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Tuesday, November 2, 2010

Davis-Bacon Prevailing Wages and State Revolving Loan Programs Under the Clean Water Act and the Safe Drinking Water Act

Gerald Mayer
Analyst in Labor Policy

Jon O. Shimabukuro
Legislative Attorney

The Davis-Bacon Act requires employers to pay workers on federal construction projects at least locally prevailing wages and fringe benefits. These wages and benefits, determined by the U.S. Department of Labor, are the minimum hourly wages and benefits that employers must pay workers. In order to hire and retain workers, employers may pay more than locally prevailing wages or benefits.

In addition to the Davis-Bacon Act itself, Congress has added Davis-Bacon prevailing wage requirements to several statutes. Two of these statutes are the Federal Water Pollution Control Act, commonly called the Clean Water Act (CWA), and the Safe Drinking Water Act (SDWA). The CWA provides grants to states to operate state revolving loan fund (SRF) programs that fund the construction of wastewater treatment plants. Similarly, the loan program under the SDWA funds the construction of public drinking water systems.

Although the sections of the CWA and SDWA that authorize appropriations for the SRFs do not explicitly provide for appropriations beyond FY1994 and FY2003 respectively, Congress has continued to appropriate funds for both loan programs. For FY2010, Congress appropriated $2.1 billion for capitalization grants to the Clean Water SRFs and $1.4 billion for the Safe Drinking Water SRFs.

Davis-Bacon coverage under the CWA, in particular, has been the subject of considerable debate. After the authorization of appropriations for the SRFs expired at the end of FY1994, the Environmental Protection Agency (EPA) issued a memorandum stating that projects that began construction after the end of FY1994 do not have to comply with the Davis-Bacon requirements. The Building and Construction Trades Department (BCTD) of the AFL-CIO disagreed with EPA’s interpretation of the law. The BCTD argued that Davis-Bacon coverage applied to projects funded by the SRFs as long as Congress continued to appropriate funds for the program. In June 2000, EPA and the BCTD proposed a settlement agreement that would require states to ensure that prevailing wages be paid for work performed on projects funded through the SRF program “for as long as grants are awarded to the states.” The agreement was to take effect in July 2001. Later, the implementation date was moved to September 2001, and then to October 2001. Whether the settlement agreement was ever implemented is not entirely clear.

The application of the Davis-Bacon prevailing wage requirements to the FY2010 appropriations for the Clean Water SRFs and the Safe Drinking Water SRFs has been similarly questioned. In November 2009, EPA indicated that Davis-Bacon coverage will apply to any “assistance agreement” entered into during FY2010, whether or not the funds for the projects are from FY2010 or prior year appropriations. Some maintain that EPA’s position is contrary to Congress’s intentions.

Date of Report: October 26, 2010
Number of Pages: 9
Order Number: R41469
Price: $19.95

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