The President’s Minimum Wage Announcement Ignores Current Rates

President Obama recently announced his intent to sign an Executive Order which would unilaterally increase the minimum wage for certain workers on federal projects. The current federal minimum wage rate is $7.25 an hour, and President Obama is looking to raise it to $10.10 per hour. At first glance, one may think that such an increase will have a widespread impact on the Washington, DC metro area, given its large concentration of federal contractors.

This will not be the case. Such a change would only apply to new or revised federal contracts, and not to current federal contracts. More significantly, the majority of federal contractors are already being paid wages that are over the proposed minimum $10.10 rate, depending on their wage classification.

For example, a bulldozer operator on a federal project in Fairfax County can make a minimum rate of $20.40 per hour, and a court security officer in Washington, D.C. can make a minimum rate of $24.72 per hour. These rates are controlled by the Department of Labor through the Davis-Bacon Act and the Service Contract Act. Additionally, many federal contractors are union members, meaning that their wage rates and benefits are controlled by collective bargaining agreements. As a result, the President is targeting an issue that is already largely covered by federal law, wage determinations and collective bargaining.

President Obama plans to highlight his Executive Order in tonight’s State of the Union address. While the potential increase may derive from good intentions, it imposes a requirement on an already heavily-regulated industry, and many business owners know that they are already in compliance with the increase.

Katie Lipp is an attorney with the Washington, DC regional business law firm Berenzweig Leonard, LLP. Katie can be reached at klipp@berenzweiglaw.com.

A Contractor Makes a Dangerous Gamble When Its Bid Price Assumes the Approval of Local Permitting Authorities

Should a federal government construction contractor assume that its permit request for a construction project will be approved by local state authorities? Absolutely not, according to the United States Court of Appeals for the Federal Circuit. The Federal Circuit found that the plain language of FAR’s Permits and Responsibilities Clause, which was incorporated into a Federal Bureau of Prisons contract, allocated any financial cost associated with permitting solely on the contractor.

Bell/Heery was awarded a design-build construction contract to build a new federal prison in New Hampshire. The project specifications detailed a “cut-to-fill” site, meaning that the project land had to be leveled by excavating, or “cutting” materials from one area of the work site and using the same materials to fill lower areas. Bell/Heery’s proposal incorrectly assumed that the local environmental officials, the New Hampshire Department of Environmental Sciences (NHDES), would approve the cut-to-fill operations – and as an unfortunate result, Bell/Heery had to incur approximately $7.7 million in excess costs to perform, because NHDES did not approve the anticipated efficient cut-to-fill operations.

Bell/Heery attempted to recover the excess $7.7 million from the Federal Bureau of Prisons, arguing that the agency was contractually required to engage with NHDES about the cut-to-fill specifications and that the agency breached its duty of good faith and fair dealing by failing to engage with NHDES, among other allegations. The Federal Circuit did not agree, citing the FAR Permits and Responsibilities Clause, which made the contractor responsible for all permitting costs. Contractors putting together bids for federal government work should keep this decision in mind when pricing their bids, to ensure that they account for the possibility of permitting roadblocks and how these hurdles will impact their bottom line.

Katie Lipp is an attorney with the Washington, DC regional business law firm Berenweig Leonard, LLP. Katie can be reached at klipp@berenzweiglaw.com.