Buy American and Davis-Bacon

October 28, 2010

Davis-Bacon Act (Prevailing Wage):

Section 1606 of Title XVI, Division A of the Recovery Act, which imposes the Davis-Bacon “prevailing wage” requirements on “projects funded directly by or assisted in whole or in part by and through the federal government pursuant to this Act shall be paid wages not less than those prevailing […] in accordance with [the federal prevailing wage statute (Davis-Bacon)]” does not apply to a project merely because such project is financed with direct-pay Build America Bonds eligible for the 35% (of interest paid) refund.

Section 1601 of Subtitle G, Part V, Division B of the Recovery Act, however, does impose the Davis-Bacon requirements on projects financed with Recovery Zone Economic Development Bonds (but not Recovery Zone Facility Bonds), which are direct-pay BABs eligible for a 45% (of interest paid) refund.

The Davis-Bacon Act requirements apply to qualified tax credit bonds, such as Qualified School Construction Bonds:

Yes, Davis-Bacon labor standards apply to all projects financed by these new tax credit bonds. The Davis-Bacon contract clauses stated in 29 CFR 5.5(a)(1) through (10) must be incorporated into covered contracts for construction, alteration, or repair work. Additional information regarding the application of Davis-Bacon labor standards is available at the U.S. Department of Labor Wage and Hour Division website at: http://www.dol.gov/whd/recovery/index.htm.

The Department of Labor provides additional information at the site quoted above:

Federal agencies must ensure that recipients of assistance funded by ARRA appropriations require contractors and subcontractors to pay laborers and mechanics employed on ARRA-assisted construction at least the Davis-Bacon prevailing wages. In addition, Division B of ARRA requires application of Davis-Bacon prevailing wage requirements to projects financed with certain tax-favored bonds.

See All Agency Memorandum AAM No. 208 for more information: http://www.dol.gov/whd/recovery/AAM208.pdf 

Buy American Provision:

Section 1605 of Title XVI, Division A of the Recovery Act requires the use of American steel, iron and manufactured goods when funds appropriated or otherwise made available under “this Act” are used for a project for the construction, alteration, maintenance, or repair of a public building or public work.  Section 4 of the Recovery Act states that any references to “this Act” in a certain division refer only to that division. Therefore, Section 1605 regarding Buy American does not specifically apply to Division B bond provisions, unless referenced indirectly within Division B, and therefore does not, for instance, apply to Build America Bonds.