Interim Internal Purchasing Guidelines > 9 Labor Guidelines > 9.4 Construction Contracts and Lease Agreements

9.4 Construction Contracts and Lease Agreements

9.4.1 Definitions

9.4.1.a Construction. Is defined in 4.4.3.a.2; however, for the purposes of this paragraph, this definition:

1. Applies only if the work is performed at a specified work site, so that wage rates can be determined for the locality;

2. Does not apply to construction so closely related to research, experiment, and development that it cannot be performed separately, or is itself the subject of research, experiment, or development;

3. Does not apply to manufacturing or furnishing equipment, components, or other materials, except manufacturing or fabricating construction materials and components on site by a construction supplier or subcontractor under a contract that otherwise meets the definition; and

4. Does not apply to contracts solely for dismantling, demolishing, or removing improvements, unless further work that will result in the construction, alteration, or repair of a building or work at that location is contemplated.

9.4.1.b Laborers and Mechanics. People who work predominantly with their hands or with construction tools and equipment. In this part, the term includes working foremen, apprentices, trainees, helpers, watchmen, guards, firefighters, fireguards, cooks, and storekeepers.

9.4.1.c Work Site. The place where a construction contract is performed, and adjacent or nearby sites of job headquarters, storage yards, prefabrication or assembly yards, quarries or borrow pits, batch plants, and similar facilities set up to serve the contract operation exclusively. Transportation of materials, equipment, or personnel to and from the construction site by employees of construction suppliers or subcontractors is included, but transportation by common carriers, material suppliers, or manufacturers is not.

9.4.2 Labor Standards for Construction

9.4.2.a Davis-Bacon Act. The Davis-Bacon Act (40 U.S.C. 276a et seq.) requires that construction contracts over $2,000 contain a provision setting the minimum wages to be paid to all classes of laborers and mechanics working on the work site. Minimum wage rates are determined by the Secretary of Labor on the basis of prevailing wage rates.

9.4.2.b Copeland Act. The Copeland Anti-Kickback Act (18 U.S.C. 874 and 41 U.S.C. 276(c)) applies to any contract over $2,000 subject to the Davis-Bacon Act. The Copeland Act makes it unlawful to force laborers or mechanics to give up any part of their compensation except for permissible deductions such as taxes and union dues.

9.4.2.c Contract Work Hours and Safety Standards Act. The overtime pay requirements of the Contract Work Hours and Safety Standards Act (see 9.3) apply to all construction contracts and lease agreements involving the employment of laborers and mechanics in construction work, with the exceptions described in 9.3.3.a.

9.4.2.d Department of Labor Regulations. Regulations covering the administration and enforcement of these laws are published by the Department of Labor in 29 CFR 3 and 5.

9.4.2.e Other Contracts Involving Construction. The labor standards and regulations described in 9.4.2.a through 9.4.2.d do not apply to contracts for supplies, services, maintenance, research and development, or other nonconstruction requirements, unless the contracts also involve construction. The labor standards in this part apply whenever such a contract specifically requires substantial construction work, or a substantial amount of construction work will be necessary to meet the requirements, and the construction work is performed separately from the rest of the contract work. ("Substantial" refers to the type and quantity of construction, not merely its total value in relation to the contract price.) The contract must specifically identify the work covered by the labor standards.

9.4.3 Labor Standards for Leases

9.4.3.a Davis-Bacon Act. The Davis-Bacon Act requirements for minimum wages for laborers and mechanics (see 9.4.2.a) apply to any lease of, or agreement to lease, interior space netting more than 6,500 square feet.

9.4.3.b Work Hours and Safety Standards

1. The Contract Work Hours and Safety Standards Act requirements for overtime pay apply to all leases except those described in 9.3.3.a. The Act's health and safety standards apply to all leases and agreements to lease, regardless of building size or rental amount, that involve the employment of laborers or mechanics in construction work.

2. These requirements apply not only to laborers and mechanics employed at the work site but to any laborers or mechanics working under the contract, including subcontractors furnishing supplies or materials if the work is performed directly on or adjacent to the work site or fabricated specifically for the project.

9.4.4 Clauses

9.4.4.a Construction Contracts. Clause 9-2 (see 9.3.3) and Clause 9-3, Davis-Bacon Act, are incorporated by reference in Clause 4-2, and must be checked-off by contracting officers for all construction contracts over $2,000.

9.4.4.b Construction Contracts With States. If a construction contract over $2,000 is with a state or a political subdivision of a state, the contract must include Clause 9-4, Compliance by States with Labor Standards.

9.4.4.c Leases

1. All leases and agreements to lease involving construction work by laborers or mechanics must contain Clause 9-5, Contract Work Hours and Safety Standards Act - Safety Standards.

2. All leases and agreements to lease involving more than $2,000 of construction work by laborers or mechanics must contain Clause 9-2.

3. All leases and agreements to lease interior space netting more than 6,500 square feet and involving construction work over $2,000 must include Clause 9-3.

9.4.5 Administration and Enforcement

9.4.5.a General. Contracting officers must ensure that suppliers and lessors are fully informed of the labor standards provisions in their contracts and their responsibilities under those provisions. Unless it is clear that the supplier or lessor is already fully informed, the supplier or lessor must be informed by conference or letter as soon as possible after the contract is awarded.

9.4.5.b Applicability. The following requirements apply to all contracts and leases containing the clauses prescribed in 9.4.4.

9.4.5.c Wage Determinations

1. General Wage Determinations. Unlike project wage determinations, general wage decisions do not expire, but are modified or superseded to keep them current. They are available by subscription from the Department of Labor. A general wage determination may be requested for an area where none presently exists if a large number of contracts for a specific type of construction are expected in that area.

2. Project Wage Determinations. If no general wage determination is applicable to a project, the contracting officer must request a project wage determination from the local Regional Administrator, Department of Labor, using Standard Form 308, Request for Determination and Response to Request.

3. Time for Making Requests. Whenever possible, the contracting officer must request any needed wage determination in sufficient time to receive it for inclusion in the solicitation, normally 30 days before the date planned for issuance of the solicitation.

4. Incorporation by Amendment. If a wage determination cannot be obtained before issuing the solicitation, it may be incorporated in the solicitation by an amendment furnished to all offerors. If there is not enough time to issue an amendment before proposals are due, and the due date for proposals cannot be extended, the amendment must be a subject of discussions (see 4.2.5.c).

5. Limitations. Project wage determinations are effective for 120 days from the date of the determination. If a project wage determination will expire before a contract or lease agreement can be awarded, the contracting officer must request a new determination in time for it to be included in a solicitation amendment before proposals are due.

6. Extensions. The Department of Labor may extend the effective period of a wage determination that expired after proposals were due but before award. The request must be submitted to the Secretary of Labor with a finding by the Vice President of Supply Management that the wage determination expired unavoidably and an extension is necessary and proper in the public interest to prevent injustice or undue hardship or to avoid serious impairment in the conduct of Postal Service business.

7. Modifications. Any modification of a wage determination by the Department of Labor must be made part of the contract or lease agreement if received before award, using the procedures in 9.4.5.c.4.

8. Posting. The contracting officer must instruct the supplier to post a copy of the wage determination in a prominent place at the work site where it can easily be seen by the workers.

9. Additional Classifications. Any class of laborers or mechanics working under the contract but not listed in the wage determination must be classified or reclassified to conform to the wage determination. Whatever action is taken must be reported to the Department of Labor. If there is any disagreement about the proper classification or reclassification, the contracting officer must submit the question, with a recommendation, to the Secretary of Labor for final determination.

9.4.5.d Subcontracts. The contracting officer must obtain a list of all subcontracts, with descriptions of the work to be done under each, to assist in the payroll review required under subparagraph 9.4.5.e.

9.4.5.e Payrolls and Compliance Statements

1. Submissions. Suppliers, or lessors, and subcontractors must submit copies of weekly payrolls to the contracting officer within 7 days after the payroll payment dates. They must also submit weekly compliance statements required by the Copeland Act regulations (see 29 CFR 3.3).

2. Examination. The contracting officer must examine the payrolls and statements to make sure the suppliers, lessors, and subcontractors comply with contract, statutory, and regulatory requirements.

3. Retention. Payrolls and compliance statements must be retained for 3 years from the contract completion date and produced to the Department of Labor upon request.

9.4.5.f Investigations

1. The contracting officer must make whatever investigations are necessary to ensure compliance with contract, statutory, and regulatory requirements. Contracts of 6 months or less must be investigated before final payment is made, if possible. Longer contracts and lease agreements must be investigated as often as necessary to ensure compliance. Investigations must include interviews with employees on a sampling basis.

2. Special detailed investigations must be made when there are complaints or other evidence of violations. Complaints must be given priority.

3. Written or oral statements made by an employee must be kept confidential and may not be disclosed to the employer without the employee's consent.

9.4.5.g Enforcement Reports

1. If underpayments total less than $1,000, are not willful, and have been made good to the employees, the contracting officer must submit a factual summary report to the Department of Labor in accordance with 29 CFR 5.7(a)(1), unless the Department did not request any future compliance investigation.

2. If underpayments total $1,000 or more or are willful, the contracting officer must submit as soon as possible a detailed enforcement report to the Secretary of Labor through the Office of Inspector General. The report must include a statement of findings about the violations and information about restitution, payment deductions, and contract terminations, as well as the names and addresses of the workers, lessors, suppliers, and subcontractors concerned.

3. If there is substantial evidence that violations are willful and violate the False Affidavits Act (18 U.S.C. 1001) or another criminal statute, the matter must be referred to the Office of Inspector General, the Attorney General, and the Secretary of Labor.

9.4.5.h Semiannual Enforcement Reports. The Vice President, Supply Management (VP, SM), must submit semiannual reports to the Secretary of Labor on compliance with and enforcement of labor standards and prevailing wage determinations. A copy of each report must be furnished to the Inspection Service. Reports for the period January 1-June 30 are due by July 31, and reports for the period July 1-December 31 are due by January 31.

9.4.5.i Suspensions and Deductions of Contract Payments. If a supplier, lessor, or subcontractor fails or refuses to pay all or any part of the wages due workers, the contracting officer may suspend contract or rent payments in amounts equal to the unpaid wages and liquidated damages that may be due, until restitution has been made or deductions against payment vouchers are made as provided in this paragraph. If failure or refusal to pay continues or appears to be willful or there is failure or refusal to comply with other contract, statutory, or regulatory requirements, the contracting officer may suspend contract or rent payments until violations stop. If restitution is not made within a reasonable time or before final payment under the contract or lease agreement, the contracting officer must send the information service center a report on Standard Form 1093, Schedule of Withholdings Under the Davis-Bacon Act, and/or the Contract Work Hours and Safety Standards Act, stating the amounts to be withheld for underpayment of wages and liquidated damages. These amounts must be deducted from the payments made to the supplier or lessor and disposed of in accordance with the contracting officer's instructions.

9.4.5.j Restitution. Suppliers, lessors, or subcontractors may make restitution of amounts due workers at any time. If wages were underpaid, the contracting officer must ask the supplier to make restitution to the employees or to plans, funds, or programs for any type of fringe benefit listed in the wage determination.

9.4.5.k Contract Termination

1. Construction Contracts. Whenever a contract is terminated for labor standards violations, the contracting officer must send a report to the Secretary of Labor and the Comptroller General. The report must give the name and address of the violating supplier or subcontractor; the name and address of the supplier or subcontractor that will complete the work; and the contract number, dollar amount, and description of work for the replacement contract.

2. Lease Agreements. A lease agreement may be terminated and the lessor, general supplier, or subcontractor declared ineligible under 29 CFR 5.6 for violating the Contract Work Hours and Safety Standards Act. However, a lease agreement may not be terminated for failure to pay prevailing wages.

9.4.5.l Liquidated Damages. If the VP, SM, finds that an assessment of liquidated damages for failure to pay overtime wages is incorrect, or that the failure to pay overtime wages was inadvertent, the VP may adjust the damages or release the supplier, lessor, or subcontractor from liability when the amount of damages is $500 or less. If the amount is over $500, the VP may recommend adjustment or relief to the Secretary of Labor (see 29 CFR 5.8).