There has been some confusion to the inconsistent applicability of the DBA provision on projects that include materials and equipment purchased using ARRA funds.
Question1: The EECBG/SEP program has an ARRA-funded cost sharing program, wherein the state provides 75% of the cost, up to a maximum of $5,000, for designated energy efficiency improvement equipment related to agriculture. The state only shares the cost for certain designated equipment purchased. Is this program subject to the DBA requirements?
Answer1: The Davis-Bacon Act (DBA) is not applicable unless construction is involved. Under ARRA, the DBA requirements apply only to laborers and mechanics employed by contractors and subcontractors on projects funded in whole or in part by ARRA. If a project does not involve construction, the DBA is inapplicable. Where an ARRA-funded grant project is only for the purchase of equipment, the DBA would not be applicable to the grant because the grant is only for a project that involves the purchase of equipment and no ARRA funds are being used for a construction project. The DBA does not apply where the principal purpose is for the procurement of items such as materials, supplies, and equipment. In this case, the program provides a cost share for the purchase of energy efficiency improvement equipment, such energy efficient irrigation pumps and materials to make mechanical improvements to irrigation pumps and systems, etc. The “project” is the purchase of energy efficient equipment and that equipment is not part of a larger "project" that involves substantial installation or other construction activities. As a result, this EECBG/SEP cost sharing program is not subject to the DBA because the ARRA-funded cost share is not being used for any labor/construction work.
Question2: We are a State Agency with an ARRA-funded SEP grant. We are considering providing grant contracts for large capital intensive energy efficiency and renewable energy projects. We are considering making a grant to be used only for a percentage of the materials and equipment on a project. The information contained in one of the DBA FAQs leads us to believe that if we use the following language in our contract template we would not trigger the DBA.
Grantee, located at ________ shall purchase and have delivered to its facility the following custom-built to specification equipment and materials. Lists the equipment and materials:
Can you confirm this understanding?
Answer2: In all cases a decision as to whether the DBA applies is made by the contracting officer on a case-by-case basis. While the FAQs are offered as guidance they are general in nature. In order to determine whether the DBA applies, the overall “project” must be considered. The SEP/EECBG Program grants are funded by the ARRA and all such grants are subject to the Davis-Bacon Act. The DBA requires “all laborers and mechanics employed by contractors and subcontractors on projects funded directly by or assisted in whole or in part by” by the ARRA be paid the prevailing wages in the locality of the project. While the DBA is not applicable to the purchase of equipment and materials, if the purchase of the equipment and materials “assists the project” in whole or in part the DBA is applicable.
In your question you indicate that your grants will be for a percentage of the equipment and materials to be used on “capital intensive energy efficiency and renewable energy projects.” Thus, it appears that the project is not the purchase of equipment and materials, but the project requires the installation of the equipment and materials purchased with an ARRA-funded grant in order to be completed. It also appears that the installation of such equipment and materials will be significant and not incidental to the purchase of the equipment and materials. As a result, in the case the DBA would be applicable to the entire project.
How have you and/or your project officer resolved this conflict with DBA when ARRA funds have been used only for the purchase of materials and equipment for a project?