WASHINGTON, June 18—Associated Builders and Contractors today issued the following statement regarding the U.S. Treasury Department’s Internal Revenue Service final rule released for public inspection June 18, which requires private developers to follow onerous project labor agreement, prevailing wage and apprenticeship policies when building clean energy projects funded by more than $270 billion in tax credits via the ABC-opposed Inflation Reduction Act.
“If the Biden administration’s goal is to undermine taxpayer investments in the construction of critical clean energy infrastructure funded by the Inflation Reduction Act, this final rule is a wild success,” said Ben Brubeck, ABC vice president of regulatory, labor and state affairs. “This bold weaponization of the IRS and end-run around Congress in an attempt to steer clean energy construction contracts to unionized labor and contractors––key election-year donors––by incentivizing private developers to require inflationary and exclusionary project labor agreements should be extremely concerning for taxpayers and clean energy advocates.
“Government-mandated PLAs box out almost 90% of the U.S. construction workforce that does not belong to union––an especially irresponsible decision when the construction industry faces a labor shortage of more than half a million people,” said Brubeck. “In addition, PLA schemes increase costs 12% to 20% by imposing inefficient work rules and discouraging competition from quality contractors that have been successfully building clean energy projects for decades.”
In comments filed Oct. 30, 2023, on the proposed rule, ABC––as well as a coalition of industry stakeholders––called on the IRS to provide further clarity and withdraw anti-competitive aspects of the proposal that would increase costs, reduce competition and delay construction of clean energy projects.
“Unfortunately, many concerning provisions of the proposed rule flagged by industry and clean energy advocates during the comment period were not appropriately addressed in the final rule, which increases risk and uncertainty for developers seeking tax credits and contractors delivering these important projects,” said Brubeck. “Coupled with construction materials inflation of more than 40% since February 2020 and a labor shortage, this Biden administration’s latest regulation means clean energy projects are much more expensive, and many of those projects will be mothballed or cancelled.”
According to the final rule, developers must certify that their contractors pay all construction workers prevailing wages and benefits determined by the U.S. Department of Labor in accordance with the federal Davis-Bacon Act. Developers must also ensure that contractors utilize apprentices enrolled in government-registered apprenticeship programs for 15% of all construction labor hours performed on a project, among other requirements. Project developers that satisfy both of these new provisions are eligible for a 500% increase in various clean energy construction project tax credits compared to baseline tax credits offered to developers under prior regulations widely used by industry. In addition, developers that require contractors to execute PLAs with labor unions are immune from new monetary penalties if the developer and its contractors fail to meet cumbersome prevailing wage and apprenticeship rules.
The final rule is effective 60 days after it is be published in the federal register on June 25, 2024, but developers are currently following the previous proposed rule requirements issued by the IRS.
In a 2023 survey of ABC contractor members, 98% of respondents stated that controversial prevailing wage and government-registered apprenticeship policies imposed by the IRA will make them less likely to bid on clean energy projects.
Review resources on the IRA tax credits for clean energy projects at abc.org/ira.
WASHINGTON, Nov. 7—Associated Builders and Contractors and its Southeast Texas chapter today announced the filing of a complaint in the U.S. District Court for the Eastern District of Texas, challenging the U.S. Department of Labor’s controversial final rule, Updating the Davis-Bacon and Related Acts Regulations, which applies to federal and federally assisted construction projects funded by taxpayers.
“Far from ‘updating’ the DOL’s enforcement of the Davis-Bacon Act, the final rule returns to failed policies of the 1970s and unlawfully expands coverage of prevailing wage requirements onto new projects and industries and increases its regulatory burden on small construction contractors working on federally funded contracts,” said Ben Brubeck, ABC vice president of regulatory, labor and state affairs. “The DOL’s final rule forces ABC to take legal action to address its numerous illegal provisions and protect its members, the free market and taxpayers from the devastating impacts of this regulation.
“Instead of instituting commonsense reforms to Davis-Bacon regulations to ensure accurate prevailing wage determinations while providing much-needed clarity to the regulated community, the rule makes it much more likely that the DOL will adopt union wage scales as the prevailing wage at a greater frequency than in current practice,” said Brubeck. “The DBA already adopts union wage scales at improbable rates, considering just 11.7% of the construction industry is unionized. The erroneous, arbitrary and capricious changes to the implementation of the Davis-Bacon Act must be challenged to preserve fair and open competition on government construction projects, regardless of labor affiliation.
“The onerous new requirements, reduced competition and artificial inflation of construction costs imposed by this rule will only exacerbate economic headwinds and undermine taxpayer investments in infrastructure,” said Brubeck.
In October, Mario Burgos, chief strategy officer, Prairie Band LLC, Albuquerque, New Mexico, testified to Congress on behalf of ABC, urging lawmakers to rein in the Biden administration’s flawed wage determination process and unclear DBA regulations. Burgos detailed his efforts to comply with a byzantine process to determine prevailing wages on federal construction projects and said the DOL’s recent rulemaking updating Davis-Bacon will only make compliance challenges worse, driving small contractors out of public works projects or even out of business.
In August, ABC pushed back on the DOL’s final rule, calling it “yet another Biden administration handout to organized labor on the backs of taxpayers, small businesses and the free market.”
In May 2022, following a survey of its membership, ABC submitted nearly 70 pages of comments on the DOL’s proposed rule––and its more than 50 significant changes––urging the DOL to withdraw the proposal.
Learn more at abc.org/davisbacon.
WASHINGTON, Oct. 31—Associated Builders and Contractors submitted comments to the U.S. Treasury Department’s Internal Revenue Service in response to a proposed rule implementing controversial labor policies through changes to the federal tax code by the ABC-opposed Inflation Reduction Act. ABC called on the IRS to provide further clarity and withdraw anti-competitive aspects of the proposal that would increase costs, reduce competition and delay construction of clean energy projects eligible for more than $270 billion in federal tax incentives from the IRA.
“If the Biden administration is truly committed to the Inflation Reduction Act’s stated goal of promoting construction of critical clean energy infrastructure, Treasury and the IRS must significantly revise the proposed rule to clarify prevailing wage and apprenticeship requirements and eliminate unnecessarily burdensome provisions that depart from the letter of the law,” said Ben Brubeck, ABC vice president of regulatory, labor and state affairs. “Otherwise, increased costs and widespread delays on clean energy construction projects are inevitable as developers and contractors struggle to understand and comply with cumbersome and unclear regulations.”
“While inflationary prevailing wage regulations and government-registered apprenticeship mandates that limit small business and workforce participation are unfortunately required by the Inflation Reduction Act, the agencies can still take important steps to provide clarity and lessen burdens for taxpayers and contractors. Among many other recommended changes to the proposed rule outlined in ABC’s comments, IRS must ensure clear prevailing wage classifications are readily available to contractors seeking to pay appropriate wages and establish apprenticeship requirements and exceptions that align with actual industry practice.”
The Treasury’s Notice of Proposed Rulemaking, Increased Credit or Deduction Amounts for Satisfying Certain Prevailing Wage and Apprenticeship Requirements, proposes regulations clarifying the applicability of tax credits for the construction of private clean energy projects funded by the IRA––including solar, wind, hydrogen, carbon sequestration, electric vehicle charging stations and more––conditioned on compliance with controversial prevailing wage and government-registered apprenticeship requirements. Effective Jan. 30, project developers who satisfy these regulations are eligible for a 500% increase in tax credits compared to baseline tax credits offered to developers under previous regulations.
“Additionally, the agencies must fully withdraw provisions of the proposed rule that incentivize project labor agreements that restrict competition and unfairly favor unions. Project labor agreements often prevent contractors from utilizing their established workforce,” said Brubeck. “Given that less than 12% of the U.S. construction industry is unionized and the construction industry is facing a skilled labor shortage of more than 500,000 people in 2023, these policies must be removed to ensure that the vast majority of the workforce is able to work on projects receiving IRA tax credits through fair and open competition.”
According to a survey of ABC contractor members published Oct. 24, 98% of respondents stated that controversial prevailing wage and government-registered apprenticeship policies imposed by the Inflation Reduction Act will make them less likely to bid on clean energy projects.
ABC also led a coalition of a dozen construction and business associations in comments urging the IRS to provide regulatory clarity and to abandon its illegal and coercive scheme to push clean energy project developers into requiring PLAs.
ABC previously submitted comments on Nov. 4, 2022, to Treasury in response to its request for comments on future initial guidance implementing these tax credits. ABC outlined concerns with the IRA’s unprecedented expansion of inflationary prevailing wage and apprenticeship requirements and the lack of clear guidance from Treasury as a result of it failing to issue regulations through a traditional notice-and-comment rulemaking.
ABC issued a Nov. 29, 2022, statement on the IRS/Treasury’s inadequate initial guidance.
Following extensive feedback from ABC and industry stakeholders on the November 2022 guidance, this summer the Biden administration announced a formal rulemaking on the matter.
Stakeholders can review ABC and government resources on the IRA tax credits for clean energy projects at abc.org/ira.
WASHINGTON, Oct. 24—According to an October 2023 survey of ABC contractor members published today, 98% of respondents stated that controversial prevailing wage and government-registered apprenticeship policies imposed by the Inflation Reduction Act will make them less likely to bid on clean energy projects. The survey gauged ABC members’ responses to a proposed rule issued by the Internal Revenue Service on Aug. 29 that would implement these requirements.
“The concerns expressed by the overwhelming majority of respondents indicate that the proposed rule fails to provide much-needed regulatory certainty and will ultimately cause unnecessary cost increases and delays to America’s clean energy projects,” said ABC Vice President of Regulatory, Labor and State Affairs Ben Brubeck. “Stakeholders seeking enhanced IRA tax incentives conditioned on meeting controversial prevailing wage and government-registered apprenticeship programs are sending a clear message that more clarity is required for the IRA to deliver on promised benefits.
“These survey results confirm that ABC members will be much more likely to participate in clean energy construction if there is clarity in these policies,” said Brubeck. “ABC members expressed a wide range of concerns, from a shortage of government-registered apprenticeship programs and participants in this competitive labor market to opaque prevailing wage regulations that will increase compliance burdens and discourage competition from small businesses. The IRS must provide additional information and promote policies that encourage competition as implementation of the IRA moves forward.”
According to the survey:
- 96% of respondents agreed the IRA’s mandates would decrease competition among contractors on clean energy projects.
- 98% of respondents indicated that the proposed rule’s incentives for union-favoring project labor agreements would make them less likely to bid on these IRA projects.
- 85% of respondents stated that the necessary GRAPs for IRA projects had not been established in their geographic area, and 90% do not believe sufficient apprentices are available to meet the IRA’s labor hour requirements.
- 98% of respondents agreed that complying with union work rules where collectively bargained union wage rates prevail would increase the burden of complying with IRA prevailing wage requirements.
Small businesses, which represent the vast majority of construction firms, were deeply concerned with the proposed rule’s requirements. Of respondents that self-identified as small businesses under the Small Business Administration’s size standards, 97% said they would be less likely to bid on IRA projects due to the proposed rule’s requirements, 98% expressed concerns regarding unclear union work rules for prevailing wage classifications and 89% said sufficient apprentices to meet IRA GRAP requirements are unlikely to be available.
“ABC members work on a wide array of projects eligible for enhanced IRA tax incentives, including solar and wind energy, electric vehicle charging stations, carbon capture and more,” said Brubeck. “Unfortunately, many ABC contractors will be needlessly disincentivized from bidding on these projects because of the Biden administration’s lack of regulatory clarity in implementing the IRA and its schemes pushing clean energy developers to mandate anti-competitive and inflationary project labor agreements, which increase costs by 12% to 20% and reduce competition from more than 88% of the U.S. construction industry workforce.”
ABC will be submitting comments to the IRS by Oct. 30 in response to the proposed rule, as well as assisting contractor members in providing comments.
The Inflation Reduction Act was signed into law on Aug. 16, 2022, and provides over $270 billion in tax incentives for the construction of solar, wind, hydrogen, carbon sequestration, electric vehicle charging stations and other clean energy projects.
However, this is conditioned on requirements that project contractors meet prevailing wage and apprenticeship requirements. Developers/taxpayers must ensure that contractors pay all construction workers prevailing wages and benefits set by the U.S. Department of Labor via the Davis-Bacon Act. Developers must also ensure that contractors utilize apprentices enrolled in government-registered apprenticeship programs for certain percentages of all construction hours worked on a project (12.5% of all work hours in 2023 and 15% of all work hours in 2024 and thereafter), among other requirements.
ABC issued a statement on the August 2023 proposed rule expressing concerns with its lack of clarity and urging the IRS to make critical improvements prior to finalization.
Previously, ABC commented on the IRS’s November 2022 guidance on the IRA, which established that GRAP and prevailing wage requirements would take effect on Jan. 30, 2023. ABC’s comments called for regulatory clarity and raised concerns with the anti-competitive impacts of GRAP and prevailing wage requirements on clean energy projects.
For more information on the proposed rule and other IRA requirements, visit abc.org/ira.
WASHINGTON, Oct. 19—Testifying on behalf of Associated Builders and Contractors before the U.S. House Committee on Small Business today, Mario Burgos, chief strategy officer, Prairie Band LLC, Albuquerque, New Mexico, urged lawmakers to rein in the Biden administration’s inscrutable and burdensome wage determination practices under the Davis-Bacon and Related Acts. Burgos detailed his efforts to comply with a byzantine process to determine prevailing wages on federal construction projects and said the U.S. Department of Labor’s recent rulemaking updating Davis-Bacon will only make compliance challenges worse, driving small contractors out of public works projects or even out of business.
Speaking at the hearing “Burdensome Regulations: Examining the Effects of DOL Rulemaking on America’s Job Creators,” Burgos narrated the DOL’s investigation of his award-winning family business, Burgos Group, which resulted in the withholding of nearly $1 million in federal payments owed to the 17-year-old firm and a settlement costing the company hundreds of thousands of dollars plus legal fees. Ultimately, this action and the overly burdensome regulatory environment facing Burgos and his company were contributing factors to its sale to Prairie Band LLC.
”Unfortunately, the number of rapidly changing and ever-increasing federal and state regulatory requirements affecting the construction industry led us to conclude that the most prudent action would be to exit the business,” Burgos testified. “The recent DOL updates to regulations implementing the Davis-Bacon and Related Acts is just the latest example of additional burdens and barriers erected, which make it more difficult for small businesses to participate in the economic investments of the bipartisan Infrastructure Investment and Jobs Act or to support our nation’s defense missions.”
In its investigation, the DOL determined that, although Burgos Group paid its employees prevailing wages on a federal project under the Arizona Laborers’ Agreement posted on the DOL’s website, they were instead subject to the unpublished prevailing wage scheme of IBEW Local Union 570, which had “claimed the work.” Burgos was never notified of the electrical union’s claim, which affected the job classifications of 84 workers, resulting in a settlement with the DOL under which Burgos Group admitted no fault or wrongdoing. “I do not believe that anyone at the DOL acted maliciously,” said Burgos. “Quite to the contrary, I believe that the subjective nature of the existing regulations created ambiguity, which puts a presumption of guilt on businesses and makes the enforcement and compliant responsibilities of DOL personnel more difficult.
“For decades, the DOL Office of Inspector General and Government Accountability Office have pointed to flaws in the DOL’s wage determination process, yet the DOL’s final rule does little to fix this problem,” said Burgos. “In fact, the new rule makes it worse by rescinding pro-taxpayer and commonsense policies that were enacted more than 40 years ago because they were not reliably producing a timely or local prevailing wage, as required by statute.
“My experience shows how difficult it can be to comply with DBA regulations when the correct wage determination is not easily determined,” said Burgos. “The revisions of the DBA, which will go into effect Oct. 23, 2023, further compound this problem. The DOL needs to publish union collective bargaining agreements publicly, or not apply this standard. Small businesses are hurt with cloak-and-dagger regulations.”
Burgos called on Congress to reduce the administrative and paperwork burden of complying with Davis-Bacon prevailing wage rules and eliminate the subjective nature of DBA compliance.
More information on the recent Davis-Bacon rulemaking is available at abc.org/davisbacon
[Editor's note: the hearing video begins at 17:16.]
WASHINGTON, Aug. 29—The U.S. Treasury Department’s Internal Revenue Service today released a proposed rule and FAQs on provisions of the ABC-opposed Inflation Reduction Act, which will affect the developers, contractors and workers that are building clean energy projects eligible for more than $270 billion in federal tax credits.
The Treasury’s Notice of Proposed Rulemaking, Increased Credit or Deduction Amounts for Satisfying Certain Prevailing Wage and Apprenticeship Requirements, proposes regulations clarifying the applicability of tax credits for the construction of private clean energy projects funded by the IRA––including solar, wind, hydrogen, carbon sequestration, electric vehicle charging stations and more––conditioned on compliance with controversial prevailing wage and government-registered apprenticeship requirements. Effective Jan. 30, 2023, project developers who satisfy these regulations are eligible for a 500% increase in tax credits compared to baseline tax credits offered to developers under previous regulations.
“As is typical in the federal government’s ‘ready, fire, aim’ approach to issuing regulations, the initial IRS guidance and FAQs on the IRA’s prevailing wage and apprenticeship requirements left many unanswered questions and created confusion that has needlessly stalled the groundbreaking of clean energy projects this year,” said Ben Brubeck, ABC vice president of regulatory, labor and state affairs. “This NPRM is a key step, welcomed by developers, taxpayers, contractors and subcontractors, who for months have been asking for clear and specific guidance on how these new provisions will be implemented. Developers can then decide whether the tax credits are worth the new and significant risks and penalties, and large and small-business contractors and subcontractors can decide whether to bid on and perform such work.”
“ABC is pleased the Biden administration recognized our legitimate concerns and directed the Treasury to conduct a formal rulemaking, which they should have started prior to the policy going into effect on Jan. 30, 2023,” said Brubeck. “Unfortunately, we are months away from a final rule and the industry is unlikely to receive the clarity and confidence it needs to fully leverage the tax credits to break ground on clean energy construction projects until then.
“ABC is still conducting a thorough review of the NPRM’s 129 pages, but, at first impression, the rule could benefit from additional improvements,” said Brubeck. “For example, in 2024 the IRA requires that 15% of all construction labor hours on a qualifying project must be performed by apprentices enrolled in government-registered apprenticeship programs. ABC expects that, in some markets, many apprenticeship programs in certain trades will not be able to meet industry demand and developers are counting on regulatory clarity for the proposal’s good-faith exception policy to assess the financial feasibility of the tax credits.
“In addition, the proposal appears to needlessly incentivize the use of anti-competitive and inflationary union-favoring project labor agreements by exempting developers from willful penalties for noncompliance with potentially confusing and half-baked rules,” said Brubeck. “To be clear, developers are not required to mandate the use of PLAs in order to receive enhanced tax credits.”
“ABC plans to address these concerns and other deficiencies in the NPRM in our formal comments to the IRS/Treasury by the Oct. 30 deadline,” said Brubeck. "We plan to encourage ABC members to participate in this rulemaking, connect them with more than 300 government-registered apprenticeship programs offered by ABC chapters, help them win IRA-funded construction contracts and build projects for clean energy developers safely, on time and on budget.”
“The bottom line is that this Biden administration policy and related regulatory delay and uncertainty are the result of yet another attempt by President Biden to ensure more taxpayer-funded construction contracts are won by unionized contractors and performed by union labor, even though less than 12% of the U.S. construction industry is unionized. This politically motivated policy will inflate the cost of clean energy projects, reduce competition from small businesses and artificially exacerbate the construction industry’s skilled labor shortage of more than 500,000 people in 2023,” said Brubeck. “The Biden administration’s favoritism toward unions through this misguided policy will ultimately undermine taxpayer investments made in clean energy construction projects.”
Background
ABC submitted comments on Nov. 4, 2022, to the Treasury in response to its request for comments on future initial guidance implementing these tax credits. ABC outlined concerns with the IRA’s unprecedented expansion of inflationary prevailing wage and apprenticeship requirements and the lack of clear guidance from Treasury as a result of it failing to issue regulations through a traditional notice-and-comment rulemaking.
ABC issued a Nov. 29, 2022, statement on the IRS/Treasury’s inadequate initial guidance.
Following extensive feedback from ABC and industry stakeholders on the November 2022 guidance, this summer the Biden administration announced a formal rulemaking on the matter.
ABC is encouraging members to participate in the Treasury’s 60-day comment period, which closes on Oct. 30.
Stakeholders can review ABC and government resources on the IRA tax credits for clean energy projects at abc.org/ira.
Of note, on Aug. 8, 2022, the Biden administration’s U.S. Department of Labor released an ABC-opposed final rule making radical changes to prevailing wage regulations implementing the Davis-Bacon Act. On July 31, 2023, the DOL’s Office of Apprenticeship sent a proposed rule, National Apprenticeship System Enhancements, to the White House Office of Management and Budget’s Office of Information and Regulatory Affairs for review, which is expected to be issued this fall.
It is unclear how the Treasury final rule will reflect the DOL’s significant changes to prevailing wage and apprenticeship regulations, which are likely to disrupt construction industry regulatory compliance, risk management, compensation and workforce development practices.
WASHINGTON, Aug. 8—Associated Builders and Contractors issued the following statement in response to the U.S. Department of Labor today issuing a final rule, Updating the Davis-Bacon and Related Acts Regulations, which will make drastic revisions to the Davis-Bacon Act and Related Acts regulations that apply to federal and federally assisted construction projects funded by taxpayers.
“This is yet another Biden administration handout to organized labor on the backs of taxpayers, small businesses and the free market,” said ABC Vice President of Regulatory, Labor and State Affairs Ben Brubeck. “Unfortunately, the DOL’s final rule disregards the feedback of ABC contractors, construction industry stakeholders and thousands of small businesses urging the withdrawal of this unnecessary, costly and burdensome regulation. Instead, the DOL is moving forward with dramatic changes to prevailing wage regulations, reversing much-needed reforms that were established nearly 40 years ago, and unlawfully increasing the regulatory burden on small businesses, new industries and public works projects.”
“With this final rule, the DOL has abandoned any possibility of instituting commonsense reforms to Davis-Bacon regulations to ensure accurate and prompt prevailing wage determinations while providing the regulated community with the clarity needed to deliver high-quality projects at an affordable cost to taxpayers,” said Brubeck. “Instead, the rule makes it much more likely that the DOL will adopt union wage scales at the prevailing wage at a greater frequency than in current practice, which already adopts union wage scales at improbable rates considering just 11.7% of the construction industry is unionized. ABC will now be forced to take appropriate legal action to address the numerous illegal provisions of the final rule and protect our members, and ultimately hard-working taxpayers, from the harmful impacts of this regulation.
“The final rule comes in the midst of challenging economic conditions facing the construction industry, including high materials costs and a skilled labor shortage of more than half a million in 2023,” said Brubeck. “The onerous new requirements and artificial inflation of construction costs imposed by this rule will only exacerbate these headwinds and undermine taxpayer investments in infrastructure.”
ABC submitted nearly 70 pages of comments on the DOL’s proposed rule, and its more than 50 significant changes, urging the DOL to withdraw the proposal.
The 1931 Davis-Bacon Act and related regulations require contractors and subcontractors that perform work on federal and federally funded construction projects of $2,000 or more to pay a government-determined prevailing wage and benefit rate on an hourly basis to on-site construction workers. According to the DOL rulemaking, the Davis-Bacon Act and 71 active Related Acts collectively apply to an estimated $217 billion in federal and federally assisted construction spending per year—about 63% of all government construction put in place—and provide government-determined wage rates for an estimated 1.2 million U.S. construction workers.
The Congressional Budget Office estimates that repealing the 1930s-era Davis-Bacon Act would save the federal government $24.3 billion in spending between 2023 and 2032. A May 2022 study found that the Davis-Bacon Act costs taxpayers an extra $21 billion a year, increases the price tag of construction projects by at least 7.2% and inflates construction workforce wages by 20.2% compared to local market averages if the DOL calculated prevailing wages using modern and scientific methodology via the U.S. Bureau of Labor Statistics.
Learn more at abc.org/davisbacon.
WASHINGTON, Nov. 7—Associated Builders and Contractors has submitted comments to the U.S. Department of Treasury and the Internal Revenue Service regarding implementation of tax credits for clean energy construction projects funded by the Inflation Reduction Act, contingent upon new controversial prevailing wage, apprenticeship and domestic content requirements.
“The IRA’s unprecedented expansion of anti-competitive prevailing wage, apprenticeship and domestic content requirements through the federal tax code onto private clean energy projects will disrupt the marketplace of contractors who successfully and safely build solar, wind, electric vehicle charging stations and other clean energy projects across America,” said Ben Brubeck, ABC vice president of regulatory, labor and state affairs. “That, in turn, hurts taxpayers because these new requirements will undermine efficient taxpayer investment in clean energy projects and result in needless construction delays and added costs that will ultimately be passed along to energy ratepayers and consumers.
“Unless Treasury provides thorough guidance through a formal notice and comment period, the likely result of these new policies will be fewer clean energy construction projects and less private investment, which would undermine President Biden’s goals of creating well-paying, middle-class jobs across America while reducing carbon emissions,” said Brubeck. “Developers, taxpayers, contractors and subcontractors need clear and specific guidance on how these new provisions will be implemented so developers can decide whether the tax credits are worth the significant risks and penalties, and large and small business contractors and subcontractors can decide whether to bid on and perform such work.”
On Oct. 5, Treasury and the IRS issued a request for comments notice inviting interested stakeholders to submit feedback in response to agency questions regarding implementation of these aspects of the IRA by Nov. 4. Opposed by ABC, the IRA was signed into law on Aug. 16, and provides over $369 billion in tax credits for the construction of solar, wind, hydrogen, carbon sequestration, electric vehicle charging stations and other clean energy projects. Developers/taxpayers can receive a bonus tax credit 500% greater than a baseline tax credit of 6%, but this is conditioned on requirements that project contractors pay Davis-Bacon prevailing wages and utilize apprentices enrolled in government-registered apprenticeship programs.
The wage and apprenticeship provisions apply to projects that begin construction 60 days after Treasury has published relevant guidance concerning these new requirements. It has been reported that Treasury intends to issue guidance by the end of the year, so this aspect of the IRA may affect certain clean energy construction projects as early as March 2023.
Treasury’s request for comments was issued as the construction industry faces significant headwinds including severe supply chain disruptions, unprecedented materials cost inflation of 41% since the onset of the COVID-19 pandemic, declining investment in structures, a shortage of 650,000 skilled workers and problematic Biden administration policies.
“As outlined in ABC’s comments, Treasury needs to work with industry to set simple and efficient regulations for these new requirements through a formal notice and comment period or risk exacerbating the many headwinds facing the construction industry,” said Brubeck. “If rushed and unclear, Treasury guidance will needlessly increase costs for contractors and taxpayers and ultimately delay and stop new clean energy projects.”
WASHINGTON, May 18—In a comment letter filed on May 17, Associated Builders and Contractors urged President Biden’s U.S. Department of Labor to withdraw an inflationary and flawed proposed rule revising Davis-Bacon Act and Related Acts regulations that apply to federal and federally assisted construction projects funded by taxpayers.
“The DOL’s proposed rule does little to improve or modernize Davis-Bacon Act regulations in the face of decades of complaints by government officials, taxpayer watchdogs and industry stakeholders critical of this regulatory boondoggle well-known for increasing the cost of construction, discouraging competition from small businesses and diminishing the value of taxpayer investment in government infrastructure projects,” said Ben Brubeck, ABC vice president of regulatory, labor and state affairs. “Instead, the proposed rule fails to fix the DOL’s unscientific wage determination process, rescinds modest pro-taxpayer reforms made by the Reagan administration and illegally increases regulatory burdens on small businesses, new industries and more public works projects.
“For years, ABC has called for reforms to confusing DOL red tape and unclear policies which—coupled with a dysfunctional wage determination process—have resulted in a broken system rigged by special interests and sympathetic bureaucrats to help make unionized contractors and union labor more competitive on public works projects,” said Brubeck. “With the Biden administration promoting itself as the most pro-union administration in history, it is little surprise the DOL missed an opportunity for meaningful regulatory reform and actively made Davis-Bacon Act regulations worse.
“Voters should know this proposed rule could not come at a worse time, as it will exacerbate the inflationary headwinds facing the construction industry—supply chain disruptions, unprecedented materials cost inflation, declining investment in structures and a skilled labor shortage of 650,000—and fail to improve the timeliness and quality of taxpayer-funded construction projects,“ said Brubeck. “This proposal will ultimately result in less value and job creation from taxpayer investment in infrastructure––including the $550 billion of new infrastructure funding via the Infrastructure Investment and Jobs Act.”
In nearly 70 pages of comments on the DOL’s proposed rule, Updating the Davis-Bacon and Related Acts Regulations, ABC opposed and provided feedback on many of the more than 50 significant changes in the proposed rule that will:
- Force contractors to adopt government-determined wage and benefits rates that do not reflect locally prevailing wage rates;
- Needlessly raise taxpayer-funded construction costs, resulting in few infrastructure projects and improvements;
- Stifle construction industry job creation and broader economic benefits;
- Undermine construction industry productivity and the efficient use of skilled labor;
- Disproportionately adopt union collective bargaining agreements as the government-determined prevailing wage;
- Unfairly give unionized firms an advantage when competing for public works contracts;
- Discourage competition from small businesses and minority-, women-owned and disadvantaged firms disproportionately by imposing onerous paperwork burdens and added regulatory costs; and
- Increase compliance risks on contractors and federal, state and local governments building projects funded by federal dollars subject to DBA requirements.
A new study released by the Beacon Hill Institute found the DBA costs taxpayers an extra $21 billion a year and increases the price tag of construction projects by at least 7.2% compared to the cost of construction if the DOL calculated prevailing wages using modern and scientific methodology via the U.S. Bureau of Labor Statistics.
In a recent survey, 94% of ABC members said that the DBA increases the overall cost of construction and creates more administrative burdens and costs than non-DBA projects. ABC members won 57% of the $128.73 billion in direct prime construction contracts exceeding $25 million awarded by federal agencies during fiscal years 2009-2021 and built hundreds of billions of dollars of construction procured by state and local government, funded in part by federal dollars.
In the absence of meaningful reforms, ABC has called for full repeal of the DBA and has opposed legislative and regulatory efforts to expand the scope of the DBA––and its costly regulatory burdens––onto public and private construction projects in which it has not been previously required. Likewise, ABC has called for reforms to and repeal of state and local prevailing wage regulations suffering from similar flaws as the federal DBA.
The 1931 Davis-Bacon Act and related regulations require contractors and subcontractors that perform work on federal and federally funded construction projects to pay a government-determined prevailing wage and benefit rate on an hourly basis to on-site construction workers. According to the DOL rulemaking, the Davis-Bacon Act and 71 active Related Acts collectively apply to an estimated $217 billion in federal and federally assisted construction spending per year—about 63% of all government construction put in place—and provide government-determined wage rates for an estimated 1.2 million U.S. construction workers.
WASHINGTON, May 16—The flawed method used by the federal government to calculate “prevailing wages” under the 91-year-old Davis-Bacon Act adds at least 7.2% to the cost of federal and federally assisted construction projects and inflates wages by 20.2% compared to local market averages, according to a new report from the Beacon Hill Institute. Associated Builders and Contractors has called on the U.S. Department of Labor to modernize its wage determination process for decades, but a proposed rule the agency released on March 18 actually makes this archaic and unscientific process even more inaccurate, inflationary and biased.
In the report, “The Federal Davis-Bacon Act: Mismeasuring the Prevailing Wage,” BHI examined the DOL Wage and Hour Division’s methodology that determines how much contractors are required to pay to construction workers on taxpayer-funded projects subject to DBA regulations. The report found that the DOL’s methodology produces government wage determinations that do not reflect local area standards and are not statistically accurate. These findings are consistent with reports critical of the DOL’s methodology by the DOL Office of Inspector General, the Government Accountability Office and think tanks published over the last 50 years.
“There is a general unawareness of the arcane statistical calculations undertaken by the U.S. DOL WHD that inflate costs. Since the law is intended to reduce wage competition, the government authorities responsible for calculating the prevailing wage are under pressure to use archaic methods for calculating a wage that is biased toward requiring union-scale wages instead of an average or even true prevailing wage. In addition, the DOL occupational classifications and rate of pay are not based on qualifications, experience, safety record or skills but rely only on the type of work performed on a project,” BHI wrote.
“The DBA turns federal construction spending into a costly welfare system for union workers in some markets,” according to the report. “The DBA gets periodic attention from Congress and various critics as an archaic policy resulting in waste, favoritism and reduced competition for government contracts.”
“The Biden administration’s sweeping proposal makes 50 significant changes to Davis-Bacon Act regulations, yet it does nothing to fix the systematic errors within the DOL’s wage determination process,” said Ben Brubeck, ABC vice president of regulatory, labor and state affairs. “Besides exacerbating these well-documented flaws, the proposal expands DBA regulatory burdens and increased costs to more taxpayer-funded construction projects and industries—including small businesses in the trucking, manufacturing and surveying industries—while failing to provide regulatory clarity to impacted contractors and stakeholders.”
“This anti-competitive and costly proposal couldn’t come at a worse time for taxpayers following the passage of the Infrastructure Investment and Jobs Act, which over the next 10 years invests $550 billion of new federal money into infrastructure above baseline spending,” said Brubeck. “The construction industry is facing unprecedented inflationary headwinds driven by supply chain disruptions, materials price escalation and a skilled labor shortage of nearly 650,000 in 2022. This rulemaking will result in more inflation and the construction of fewer roads, bridges, schools, transportation systems and utilities funded by taxpayers.
“The public has until May 17 to urge the administration to reconsider its path forward on this ill-advised and economically damaging rulemaking. Meaningful Davis-Bacon Act regulatory reform will foster robust competition from all members of the construction industry on federally funded contracts and deliver communities the high-quality infrastructure they deserve while providing the best possible value for taxpayers.”
The 1931 Davis-Bacon Act and related regulations require contractors and subcontractors that perform work on federal and federally funded construction projects to pay a government-determined prevailing wage and benefit rate on an hourly basis to on-site construction workers. According to the DOL proposal, the Davis-Bacon Act and 71 Related Acts collectively apply to an estimated $217 billion in federal and federally assisted construction spending per year—which is about two-thirds of all U.S. public works construction spending in 2021—and results in government-determined wage rates for an estimated 1.2 million U.S. construction workers.
For decades, small businesses in the construction industry have complained about the regulatory burdens and lack of clarity caused by dysfunctional DBA regulations and have called for its outright repeal without meaningful DBA reforms. Repeal of the DBA is likely to save taxpayers at least $217 billion over the next 10 years, according to BHI.
WASHINGTON, March 11—Associated Builders and Contractors today released the following statement from Ben Brubeck, ABC vice president of regulatory, labor and state affairs, in reaction to the U.S. Department of Labor’s proposed rule, Updating the Davis-Bacon and Related Acts Regulations. The 1931 Davis-Bacon Act and related regulations require contractors and subcontractors that perform work on federal and federally funded construction projects to pay a government-determined prevailing wage and benefit rate on an hourly basis to on-site construction workers. The Davis-Bacon Act and 71 active related acts collectively apply to an estimated $217 billion in federal and federally assisted construction spending per year and provide government-determined wage rates for an estimated 1.2 million U.S. construction workers.
“The 91-year-old Davis-Bacon Act and related regulations are in dire need of modernization and clarity. For decades, watchdogs in the federal government have criticized the DOL’s convoluted method for determining prevailing wage and benefit rates through an outdated and unscientific survey process riddled with errors and inefficiencies.
“In its current form, Davis-Bacon needlessly raises taxpayer-funded construction costs, stifles job creation, undermines productivity and discourages competition from small businesses interested in pursuing federal and federally assisted construction projects. For years, ABC has called for reforms to confusing DOL compliance rules and enforcement policies which—coupled with a dysfunctional wage determination process—have resulted in a broken system.
“While ABC is still reviewing the 432-page rule, it appears the DOL missed an opportunity for meaningful Davis-Bacon reform. For example, the proposed rule reverts back to 1983 regulations that do not result in actual prevailing rates, as required by statute. Reversing course by 40 years is not modernization. Instead, it is even worse public policy catering to special interests embedded in the Biden administration that benefit from the broken status quo.
“Throughout the rulemaking process, ABC will continue to advocate for commonsense reforms to Davis-Bacon regulations that will provide clarity for the regulated community and create accurate and timely prevailing wages. This approach will encourage quality contractors and their skilled workforce to compete to rebuild their communities and give taxpayers the best value for investments in public works projects.”
ABC will encourage its members, industry stakeholders and taxpayers to suggest additional improvements to the Davis-Bacon Act regulations within the 60-day comment period deadline.
Why the Davis-Bacon Act Needs Commonsense Reform:
- ABC recently surveyed its contractor members on the burdensome Davis-Bacon Act and related prevailing wage laws and their impact on member companies’ ability to develop their workforce, hire local, small, women-, minority-, veteran-owned and disadvantaged businesses and workers, win work and deliver quality projects safely, on time and on budget. Nearly 90% of survey respondents did not support prevailing wage laws and the Davis-Bacon Act in its current form, and 83% of respondents supported a full repeal of prevailing wage laws, while 82% supported prevailing wage law reform. In addition, 95% of respondents said prevailing wage laws make construction projects more expensive and 75% said prevailing wage regulations make them less likely to bid on taxpayer-funded public works projects.
- The Congressional Budget Office has estimated that repealing the Davis-Bacon Act would save the federal government $17.1 billion between 2021 and 2030.
- According to a study by the Heritage Foundation, 30,000 more construction jobs could be created on an annual basis if the DOL accurately calculated Davis-Bacon rates to find the true prevailing wage. ABC estimates the construction industry will need to attract nearly 650,000 additional workers on top of the normal pace of hiring in 2022 to meet the demand for labor.