor at least 45 days (60 days if possible) before
issuing the solicitation or exercising an option to extend the term of
a contract.
* * * * *
6. In section 22.404-6, revise paragraph (a); and add paragraph (d)
to read as follows:

22.404-6 Modifications of wage determinations.

(a) General. (1) The Department of Labor may modify a wage
determination to make it current by specifying only the items being
changed or by issuing a ``supersedeas decision,'' which is a reissuance
of the entire determination with changes incorporated.
(2) All project wage determination modifications expire on the same
day as the original determination.
(3) The agency must time-date stamp all modifications of wage
determinations immediately upon receipt. (Note the distinction between
receipt by the agency (modification is effective) and receipt by the
contracting officer, which may occur later.)
* * * * *
(d) The following applies when modifying a contract to exercise an
option to extend the term of a contract:
(1) A modified wage determination is effective if, before execution
of the contract modification to exercise the option, the contracting
agency receives a written action from DoL, or DoL publishes notice of
modifications to general wage determinations in the Federal Register.
(2) If the contracting officer receives an effective wage
modification either before or after execution of the contract
modification to exercise the option, the contracting officer must
modify the contract to incorporate the modified wage determination, and
any changed wage rates, effective as of the date of option exercise.
7. Revise section 22.404-7 to read as follows:

22.404-7 Correction of wage determinations containing clerical errors.

Upon the Labor Department's own initiative or at the request of the
contracting agency, the Administrator, Wage and Hour Division, may
correct any wage determination found to contain clerical errors. Such
corrections will be effective immediately, and will apply to any
solicitation or active contract. Before contract award, the contracting
officer must follow the procedures in 22.404-5(b)(1), (b)(2)(i) or (ii)
in sealed bidding, and the procedures in 22.404-5(c)(3) or (4) in
negotiations. After contract award, the contracting officer must follow
the procedures at 22.404-6(b)(5), except that for contract
modifications to exercise an option to extend the term of the contract,
the contracting officer must follow the procedures at 22.404-6(d)(2).
8. In section 22.404-10, revise the first sentence to read as
follows:

22.404-10 Posting wage determinations and notice.

The contractor must keep a copy of the applicable wage
determination (and any approved additional classifications) posted at
the site of the work in a prominent place where the workers can easily
see it. * * *
9. Add section 22.404-12 to read as follows:

[[Page 67988]]

22.404-12 Labor standards for contracts containing construction
requirements and option provisions that extend the term of the
contract.

(a) Each time the contracting officer exercises an option to extend
the term of a contract for construction, or a contract that includes
substantial and segregable construction work, the contracting officer
must modify the contract to incorporate the most current wage
determination.
(b) If a contract with an option to extend the term of the contract
has indefinite-delivery or indefinite-quantity construction
requirements, the contracting officer must incorporate the wage
determination incorporated into the contract at the exercise of the
option into task orders issued during that option period. The wage
determination will be effective for the complete period of performance
of those task orders without further revision.
(c) The contracting officer must include in fixed-price contracts a
clause that specifies one of the following methods, suitable to the
interest of the Government, to provide an allowance for any increases
or decreases in labor costs that result from the inclusion of the
current wage determination at the exercise of an option to extend the
term of the contract:
(1) The contracting officer may provide the offerors the
opportunity to bid or propose separate prices for each option period.
The contracting officer must not further adjust the contract price as a
result of the incorporation of a new or revised wage determination at
the exercise of each option to extend the term of the contract.
Generally, this method is used in construction-only contracts (with
options to extend the term) that are not expected to exceed a total of
3 years.
(2) The contracting officer may include in the contract a
separately specified pricing method, that permits an adjustment to the
contract price or contract labor unit price at the exercise of each
option to extend the term of the contract. At the time of option
exercise, the contracting officer must incorporate a new wage
determination into the contract, and must apply the specific pricing
method to calculate the contract price adjustment. An example of a
contract pricing method that the contracting officer might separately
specify is incorporation in the solicitation and resulting contract of
the pricing data from an annually published unit pricing book (e.g.,
the R.S. Means Cost Estimating System, or the U.S. Army Computer-Aided
Cost Estimating System), which is multiplied in the contract by a
factor proposed by the contractor (e.g., .95 or 1.1). At option
exercise, the contracting officer incorporates the pricing data from
the latest annual edition of the unit pricing book, multiplied by the
factor agreed to in the basic contract. The contracting officer must
not further adjust the contract price as a result of the incorporation
of the new or revised wage determination.
(3) The contracting officer may provide for a contract price
adjustment based solely on a percentage rate determined by the
contracting officer using a published economic indicator incorporated
into the solicitation and resulting contract. The contracting officer
must apply the percentage rate, based on the economic indicator, to the
portion of the contract price designated in the contract clause as
labor costs subject to the provisions of the Davis-Bacon Act. The
contracting officer must insert 50 percent as the estimated portion of
the contract price that is labor unless the contracting officer
determines, prior to issuance of the solicitation, that a different
percentage is more appropriate for a particular contract or
requirement. This percentage adjustment to the designated labor costs
must be the only adjustment made to cover increases in wages and/or
benefits resulting from the incorporation of a new or revised wage
determination at the exercise of the option.
(4) The contracting officer may provide a computation method to
adjust the contract price to reflect the contractor's actual increase
or decrease in wages and fringe benefits (combined) to the extent that
the increase is made to comply with, or the decrease is voluntarily
made by the contractor as a result of incorporation of, a new or
revised wage determination at the exercise of the option to extend the
term of the contract. Generally, this method is appropriate for use
only if contract requirements are predominately services subject to the
Service Contract Act and the construction requirements are substantial
and segregable. The methods used to adjust the contract price for the
service requirements and the construction requirements would be
similar.
10. In section 22.406-3, add paragraph (e) to read as follows:

22.406-3 Additional classifications.

* * * * *
(e) In each option to extend the term of the contract, if any
laborer or mechanic is to be employed during the option in a
classification that is not listed (or no longer listed) on the wage
determination incorporated in that option, the contracting officer must
require that the contractor submit a request for conformance using the
procedures noted in paragraphs (a) through (d) of this section.
11. Add sections 22.407(e), (f), and (g) to read as follows:

22.407 Contract clauses.

* * * * *
(e) Insert the clause at 52.222-30, Davis-Bacon Act--Price
Adjustment (None or Separately Specified Pricing Method), in
solicitations and contracts if--
(1) The contract is expected to be a fixed-price contract subject
to the Davis-Bacon Act that will contain option provisions by which the
contracting officer may extend the term of the contract, and the
contracting officer determines the most appropriate contract price
adjustment method is the method at 22.404-12(c)(1) or (2); or
(2) The contract is expected to be a cost-reimbursable type
contract subject to the Davis-Bacon Act that will contain option
provisions by which the contracting officer may extend the term of the
contract.
(f) Insert the clause at 52.222-31, Davis-Bacon Act--Price
Adjustment (Percentage Method), in solicitations and contracts if the
contract is expected to be a fixed-price contract subject to the Davis-
Bacon Act that will contain option provisions by which the contracting
officer may extend the term of the contract, and the contracting
officer determines the most appropriate contract price adjustment
method is the method at 22.404-12(c)(3).
(g) Insert the clause at 52.222-32, Davis-Bacon Act--Price
Adjustment (Actual Method), in solicitations and contracts if the
contract is expected to be a fixed-price contract subject to the Davis-
Bacon Act that will contain option provisions by which the contracting
officer may extend the term of the contract, and the contracting
officer determines the most appropriate method to establish contract
price is the method at 22.404-12(c)(4).

[[Page 67989]]

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

12. Add sections 52.222-30, 52.222-31, and 52.222-32 to read as
follows:

52.222-30 Davis-Bacon Act--Price Adjustment (None or Separately
Specified Pricing Method).

As prescribed in 22.407(e), insert the following clause:

Davis-Bacon Act--Price Adjustment (None or Separately Specified Pricing
Method) (Date)

(End of clause)

52.222-31 Davis-Bacon Act--Price Adjustment (Percentage Method).

As prescribed in 22.407(f), insert the following clause:

Davis-Bacon Act--Price Adjustment (Percentage Method) (Date)

(End of clause)

52.222-32 Davis-Bacon Act--Price Adjustment (Actual Method).

As prescribed in 22.407(g), insert the following clause:

Davis-Bacon Act--Price Adjustment (Actual Method) (Date)

(a) The wage determination issued under the Davis-Bacon Act by
the Administrator, Wage and Hour Division, Employment Standards
Administration, U.S. Department of Labor, that is in effect at the
exercise of an option to extend the term of the contract, will apply
to that option period.
(b) The Contractor states that the prices in this contract do
not include any allowance for any contingency to cover increased
costs for which adjustment is provided under this clause.
(c) The Contracting Officer will adjust the contract price or
contract unit price labor rates to reflect the Contractor's actual
increase or decrease in wages and fringe benefits to the extent that
the increase is made to comply with, or the decrease is voluntarily
made by the Contractor as a result of--
(1) Incorporation of the Department of Labor's Davis-Bacon Act
wage determination applicable at the exercise of an option to extend
the term of the contract; or
(2) Incorporation of a Davis-Bacon Act wage determination
otherwise applied to the contract by operation of law.
(d) Any adjustment will be limited to increases or decreases in
wages and fringe benefits as described in paragraph (c) of this
clause, and the accompanying increases or decreases in social
security and unemployment taxes and workers' compensation insurance,
but will not otherwise include any amount for general and
administrative costs, overhead, or profit.
(e) The Contractor shall notify the Contracting Officer of any
increase claimed under this clause within 30 days after receiving a
revised wage determination unless this notification period is
extended in writing by the Contracting Officer. The Contractor shall
promptly notify the Contracting Officer of any decrease under this
clause, but nothing in this clause precludes the Government from
asserting a claim within the period permitted by law. The notice
shall contain a statement of the amount claimed and any relevant
supporting data, including payroll records that the Contracting
Officer may reasonably require. Upon agreement of the parties, the
Contracting Officer will modify the contract price or contract unit
price in writing. The Contractor shall continue performance pending
agreement on or determination of any such adjustment and its
effective date.
(f) Contract price adjustment computations shall be computed as
follows:
(1) Computation for contract unit price per single craft hour
for schedule of indefinite-quantity work. For each labor
classification, the difference between the actual wage and benefit
rates (combined) paid and the wage and benefit rates (combined)
required by the new wage determination shall be added to the
original contract unit price if the difference results in a combined
increase. If the difference computed results in a combined decrease,
the contract unit price shall be decreased by that amount if the
Contractor provides notification as provided in paragraph (e) of
this clause.
(2) Computation for contract unit price containing multiple
craft hours for schedule of indefinite-quantity work. For each labor
classification, the difference between the actual wage and benefit
rates (combined) paid and the wage and benefit rates (combined)
required by the new wage determination shall be multiplied by the
actual number of hours expended for each craft involved in
accomplishing the unit-priced work item. The product of this
computation will then be divided by the actual number of units
ordered in the preceding contract period. The total of these
computations for each craft will be added to the current contract
unit price to obtain the new contract unit price. The extended
amount for the contract line item will be obtained by multiplying
the new unit price by the estimated quantity. If actual hours are
not available from the preceding contract period for computation of
the adjustment for a specific contract unit of work, the Contractor,
in agreement with the Contracting Officer, shall estimate the total
hours per craft per contract unit of work.
Example:

[[Page 67990]]

Asphalt Paving
[Current price $3.38 per square yard]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Actual
Hourly Actual units Increase/sq.
DBA craft New WD rate Diff hrs. (sq. yard
paid yard)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Equip Opr...................................................... $18.50 - $18.00 = $.50 x 600 / 3,000 = $.10
Truck Driver................................................... $19.00 - $18.25 = $.75 x 525 / 3,000 = .13
Laborer........................................................ $11.50 - $11.25 = $.25 x 750 / 3,000 = .06
-------------
Total increase per square yard = $.29*
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Note: Adjustment for labor rate increases or decreases may be accompanied by social security and unemployment taxes and workers' compensation
insurance.

Current unit price = $3.38 per square yard
Add DBA price adj. + .29
---------
New unit price = $3.67 per square yard

(End of clause)

[FR Doc. 99-31348 Filed 12-2-99; 8:45 am]
BILLING CODE 6820-EP-P