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Recent Case Clarifies Jurisdiction Over Disputes

August 2, 2012 Written by: Written by Kevin Frankovich, CGR Associates, Inc.

Many contractors have no doubt found compliance with the provisions of the Davis-Bacon and Service Contract Acts confusing at one time or another. Most feel that following the terms and wage determinations in the contract is a logical start to compliance with the laws.

However a recent case involving jurisdiction over various aspects of the laws and their implementation is evidence that mistakes are sometimes made on the part of the awarding agency.  The reason this case is significant is that it clarifies which agency has jurisdiction over resolving disputes in such an occurrence.

In this instance, Caddell Construction learned that a second-tier subcontractor had been paying a lower wage than required for the job classification of its workers. Caddell then notified its subcontractor of the error and, as well, as its decision to withhold further payment to the subcontractor until copies of restitution checks to the affected employees were provided.

The second-tier sub responded that the contract failed to clearly specify a wage determination for its workers, and that it had used the classification provided when they sought clarification from the agency.  The subcontractor, Circle C, then filed a claim with Caddell for the difference between the wages that had been paid and the correct prevailing wage.
Caddell Construction, following procedures outlined in the Contract Disputes Act, submitted a claim with the contracting officer – which was denied.  Caddell then appealed to the Armed Services Board of Contract Appeals. The government moved for dismissal of the appeal, arguing that jurisdiction for this type of labor dispute lay with the US Department of Labor.

The Board denied the motion, finding that in fact the ASBCA does have jurisdiction to hear disputes regarding wage issues “where there was an alleged mistake (mutual or unilateral) as to the applicability of the Davis-Bacon Act to appellant’s employees.” Since the claim was the result of incorrect wage information being provided to bidders prior to bids being submitted, the Board concluded that the claim fell within its jurisdiction.

The takeaway from this case is that, in general, disputes regarding contract issues – including alleged mistakes in bid specifications – fall under the jurisdiction of the contracting agency and oversight board. Authority over disputes regarding labor issues, including the correct rate of pay and benefits for a particular wage determination, rests with the US Department of Labor.