ESA Final Rules

Amendments to Federal Contract Labor Laws by the Federal Acquisition Streamlining Act of 1994   [9/5/1996]
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Part III





Department of Labor





_______________________________________________________________________



Office of the Secretary



Wage and Hour Division



_______________________________________________________________________



29 CFR Parts 4 and 5



41 CFR Parts 50-201 and 50-206



Amendments to Federal Contract Labor Laws by the Federal Acquisition 
Streamlining Act of 1994; Final Rule


[[Page 40714]]



DEPARTMENT OF LABOR

Office of the Secretary
Wage and Hour Division

29 CFR Parts 4 and 5

41 CFR Part 50-201 and 50-206

RIN 1215-AA96

 
Amendments to Federal Contract Labor Laws by The Federal 
Acquisition Streamlining Act of 1994

AGENCY: Wage and Hour Division, Employment Standards Administration, 
Labor.

ACTION: Final rule.

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SUMMARY: This rule revises regulations on Labor Standards for Federal 
Service Contracts Davis-Bacon and Related Acts Provisions and 
Procedures, General Regulations Under the Walsh-Healey Public Contracts 
Act, and the Walsh-Healey Public Contracts Act Interpretations to 
incorporate changes necessitated by the Federal Acquisition 
Streamlining Act of 1994, which raised the coverage threshold of the 
Contract Work Hours and Safety Standards Act (CWHSSA) to $100,000 and, 
among other things, eliminated the eligibility requirements of the 
Walsh-Healey Public Contracts Act (PCA).

DATES: These regulatory changes are effective on September 4, 1996.

FOR FURTHER INFORMATION CONTACT:
Richard M. Brennan, Deputy Director, Office of Enforcement Policy, Wage 
and Hour Division, Employment Standards Administration, U.S. Department 
of Labor, Room S-3506, 200 Constitution Avenue, NW, Washington, DC 
20210, (202) 219-8412. This is not a toll-free number.

SUPPLEMENTARY INFORMATION: 

I. Paperwork Reduction Act

    This rule does not contain any new information collection 
requirements and does not modify any existing requirements contained in 
29 CFR parts 4 and 5 and in 41 CFR parts 50-201 and 206. Thus, this 
rule contains no reporting or recordkeeping requirements subject to the 
Paperwork Reduction Act of 1980 (Pub. L. 96-511).

II. Background

    The Department published a notice of proposed rulemaking in the 
Federal Register on September 7, 1995 (60 FR 46553), inviting public 
comments on proposed revisions to 29 CFR parts 4 and 5, and 41 CFR 
parts 50-201 and 50-206, to correspond to provisions of the Federal 
Acquisition Streamlining Act of 1994 (FASA) (Pub. L. 103-355, 108 Stat. 
3243). Section 4104(c) of FASA amended sections 103 and 107 of the 
Contract Work Hours an Safety Standards Act (CWHSSA), 40 U.S.C. 327 et 
seq, to establish a threshold of $100,000 or more for contracts subject 
to CWHSSA's overtime provisions. As a result of this new $100,000 
statutory threshold, conforming revisions were proposed to 
Sec. 4.181(b) of 29 CFR part 4 and Secs. 5.5(b) and 5.15(b) (1) and (2) 
of 29 CFR part 5.
    Section 7201 of FASA amended the PCA to: (1) Repeal section 1(a) of 
the PCA, which eliminates the requirement that covered contractors must 
be either a ``regular dealer'' or ``manufacturer,'' \1\ and to 
redesignate paragraphs (b), (c), (d) and (e) to (a), (b), (c) and (d), 
respectively; (2) substitute, in section 10(b) of the PCA, the term 
``supplier of'' for the terms ``regular dealer'' and ``manufacturer''; 
(3) strike, in section 10(c) of the PCA, the terms ``regular dealer'' 
and ``manufacturer''; and (4) add new subsections (a) and (b) to 
section 11 of the PCA to provide for the Secretary's authority to 
define the terms ``regular dealer'' and ``manufacturer.''
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    \1\ Under the PCA as amended, an eligible bidder includes, in 
addition to a manufacturer or regular dealer, any supplier or 
distributor of the materials, supplies, articles, or equipment to be 
manufactured or supplied under the contract.
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    Pursuant to these statutory amendments to the PCA, the Department 
proposed the following modifications to 41 CFR parts 50-201 and 50-206:
    1. Renumber Sec. 50-201.1 of 41 CFR part 50-201 relating to 
contract stipulations as Sec. 50-201.3;
    2. Delete the paragraph currently designated as Sec. 50-201.1(a) to 
remove the ``manufacturer of or regular dealer in'' requirement, and 
redesignate subsequent paragraphs of this section;
    3. Delete Sec. 50-201.101 relating to definitions of the terms 
``manufacturer'' and ``regular dealer'';
    4. Delete Sec. 50-201.604 relating to partial administrative 
exemptions from the manufacturer or regular dealer requirement; and
    5. Delete the entire part 50-206, which relates primarily to the 
qualifications of contractors and interpretations of the terms 
``manufacturer'' and ``regular dealer,'' and incorporate Secs. 50-206.1 
and 50-206.2 into the general regulations at part 50-201 as new 
Secs. 50-201.1 and 50-201.2, respectively.
    In addition, section 3023 of FASA repealed 10 U.S.C. 7299 to 
eliminate the applicability of the PCA to contracts for the 
construction, alteration, furnishing, or equipping of naval vessels. 
While this amendment required no changes in the regulations, the 
Department advised contracting agencies and contractors that such 
contracts would, as a result, be subject to the Davis-Bacon Act, which 
applies to contracts in excess of $2,000 for the construction, 
alteration, and/or repair, including painting and decorating, of a 
public building or a public work, because marine vessels have 
historically been regarded as ``public works'' for purposes of the 
Davis-Bacon Act.
    In connection with the repeal of the bidder eligibility 
requirements, section 7201(4) added a new provision to the PCA which 
provided that the Secretary of Labor ``* * * may [emphasis added] 
prescribe in regulations the standards for determining whether a 
contractor is a manufacturer of or a regular dealer in materials, 
supplies, articles, or equipment to be manufactured or used in the 
performance of a contract entered into by * * * (the United States).'' 
The new section also provides for judicial review of any legal question 
regarding the interpretation of manufacturer or regular dealer as 
promulgated under this new section. According to the legislative 
history of FASA's section 7201(b), authorizing the Secretary of Labor 
to define the terms ``regular dealer'' and ``manufacturer'' was 
considered appropriate because the terms have been incorporated by 
reference into a number of other statutes. (See H.R. Conf. Rep. No. 
712, 103d Cong., 2d Sess. 225 (1994).)
    Because only one statute was found which explicitly incorporates 
PCA's definition of the term ``manufacturer'' and/or ``regular dealer'' 
by reference,\2\ the Department concluded that maintaining special 
rules defining the terms ``manufacturer'' or ``regular dealer'' was not 
necessary, given FASA's repeal of the eligibility requirements; that 
the former definitions could be adapted, if necessary, by other Federal 
agencies; and that the former definitions could be used to resolve 
questions of PCA eligibility in contracts awarded prior to the change 
in applicable law. This conclusion was also supported by the fact that 
a review of the numerous

[[Page 40715]]

references to the ``manufacturer'' or ``regular dealer'' provisions of 
the PCA throughout the Code of Federal Regulations (CFR) disclosed that 
they were only intended to implement these eligibility requirements 
through the procurement process.
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    \2\ This statute, 15 U.S.C. 637, concerns contracting authority 
of the Small Business Administration and the awarding of 
subcontracts to small businesses owned and controlled by socially 
and economically disadvantaged individuals. It provides at 15 U.S.C. 
637(a)(17) that a responsible business concern may be the actual 
manufacturer or processor of the product to be supplied under a 
contract or ``* * * be a regular dealer, as defined pursuant to 
section 35(a) of Title 41 (popularly referred to as the Walsh-Healey 
Public Contracts Act), in the product to be offered the Government * 
* *.'' (See 15 U.S.C. 637(a)(17)(B)(iii).)
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    A total of 3 comments were received in response to the notice. Two 
commenters focused their remarks on the repeal of 10 U.S.C. 7299, which 
eliminated the applicability of the PCA to contracts for the 
construction, alteration, furnishing, or equipping of naval vessels. 
Both the Department of Navy and Shipbuilders Council of America 
questioned the Department's interpretation that, in the absence of 10 
U.S.C. 7299, the Davis-Bacon Act would apply to shipbuilding and ship 
repair contracts. The Department of Navy also argued that the Congress 
intended to implement a Department of Defense 800 panel recommendation 
on acquisition reform which sought repeal of the PCA, including repeal 
of 10 U.S.C. 7299, and a companion amendment to the Davis-Bacon Act to 
make clear that it was not applicable to ship repair or construction 
contracts. This commenter further argued that the failure of FASA to 
include an amendment to the Davis-Bacon Act does not alter 
Congressional intent. To clarify the situation, according to this 
commenter, the Department of Navy expected 10 U.S.C. 7299 to be 
reinstated in the upcoming FY 1996 appropriation authorization for the 
Department of Defense. The third commenter, the Honorable Jan Meyer, 
Chair, Committee on Small Business, U.S. House of Representatives, 
supported the Department's view that the promulgation of special rules 
defining the terms ``manufacturer'' or ``regular dealer'' was not 
necessary.
    After review of the comments, the Department has concluded that it 
is appropriate to adopt the revisions proposed in the September 1995 
rulemaking as a final rule. With respect to commenter concerns that 
contracts for naval vessels, previously subject to the requirements of 
the PCA, would be subject to the DBA in the absence of 10 U.S.C. 7299, 
the Department lacks authority to provide for an alternative result. 
Marine vessels have historically been regarded as ``public works'' for 
purposes of the DBA.\3\ The DBA has accordingly been applied to 
contracts for the construction, alteration, or repair of Federally-
owned or operated marine vessels (e.g., of the U.S. Army Corps of 
Engineers, National Oceanic and Atmospheric Administration, and 
Maritime Administration). Pursuant to 10 U.S.C. 7299, however, 
contracts in excess of $10,000 calling for construction, alteration, 
furnishing or equipping of naval vessels (U.S. Navy or U.S. Coast 
Guard) were heretofore subject to PCA. This statute had the effect of 
removing Navy and Coast Guard vessels from DBA coverage. The repeal of 
10 U.S.C. 7299, however, caused the provisions of DBA to become 
applicable to Navy and Coast Guard vessels as with all other Federally-
owned or operated marine vessels. Although this may have been an 
unintended consequence of the passage of FASA, the question of DBA 
coverage is clear. Thus, contracts involving U.S. Navy or U.S. Coast 
Guard vessels, as for all other U.S. Government marine vessels 
historically, would also be subject to DBA by statutory language in the 
absence of 10 U.S.C. 7299. In any case, however, this issue has become 
moot by the enactment of section 815 of the Fiscal Year 1996 DOD 
Authorization Act (Pub. L. 104-106; February 10, 1996), which includes 
a provision reinstating former 10 U.S.C. 7299. As a result, each 
contract for the construction, alteration, furnishing or equipping of a 
naval vessel is once again subject to the PCA, unless the President 
determines that this requirement is not in the interest of national 
defense.
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    \3\ See Title Guaranty and Trust Co. v. Crane Co., 219 U.S. 24 
(1910); 38 Op. Atty. Gen. 418; and 17 Comp. Gen. 585.
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Executive Order 12866/Sec. 202 of the Unfunded Mandates Reform Act of 
1995

    This final rule is not a ``significant regulatory action'' within 
the meaning of Executive Order 12866, nor does it require a section 202 
statement under the Unfunded Mandates Reform Act of 1995. The revisions 
adopted in this rule are technical in nature as required by statutory 
language in FASA. While the new statutory threshold of $100,000 under 
the Contract Work Hours and Safety Standards Act can be expected to 
reduce procurement burdens on purchases under $100,000, contractors 
awarded such contracts may continue to be obligated to pay weekly 
overtime where the requirements of the Fair Labor Standards Act (29 
U.S.C. 201, et seq.) apply. Likewise, the repeal of the 
``manufacturer'' and ``regular dealer'' requirements under PCA may be 
expected to increase competition for certain supply contracts; however, 
the impact on procurement costs resulting from an enlarged pool of 
eligible bidders is not clearly apparent, and could be minimal. 
Accordingly, these changes are not expected to result in a rule that 
may: (1) Have an annual effect on the economy of $100 million or more 
or adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or tribal governments or 
communities; (2) create a serious inconsistency or otherwise interfere 
with an action taken or planned by another agency; (3) materially alter 
the budgetary impact of entitlements, grants, user fees, or loan 
programs or the rights and obligations of recipients thereof; or (4) 
raise novel legal or policy issues arising out of legal mandates, the 
President's priorities, or the principles set forth in Executive Order 
12866 and section 202 of the Unfunded Mandate Reform Act of 1995. 
Therefore, no regulatory impact analysis has been prepared.

Regulatory Flexibility Act

    The final rule will not have a significant economic impact on a 
substantial number of small entities. The rule implements statutory 
changes enacted by FASA, and furthers its streamlining objectives. The 
repeal of the ``manufacturer'' and ``regular dealer'' requirements 
under PCA will likely increase the number of eligible bidders on supply 
contracts, many of whom would be small entities, which would have 
beneficial effects consistent with the purpose of the Regulatory 
Flexibility Act. The elimination of PCA bidder requirements will also 
simplify the processing of eligibility protests on bidder eligibility 
and will otherwise streamline the procurement process. While these and 
other benefits of the rule would be difficult, if not impossible, to 
quantify, the rule is not expected to have a `'significant economic 
impact on a substantial number of small entities'' within the meaning 
of the Regulatory Flexibility Act. Therefore, a regulatory flexibility 
analysis is not required.

Document Preparation

    This document was prepared under the direction and control of Maria 
Echaveste, Administrator, Wage and Hour Division, Employment Standards 
Administration, U.S. Department of Labor.

List of Subjects

29 CFR Part 4

    Administrative practice and procedure, Employee benefit plans, 
Government contracts, Investigations, Labor, Law enforcement, Minimum 
wages, Penalties, Recordkeeping requirements, Reporting requirements, 
Wages.

[[Page 40716]]

29 CFR Part 5

    Administrative practice and procedures, Government contracts, 
Investigations, Labor, Minimum wages, Penalties, Recordkeeping 
requirements, Reporting requirements, Wages.

41 CFR Parts 50-201 and 50-206

    Administrative practice and procedures, Child Labor, Government 
contracts, Government procurement, Minimum wages, Penalties, Reporting 
and recordkeeping requirements, Wages.

    For the reasons set forth above, 29 CFR Part 4, 29 CFR Part 5, CFR 
Part 50-201, and 41 CFR Part 50-206 are amended as set forth below.

    Signed at Washington, DC, on this 30th day of July, 1996.
Maria Echaveste,
Administrator, Wage and Hour Division.

    Accordingly, the following Parts of the Code of Federal Regulations 
are amended:
    (a) Part 4, Title 29, Code of Federal Regulations (29 CFR Part 4);
    (b) Part 5, Subpart A, Title 29, Code of Federal Regulations (29 
CFR Part 5);
    (c) Part 50-201, Chapter 50 of Title 41, Code of Federal 
Regulations (41 CFR Part 50-201); and
    (d) Part 50-206, Chapter 50 of Title 41, Code of Federal 
Regulations (41 CFR part 50-206), as set forth below.

Title 29--Labor

Subtitle A--Office of the Secretary

PART 4--LABOR STANDARDS FOR FEDERAL SERVICE CONTRACTS

    1. Authority citation for part 4 is revised to read as follows:

    Authority: 41 U.S.C. 351, et seq., 79 Stat. 1034, as amended in 
86 Stat. 789, 90 Stat. 2358; 41 U.S.C. 38 and 39; 5 U.S.C. 301; and 
108 Stat. 4101(c).


Sec. 4.181  [Amended]

    2. In Sec. 4.181, paragraph (b)(1) is revised to read as follows:
* * * * *
    (b) Contract Work Hours and Safety Standards Act. (1) The Contract 
Work Hours and Safety Standards Act (40 U.S.C. 327-332) applies 
generally to Government contracts, including service contracts in 
excess of $100,000, which may require or involve the employment of 
laborers and mechanics. Guards, watchmen, and many other classes of 
service employees are laborers or mechanics within the meaning of such 
Act. However, employees rendering only professional services, seamen, 
and as a general rule those whose work is only clerical or supervisory 
or nonmanual in nature, are not deemed laborers or mechanics for 
purposes of the Act. The wages of every laborer and mechanic for 
performance of work on such contracts must include compensation at a 
rate not less than 1\1/2\ times the employees' basic rate of pay for 
all hours worked in any workweek in excess of 40. Exemptions are 
provided for certain transportation and communications contracts, 
contracts for the purchase of supplies ordinarily available in the open 
market, and work, required to be done in accordance with the provisions 
of the Walsh-Healey Act.
* * * * *

PART 5--LABOR STANDARDS PROVISIONS APPLICABLE TO CONTRACTS COVERING 
FEDERALLY FINANCED AND ASSISTED CONSTRUCTION (ALSO LABOR STANDARDS 
PROVISIONS APPLICABLE TO NONCONSTRUCTION CONTRACTS SUBJECT TO THE 
CONTRACT WORK HOURS AND SAFETY STANDARDS ACT)

Subpart A--Davis-Bacon and Related Acts Provisions and Procedures

    3. The authority citation for part 5 is revised to read as follows:

     Authority: 40 U.S.C. 276a-176a-7; 40 U.S.C. 276c; 40 U.S.C. 
327-332; Reorganization Plan No. 14 of 1950, 5 U.S.C. Appendix; 5 
U.S.C. 301; 29 U.S.C. 259; 108 Stat. 4104(c); and the statutes 
listed in section 5.1(a) of this part.

    4. In Sec. 5.5, paragraph (b) is revised to read as follows:


Sec. 5.5  Conract provisions and related matters.

* * * * *
    (b) Contract Work Hours and Safety Standards Act. The Agency Head 
shall cause or require the contracting officer to insert the following 
clauses set forth in paragraphs (b)(1), (2), (3), and (4) of this 
section in full in any contract in an amount in excess of $100,000 and 
subject to the overtime provisions of the Contract Work Hours and 
Safety Standards Act. These clauses shall be inserted in addition to 
the clauses required by Sec. 5.5(a) or 4.6 of part 4 of this title. As 
used in this paragraph, the terms laborers  and mechanics include 
watchmen and guards.
* * * * *


Sec. 5.15  [Amended]

    5. In Sec. 5.15, paragraph (b) is amended by removing paragraphs 
(b)(1) and (2), and by redesignating paragraphs (b)(3), (4), and (5) as 
paragraphs (b)(1), (2), and(3), respectively.

Title 41--Public Contracting and Property Management

CHAPTER 50--PUBLIC CONTRACTS, DEPARTMENT OF LABOR

PART 50-201--GENERAL REGULATIONS

    6. The authority citation for part 50-201 is revised to read as 
follows:

    Authority: Sec. 4, 49 Stat. 2038; 41 U.S.C. 38. Interpret or 
apply sec. 6, 49 Stat. 2038, as amended; 41 U.S.C. 40; 108 Stat. 
7201.

    7. Sections 50-201.1 and 50-201.2 are redesignated as Secs.  50-
201.3 and 50-201.4, respectively, and paragraph (a) of the clause in 
Sec. 50-201.3, as newly redesignated, is removed, and paragraphs (b) 
through (j) are redesignated as paragraphs (a) through (i), 
respectively, and the heading of the clause is revised to read as 
follows:

REPRESENTATIONS AND STIPULATIONS PURSUANT TO PUBLIC LAW 846, 74TH 
CONGRESS, AS AMENDED

* * * * *


Sec. 50-201.101  [Removed]


Sec. 50-201.102 through 50-201.106  [Redesignated as Secs. 50-201.101 
through 50-201.105]

    8. Section 50-201.101 is removed, and Secs. 50-201.102 through 50-
201.106 are redesignated as Secs. 50-201.101 through 50-201.105, 
respectively.


Sec. 50-201.604  [Removed]

    9. Section 50-201.604 is removed.

PART 50-206--THE WALSH-HALEY PUBLIC CONTRACTS ACT INTERPRETATIONS


Secs. 50-206.1 and 50-206.2  [Redesignated at 50-201.1 and 50-201.2]


Secs. 50-206.3 and 50-206.50 through 50-206.56   [Removed]

    10. In part 50-206, Secs. 50-206.1 and 50-206.2 are redesignated as 
Secs. 59-201.1 and 50-201.2 in part 50-201, respectively, and the 
remainder of part 50-206 is removed.
[FR Doc. 96-19792 Filed 8-2-96; 8:45 am]
BILLING CODE 4510-27-M