The President's proprietary authority

In Building Construction Trades Department, AFL-CIO v. Allbaugh, (1) the United States Court of Appeals for the District of Columbia Circuit (Court of Appeals) reversed the United States District Court for the District of Columbia (District Court) and held that President Bush acted within his constitutional authority when he issued an Executive Order (2) (EO) that prohibited the required use of project labor agreements (3) (PLA) on any federal or federally funded construction projects. (4)

On 17 February 2001, President Bush signed EO 13,202. The EO prevents contracting authorities from requiring or forbidding the use of PLAs. (5) The plaintiffs (6) challenged the validity of the EO after the Federal Highway Administration rejected a bid specification that incorporated a PLA for a federally funded construction project. (7) The District Court held that the President exceeded his authority by issuing the EO. (8) The court also found that the National Labor Relations Act (9) (NLRA) preempted the President's authority because the EO "abridged the rights granted in the Act and would alter the delicate balance of bargaining and economic power that the NLRA establishes." (10) The District Court issued a permanent injunction against enforcement of the Executive Order; the agency appealed this injunction. (11)

On appeal, the Court of Appeals reversed and vacated the District Court's injunction. The Court of Appeals held that "the President's power necessarily encompasses general administrative control of those executing the laws," which "frequently requires the President to provide guidance and supervision to his subordinates." (12) The court determined that the EO was "such an exercise of the President's supervisory authority over the Executive Branch." (13)

The district court held that because "private entities were being prohibited ... from requiring PLAs that are expressly allowed by the [NLRA], the NLRA preempted the EO insofar as it applies to private recipients of federal funding who act as employers in construction projects." (14) The appeals court held, however, that the NLRA was not applicable unless the "[g]overnment is regulating within a protected zone, not when it is acting as a proprietor." (15) If the government imposes a condition to awarding or funding a contract unrelated to the employer's performance of contractual obligations to the government, the condition is regulatory. Because "the impact of [the] procurement policy [expressed in EO 13,202] extends only to work on projects funded by the government," the EO expresses a proprietary policy that is not subject to preemption by the NLRA. (16)

Labor Clauses Below the Simplified Acquisition Threshold

On 20 March 2002, the Civilian Agency Acquisition Council (CAAC) and the Defense Acquisition Regulations Council (DARC) issued a final rule, amending the Federal Acquisition Regulation (FAR) and clarifying the application of labor clauses to contracts below the simplified acquisition threshold. (17) The final rule incorporates the prohibition of segregated facilities clause and the equal opportunity clause by reference. (18) The rule also requires the application of the prohibition of segregated facilities clause whenever the equal opportunity clause is used. (19) The rule clarifies the geographic application of the Walsh-Healey Public Contracts Act, (20) the Affirmative Action for Workers with Disabilities Act, (21) and the Service Contract Act. (22) Finally, the rule defines "United States" in the equal opportunity clause. (23)

Davis-Bacon Act

What Do You Mean I'm Responsible ?

In Westchester Fire Insurance Co. v. United States, (24) the U.S. Court of Federal Claims (COFC) held that the rights of a subcontractor's employees to withheld Davis-Bacon Act (25) (DBA) and Contract Work Hours and Safety Standards Act (26) (CWHSSA) wages were superior to the rights of the Coast Guard, the contractor, and the contractor's subrogee, Westchester. (27) Zanis Contracting Corporation (Zanis) was the prime contractor for a $440,000 U.S. Coast Guard contract for waterfront rehabilitation at a Coast Guard facility in Eaton Neck, New York. The contracting officer terminated the Eaton Neck contract for default and re-procured the remaining work after the contracting officer and the surety failed to enter into a takeover agreement. (28) Five months after the contracting officer terminated the contract, the Department of Labor (DOL) requested that the contracting officer withhold $69,105.12 for alleged DBA and CWHSSA wage infractions by a Zanis subcontractor, Harbor Clean Corporation (Harbor Clean). Westchester claimed that the contracting officer voluntarily paid the GAO $60,216.58 of the unpaid balance of the defaulted Zanis contract for DBA and CWHSSA violations. Therefore, Westchester argued that their liability excluded the amount the contracting officer paid to the GAO. (29)

The COFC held that the contracting officer was required to withhold funds from the prime contractor by law and by contract, and therefore, that the release of the funds to the GAO was not voluntary. (30) Once withheld, the funds were no longer available to the Coast Guard, Zanis, or Westchester because "a surety is not entitled to the use of contract funds that are set aside to pay. (31) Westchester claimed subrogation to the rights of the Coast Guard. The COFC responded that "it was immaterial whether Westchester was subrogated to the rights of the Coast Guard or Zanis in the remaining balance of the contract because the rights of the harbor workers were superior to both." (32) The court also held that Harbor Clean violated the labor standards during the performance of the contract. (33) After Zanis defaulted, Westchester was responsible for fulfilling the terms of the contract under the performance bond or the payment bond. (34) The GAO recommended that Westchester pay $151,449.58, plus interest. (35)