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Davis-Bacon CityCenterDC Case




by:
Karin Hunter Johnson
Nick Schnermann
Sheppard, Mullin, Richter & Hampton LLP - Washington Office

 
April 11, 2014

Previously published on April 7, 2014

In a recent decision out of the U.S. District Court for the District of Columbia, Judge Amy Jackson held that the Davis-Bacon Act (“Davis-Bacon”) did not apply to a privately-funded development of privately-maintained buildings to be occupied by private citizens and businesses. Judge Jackson’s decision overturned the original decision of the Department of Labor’s (“DOL”) Administrative Review Board (“ARB”), which found that Davis-Bacon applied to the project because it served the interests of the general public.

The case involved the “CityCenterDC” project on the site of the old Washington Convention Center in downtown Washington DC. While the land is owned by the City, the redevelopment will be entirely funded, occupied, and maintained by private parties for the entirety of the developers’ ninety-nine year lease. The mixed-use development will consist of two office buildings, a hotel, condominiums and apartments, retail shops, and public spaces. The City entered into an agreement to lease the land to the developers for $2 Million per year, but retained the right to maintain an active role in the project. Specifically, DC reserved the right to approve certain design decisions, to approve the choice of contractors, architects and other personnel, to enter and inspect the project site, and to audit the developers’ books and records related to the project.

Davis-Bacon applies to “every contract in excess of $2,000, to which the Federal Government or the District of Columbia is a party, for construction - of public buildings and public works of Government or the District of Columbia.” The Administrative Review Board found that this was a contract “for construction” to which DC was a party and that the project was a “public work” under DOL regulations because it “serves the interests of the general public” through construction jobs, increased economic activity, public spaces, sidewalks, and increased tax revenue. The Developers and the City—which feared being held responsible for the increased costs—both brought suit asking the court to set aside the Administrative Review Board’s decision.

Judge Jackson’s decision questions a number of the Administrative Review Board’s findings, but it ultimately rests on a rejection of the Administrative Review Board’s conclusion that CityCenterDC is a public work. She reasoned that the “text, history, and purpose of the Davis-Bacon Act reveal that Congress used the term ‘public work’ in its traditional sense: work that is either funded by public dollars or used by the public, and usually both.” Judge Jackson further noted that the plain language and operation of the Act clearly contemplates that this term was meant to apply to where government funds were involved. For example, Davis-Bacon provides for enforcement against contractors by withholding payment for their work but it is difficult, if not impossible, to see how this enforcement mechanism would work if the government is not making any payments to the contractor. Judge Jackson also concluded that virtually any private project would qualify as a public work if providing jobs and tax revenue were all that was required.

Judge Jackson further questioned the Administrative Review Board’s conclusion that the City’s lease agreements with the developers were contracts “for construction.” She acknowledged that there was precedent holding that agreements under which private parties built facilities for the purpose of leasing them to the government could qualify as contracts for construction but noted that, in all those cases, the government was the lessee and would ultimately occupy and maintain those buildings.

This decision draws a clear line limiting the applicability of Davis-Bacon and holding that it simply cannot apply to private construction projects with only an incidental connection to the government. With the Department of Labor becoming increasingly aggressive in its enforcement efforts, decisions like this set important limits on the reach of Davis-Bacon.



 

The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.
 

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Karin Hunter Johnson
Nick Schnermann
 
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