BUSINESS OPERATIONS
By Richard Arnholt
Increased Minimum Wage for Federal Contractors: Impact on Steel Erectors
P
resident Biden’s Executive Order 14026 (EO 14026), executed on April 27, 2021, increased the minimum hourly wage that federal contractors must pay certain workers on federal construction projects from $10.50 to $15, an action the president explained was aimed at promoting the government’s procurement interests in economy and efficiency by contracting with sources that “adequately” compensate their workers. On November 24, 2021, the Department of Labor (DOL) published a final rule implementing EO 14026, which went into effect on January 30, 2022. Unsurprisingly, the benefit to workers will result in taxpayers paying almost 50% more for certain types of services and will increase the cost of labor for the construction companies, including steel erectors, engaged as prime or subcontractors on federal construction projects.
Contracts Covered by the EO 14026 Importantly, this new minimum wage requirement only applies to work under certain types of federal contacts, and then only to “new” contracts entered into on or after January 30, 2022. A contract is considered “new” Richard Arnholt is a member at Bass, Berry & Sims in Washington, D.C. He advises companies on the complex rules applicable to contracting with federal and state governments. He focuses on risk mitigation through implementation and upgrades to ethics and compliance programs as well as response to government allegations of procurement fraud or misconduct. He can be reached at rarnholt@bassberry.com.
36 | THE STEEL ERECTORS ASSOCIATION OF AMERICA
even if it is (1) an extension of an existing contract, (2) a renewal of an existing contract, or (3) an exercised option on an existing contract. The regulations call for additional wage increases starting January 1, 2023, and annually thereafter. Covered contracts under the EO 14026 include the following types of agreements: • Procurement contracts for construction covered by the Davis-Bacon Act (DBA). • Service contracts under the Service Contract Act (SCA). • Concession contracts with the federal government. • Contracts related to federal land and offering of services to the general public, federal employees, and their dependents. The final rule also expressly excludes the following types of federal agreements from the application of the new minimum wage requirements: • Contracts that result from a solicitation issued prior to January 30, 2022, that are entered into on or between January 30, 2022 and March 30, 2022. • Grants. • Contracts with and grants to Indian Tribes. • Contracts for construction and services (except for those expressly covered by EO 14026) that are excluded from DBA or SCA coverage. Contracts for the manufacturing or furnishing of materials, supplies, articles, or equipment to the federal government (i.e., furnishing steel is likely excluded from