December 2023 Construction Spending; Annual Review

The U.S. Census Bureau announced construction spending for December 2023 was at a seasonally adjusted annual rate of $2,096 billion, 0.9% above the revised estimate of $2,078 billion in November. Compared to last year, construction spending in December was up 13.9%. The overall construction value in 2023 was $1,979 billion, 7% above the total construction spending in 2022.

While private construction spending in December was $1,620 billion, 0.7% above the revised November estimate of $1,608 billion, public construction spending was $476 billion, 1.3 % above the revised November estimate of $470 billion. A key contributor to public construction was highway construction at $151 billion, 4.1% above the revised November estimate of $145 billion.

Compared to the previous year, the value of public construction in 2023 was $438 billion, 16.3% above what was spent in 2022. Again, highway construction was a leading contributor of growth with $134 billion, up 18 % above the $113 billion in 2022.

More information may be found at: https://www.census.gov/construction/c30/pdf/release.pdf.

WHD to Host Newly Expanded Virtual Prevailing Wage Seminars

The Department of Labor’s Wage and Hour Division (WHD) will be hosting virtual compliance seminars on the payment of prevailing wages on federally funded service and construction contracts. These seminars are a component of WHD’s continuous efforts to improve compliance and expand awareness concerning the prevailing federal wage requirements.

This year, the WHD has expanded its seminar offerings for contractors, agencies, unions, workers, and other stakeholders. These day-long seminars will offer sessions on various prevailing wage compliance topics, using breakout rooms so that participants can choose the most valuable sessions.

To attend, participants only need to register for their preferred seminar date; individual session registration is not required. The seminars are scheduled for Feb. 27, May 15, and Aug. 29, 2024, from 11:00 am to 5:30 pm EDT.

The tentative agenda in the registration link below will be updated leading up to each seminar date. While seminar attendance is free, registration is required. Participants may click here to register.

Proposed FAR Amendments: Enhancing Consistency in Suspension and Debarment Procedures for Federal Contractors

The Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA) have jointly proposed amendments to the Federal Acquisition Regulation (FAR) to enhance suspension and debarment consistency. Recommendations from the Interagency Suspension and Debarment Committee prompted these changes. Currently, the FAR and Nonprocurement systems operate independently, leading to variations. The proposed amendments align the FAR more closely with the Nonprocurement Common Rule (NCR).

While the FAR and NCR systems share core principles, there are disparities. The proposed rule introduces definitional changes, including standardized terms like “suspending and debarring official” and “administrative agreement,” aiming to clarify and promote the understanding of alternative measures.

Significantly, the proposed amendments bring substantive, procedural changes to suspension and debarment procedures by introducing seven new aggravating factors to be considered alongside the existing ten mitigation factors. This change aims to enhance consistency between the FAR and NCR, providing additional guidance for officials making contractor responsibility determinations.

The proposed rule also advocates for increased flexibility by expanding communication modes for notices and extending the time frame for a debarment decision from 30 to 45 days, with the possibility of further extensions for good cause. These changes aim to streamline and improve suspension and debarment procedures, aligning the FAR more closely with the NCR while ensuring clarity, consistency, and enhanced flexibility in the process.

Written comments are due on March 11, 2024.

DOL Issues Final Rule on Classifying Workers Under the FLSA

The Department of Labor (DOL) has issued a final rule under the Fair Labor Standards Act (FLSA) to clarify the distinction between employees and independent contractors. The rule aims to enhance employers’ and workers’ understanding of the distinction and reduce employee misclassification.

This issue affects workers’ eligibility for minimum wage and overtime pay, can create an unfair competitive advantage, and generates broader adverse effects on the economy. Acting Secretary of Labor Julie Su emphasizes the rule’s role in protecting workers and ensuring proper classification.

The Final rule seeks consistency for entities covered by the FLSA. The guidance aligns with established judicial precedent and reinstates a multifactor analysis, considering factors such as profit opportunity, financial investment, work permanence, employer control, essentiality of the work, and worker skill.

The new rule rescinds the 2021 Independent Contractor Rule, which was deemed inconsistent with the law. Stakeholder feedback from the 2022 forums and the October 2022 comment period informed the development of the rule. It becomes effective on March 11, 2024.

SDVOSB Changes in the FY 2024 National Defense Authorization Act

The National Defense Authorization Act (NDAA) for Fiscal Year 2024, signed into law on December 22, 2023, introduces significant changes to federal contracting, focusing on Service-Disabled Veteran-Owned Small Businesses (SDVOSBs).

Highlights of the changes include:

• Prime Contracting Goal Increase: Congress has increased the prime contracting goal for SDVOSBs from 3% to 5% of total prime contract spending. Section 863 of the 2024 NDAA replaces the previous 3% goal with the new 5% target, effective immediately upon the President’s signature.
• Prohibition of Self-Certified SDVOSBs: Section 864 of the 2024 NDAA prohibits the government from counting awards to self-certified SDVOSBs towards prime and subcontracting goals. Awards must be made to SBA-certified SDVOSBs to contribute to meeting goals.
• Grace Period for Section 864: Unlike the immediate effectiveness of the goal increase, Section 864 includes a grace period. The SBA has 180 days to prepare regulations, and until October 1 of the fiscal year following the publication of these regulations, the government can continue counting awards to self-certified SDVOSBs.
• Goal Impact: The new 5% goal challenges the government to improve its SDVOSB performance. In Fiscal Year 2022, the government awarded 4.57% of prime contract dollars to SDVOSBs. Achieving the 5% goal would have meant over $2.5 billion in additional SDVOSB prime contracting.
• Clarifies Previous Legislation: Section 864 explains that, despite prior legislation and SBA regulations in 2021 that say the government could claim credit for prime contracts awarded to self-certified SDVOSBs, the new rule closes this gap and emphasizes the importance of awards going to SBA-certified SDVOSBs.

In conclusion, the 2024 NDAA brings about a substantial increase in the SDVOSB prime contracting goal, accompanied by measures to ensure that only SBA-certified SDVOSBs contribute to meeting these goals, eliminating the previous practice of counting awards to self-certified SDVOSBs.

GSA Final Rule to Require Project Labor Agreements on Federal Construction Projects

On December 18, 2023, the General Services Administration (GSA) introduced a final rule enforcing Executive Order 14063, requiring federal agencies to implement project labor agreements (PLA) on large-scale federal construction projects. PLAs are pre-hire collective bargaining agreements with construction trades unions, establishing terms and conditions for all workers on specific federal construction projects.

The rule amends the Federal Acquisition Regulation, stipulating that federal construction projects exceeding $35 million must adopt a PLA to govern terms and conditions for construction workers. All involved parties must negotiate and establish these terms. The Biden Administration asserts that this expansion aims to ensure a predictable supply of skilled workers and eliminate construction delays caused by labor unrest.

The rule is set to affect around 200,000 workers on federal construction projects and will be effective  January 22, 2024. Opponents argue that the requirement may discriminate against non-union contractors and substantially raise costs for federal construction projects.

DOL Announces Final Rule on Nondisplacement of Service Contract Workers

The Department of Labor (DOL) has announced a final rule to enact the provisions of Executive Order (EO) 14055, titled “Nondisplacement of Qualified Workers Under Service Contracts.” This EO, issued by President Biden, mandates that contractors and subcontractors engaged in federal service contracts must extend the right of first refusal for employment on the successor contract to service employees previously employed under the predecessor contract.

The final rule establishes comprehensive standards and procedures for implementing and enforcing EO 14055. The rule outlines the obligations of contracting agencies and contractors under the executive order, creating a robust investigation process designed to safeguard workers from displacement. Additionally, it clarifies how the executive order applies to subcontracts and enumerates potential sanctions and remedies that the Department of Labor may impose.

The final rule takes effect on February 12, 2024. However, it will apply exclusively to solicitations issued on or after this effective date as stipulated by regulations from the Federal Acquisition Regulatory Council (FAR Council). For more information, please visit Final Rule: Nondisplacement of Qualified Workers under Service Contracts.

California’s Expanded Paid Sick Leave Requirements Take Effect January 1, 2024

In October, Governor Newsom approved SB 616, which changes California’s sick pay law. These modifications, slated to take effect on January 1, 2024, impact various facets of the Healthy Workplaces, Healthy Families Act of 2014.

The changes introduced by SB 616 encompass an increase in the allowable paid sick leave, rising from 24 hours or three days to 40 hours or five days, whichever is greater. Simultaneously, the accrual cap on paid sick leave sees an upward adjustment from 48 hours or six days to 80 hours or ten days.

Changes in accrual requirements now mandate that, for employers utilizing a different accrual system than one hour per 30 hours worked, employees must accumulate a minimum of 24 hours or three days by their 120th day of employment and 40 hours or five days by their 200th day of work.

Moreover, adjustments to conditions for paid leave or time-off policies specify that eligibility for at least 40 hours or five days of paid sick leave or time off must occur within six months of employment. Extending paid sick leave provisions to employees covered by a collective bargaining agreement eliminates the previous exemption for such employees.

In addition, SB 616 establishes a statewide standard, preempting any local ordinances with less generous leave requirements than those stipulated in the bill. California employers must ensure that their policies align with these new changes to guarantee compliance.

SBA Issues Final Rule Addressing Credit for Lower-Tier Subcontracts on Federal Contracts

The U.S. Small Business Administration (SBA) has amended its regulations to align with the National Defense Authorization Act (NDAA) for Fiscal Year 2020. Effective November 13, 2023, the final rule allows federal prime contractors to apply credit for subcontracts to small businesses at lower tiers toward subcontracting goals. This change involves incorporating lower-tier subcontracting performance into the subcontracting plan goals.

The final rule responds to changes in section 870 of the NDAA of 2020, affecting section 8(d) of the Small Business Act regarding the requirements that apply to a Federal contractor seeking to obtain subcontracting credit on certain types of Federal contracts. The amendments permit prime contractors to elect to receive credit for lower-tier subcontracts, eliminate tier-specific goals for such contractors, and require subcontracting plans to specify the records maintained for lower-tier credit substantiation. The changes replace the prior mandate with an election and streamline subcontracting goals for all prime contractors.

In the past, the final rule had allowed contractors to receive lower-tier subcontracting credit only if they had two sets of subcontracting goals: one for small-business subcontracting at the first tier and an additional goal for small-business subcontracting at lower levels. Section 870 prohibits agencies from setting tier-specific goals for prime contractors utilizing lower-tier credit. Consequently, the SBA has revised the regulations to streamline subcontracting goals, ensuring that prime contractors have only one set of goals.

These adjustments provide prime contractors greater flexibility in receiving credit for lower-tier subcontracts and eliminate tier-specific goals. Additionally, it represents a shift away from the prior mandatory practice of recognizing lower-tier subcontracts, moving towards an optional framework. Prime contractors now have the option to receive recognition for either first-tier subcontracts alone or for subcontracts at any tier. This flexibility reflects the stipulations outlined in the NDAA of 2020.

What Employers Should Know About the Illinois & Chicago New Paid Leave Rules

On November 3, 2023, the Illinois Department of Labor released proposed regulations for implementing the Paid Leave for All Workers Act (PLAWA).

This law mandates that private employers throughout the state provide their employees with earned paid leave, applicable for any purpose. While some Illinois municipalities already had similar requirements, this Act ensures uniform benefits statewide.

Broadly, the PLAWA covers most employers with employees who work in Illinois, and under this Act, employees are entitled to one hour of paid time off for every 40 hours they work in 12 months. Employers are not required to grant more than 40 hours of paid leave in that period, but employees can also take that leave for any reason.

Although the proposed rules are not yet finalized, they provide additional guidance for employers to consider when aligning their leave policies with the impending PLAWA, which will be effective on January 1, 2024.

Meanwhile, on November 9, 2023, Chicago passed an ordinance providing a comprehensive package encompassing paid leave to all employees who work at least two hours in two weeks while physically present within the City of Chicago.

As per the ordinance, employees can accumulate up to 40 hours of paid leave within 12 months. Additionally, employees can now use an additional 40 hours of paid leave for any reason, making the total allowable paid time off 80 hours per 12-month period. The Chicago ordinance is one of the nation’s most generous paid time off regulations.

The implementation of the Chicago ordinance is scheduled for December 31, 2023, requiring businesses in the city to modify their policies to align with this broader framework quickly.

Moreover, businesses with employees in Illinois, including those within and outside the City of Chicago, should take measures to ensure compliance with the provisions of the Illinois Paid Leave for All Workers Act, which is also to take effect at the beginning of the new year.