NAHB submitted comments this week urging the U.S. Department of Labor (DOL) to withdraw its proposed changes to regulations that would dramatically change the way federal prevailing wages are determined for construction projects covered by Davis Bacon and its Related Acts (DBRA).
With very limited exceptions, the provisions do not directly impact single-family home builders. But NAHB's multifamily members who use certain HUD and FHA Multifamily Mortgage Insurance programs to build apartment properties would be significantly affected.
DOL’s Wage and Hour Division issued a proposed rule to amend the regulations implementing the DBRA. In particular, the agency proposes to change the definition of "prevailing wage" by returning to the original methodology used to determine wage rates from 1935 to 1983, also known as the "three-step process."
The Davis-Bacon Act was passed in 1931 to require federal government construction contractors on covered public buildings and public works to pay the "prevailing wage" to laborers. During the Reagan administration, many changes to the act were implemented, including on calculations of the prevailing wage. DOL's proposal reverses many of the changes made some 40 years ago.
One example of a proposed change is to undo the Reagan-era separation of rural and urban wages in the prevailing wage calculation. If this happens, urban wages will dominate and drive up the prevailing wage of projects in rural areas where market wages are lower.
The DBRA regulations are due for a much-needed review and comprehensive changes to modernize and streamline the process for determining prevailing wages on covered projects and address the needs of today's construction industry. However, NAHB is concerned that if the proposed rule moves forward in its current form, DOL will have failed in producing substantive, positive change to the DBRA.
Moreover, NAHB remains concerned about its ability to thoroughly respond to DOL’s proposed rule within the relatively short comment period of 60 days due to the size and scope of the rulemaking. Having submitted a letter requesting a 60‐day extension of the current comment period, NAHB is disappointed DOL did not grant its request, along with similar requests from roughly one dozen other construction and multifamily housing associations.
NAHB urges DOL to withdraw the current proposal, fix the problems stakeholders have identified, and issue a revised proposal. Absent withdrawal, NAHB recommends DOL take the following actions:
- Develop and implement a new scientifically sound methodology to determine prevailing wages that are more representative of wages determined by the market for any given area;
- Keep in place the bar on cross‐consideration of metropolitan and rural wage rates when determining prevailing wages;
- Remove provisions expanding the definition of "site of the work" from the rulemaking;
- Provide additional clarification and guidance on "employed," "prime contractor," "public building," and other definitions;
- Assign the residential construction category to all apartment properties covered under DBRA and assign only a single residential wage determination for apartment projects;
- Lock in prevailing wages for covered apartments that are effective on the date of the borrower’s application; and
- Reduce administrative requirements that burden employers as well as deter small and minority firms from participating in DBRA covered projects.
NAHB welcomes the opportunity to work with the DOL to ensure the concerns and burdens of the residential construction industry are not further exacerbated by revisions to the DBRA requirements.