Reconsideration of Applicability of the Davis-Bacon Act to the Veterans Administration's Lease of Medical Facilities, 94-14

• Decision Date: 23 May 1994
• Docket Number: 94-14
• Citation: 18 Op. O.L.C. 109
• Court: Opinions of the Office of Legal Counsel of the Department of Justice
• Parties: Reconsideration of Applicability of the Davis-Bacon Act to the Veterans Administration's Lease of Medical Facilities

18 Op. O.L.C. 109

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

No. 94-14

United States Department of Justice

May 23, 1994

WALTER DELLINGER Assistant Attorney General Office of Legal Counsel.

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

Contrary to the view expressed in an earlier opinion of the Office of Legal Counsel, the plain language of the Davis-Bacon Act does not bar its application to a lease contract on the ground that such contracts are per se not contracts for construction. The applicability of the Davis-Bacon Act to any specific lease contract can be determined only by considering the details of the particular contract.

MEMORANDUM OPINION FOR THE SOLICITOR DEPARTMENT OF LABOR AND THE GENERAL COUNSEL DEPARTMENT OF VETERANS AFFAIRS

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 construction of a building to be used as an outpatient clinic. Applicability of the Davis-Bacon Act to the Veterans Administration's Lease of Medical 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 Department of Labor. The VA had entered into a contract (the "Crown Point contract") 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 Applicability of Davis-Bacon Act to Lease of Space for 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 [ 110] 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 of 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. Nonetheless, the VA had concluded that the Act did not apply to the Crown Point agreement 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 mandating 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 Military Housing, Ft. Drum, WAB Case No. 85-16 (Aug. 23, 1985)). The VA appealed to the WAB, which upheld the Administrator'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 WAB'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 Dep't, AFL-CIO v. Turnage, 705 F.Supp. 5 (D.D.C. 1988), and an O.L.C. ruling that the WAB decision conflicted 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 [ 111] 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 construction 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. Nevertheless, we can say that the fact that a contract is a lease is not the sole determinative 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 Veterans Administration outpatient clinic was not a contract for construction of a public 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 construction . . . of public buildings or public works" do not plainly and precisely indicate 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 interpretation of the Act is supported not only by its language, but also by the legislative 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 corresponding classes of laborers and mechanics employed on projects of [ 112] a character similar to the contract work in the [area where] the work is to be performed ....

40U.S.C. §276a(a).^[1]

The 1988 Opinion concluded that this language "plainly and precisely" limited the Act'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 [ 113] construction, " unambiguously excludes a contract for the long-term lease of a building to be constructed to comply with the contract, especially when the contracting agency contemplates the construction of a new building and includes substantial 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 circumstances, privately financed construction may be subject to prevailing wage requirements if, for example, the facilities are specially constructed with the intention 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 Opinio...