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       Office of the Assistant to the Secretary for Labor Relations
                          LABOR RELATIONS LETTERS
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 Date:  January 15, 1993                               Letter No. LR-93-01
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   Subject:  Determination of prevailing wage rates for construction work
             financed or eligible for financing under the Comprehensive
             Improvement Assistance Program (CIAP) or Comprehensive
             Grant Program (CGP)
             I.    General applicability of prevailing wage rates.
             II.   "Nature" of work for the determination of wage rate
                   applicability for CIAP/CGP-eligible work
             III.  Guidance on the determination of nature of work for
                   painting.
 
        The following guidance concerns the proper determination of
   Davis-Bacon or HUD-determined prevailing wage rate applicability to
   construction work carried out in public or Indian housing, both
   prevailing wage requirements found in Section 12(a) of the U.S. Housing
   Act of 1937, as amended (Act) (Title 42 U.S.C. 1437j (a)).
 
   I.   General applicability of prevailing wage rates.
 
        Section 12(a) of the Act requires that not less than the wages
   prevailing in the locality, as determined or adopted by HUD, shall be
   paid to all maintenance laborers and mechanics employed in the operation
   of low-come housing; and that not less than the wages prevailing in the
   locality, as predetermined by the Secretary of Labor pursuant to the
   Davis-Bacon Act, shall be paid to all laborers and mechanics employed in
   the development of the project involved.
 
        Construction work which is financed or which is eligible for
   financing under the Comprehensive Improvement Assistance Program (CIAP)
   or Comprehensive Grant Program (CGP) is subject to either HUD-determined
   prevailing wage rates or Department of Labor (DOL)-determined
   (Davis-Bacon and Related Acts) prevailing wage rates, depending on the
   nature of work that is performed; (i.e., whether the work falls within
   the purview of "operation" or "development," above).  It is important to
   recognize that the source of the funds under the Act, whether from
   "operating" or
 
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SL: Distribution: W-3-1; R-1 (PIH); R-6, R-7, R-9, LR
 
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  "development" funds, is not determinative with regard to the proper
  characterization of work and correct wage rate application.
 
         The HUD Office of Labor Relations is responsible for the
  determination of whether work which will be undertaken at public and
  Indian housing developments constitutes maintenance, nonroutine
  maintenance or development.  Consultation with HUD Public or Indian
  Housing Staff may be necessary from time to time to help define the
  "nature" of the work.  Following the determination of the "nature" of the
  work, the Labor Relations staff determines and issues prevailing wage
  rates to cover work which is found to constitute maintenance or
  nonroutine maintenance, or issues appropriate Davis-Bacon wage rates for
  development work.  (See also HUD Handbooks 7485.1, REV 4 (12/89), and
  7485.3 (3/92).)
 
  II.  "Nature" of work for the determination of wage rate applicability
       for CIAP/CGP-funded and CIAP/CGP-eligible work.
 
       For CIAP/CGP-funded or eligible work, a proper determination of
  which prevailing wage rate is applicable (HUD- or DOL-determined) must
  be based on the nature of the work (with consideration of substantiality
  of the work) that is/will be performed.  It is important to understand
  that simply making a judgement that the work in question "appears" to be
  maintenance or construction is not an appropriate analytical approach for
  reaching this decision and may often lead to an improper determination
  and misapplication of prevailing wage requirements.  An improper
  determination may result in local agencies or contractors having to pay
  wage restitution to workers.
 
  A.   Statutory and regulatory definitions.
 
       In order to perform an evaluation of proposed work for a
  determination of the "nature" of the work, the substantiality (scope and
  context) of that work (discussed below) must be viewed in light of
  statutory and regulatory definitions and other policy directives and
  guidance:
 
       o    Operation is defined in the Act (Section 3(c)(2)) in part as
            any or all undertakings appropriate for management, operation,
            services, maintenance, security..., or financing in connection
            with a low-income housing project.
 
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       o    Maintenance, an activity normally funded under an "operating"
            account, is not defined in the Act or in existing HUD
            regulations.  For the purpose of this Letter, maintenance shall
            mean work that involves the regular upkeep and preservation
            of buildings, grounds, and facilities.  Maintenance may include
            but is not limited to groundskeeping, janitorial work, patching
            and/or finishing of interior and exterior walls and other
            surfaces, and the preservation, inspection and general upkeep
            of electrical, plumbing, and heating and air conditioning
            systems.  Maintenance work is subject to HUD-determined
            prevailing maintenance wage rates.
 
       o    Nonroutine maintenance under CIAP/CGP (24 CFR 968.203)
            is defined as work items that ordinarily would be performed on
            a regular basis in the course of upkeep of a property but have
            become substantial in scope because they have been put off,
            and that involve expenditures that would otherwise materially
            distort the level trend of maintenance expenses.  Nonroutine
            maintenance may include replacement of equipment and
            materials rendered unsatisfactory because of normal wear and
            tear by items of substantially the same kind.  Nonroutine
            maintenance is subject to wage rates which are determined by
            HUD to prevail in the locality for similar work.
            HUD-determined maintenance wage rates are not applicable to
            nonroutine maintenance.
 
       o    Development is defined in the Act (Section 3(c)(1)) as any or
            all undertakings necessary for planning, land acquisition,
            demolition, construction, or equipment, in connection with a
            low-income housing project.  The definition indicates that
            "construction" may be confined to "reconstruction, remodeling,
            or repair of existing buildings."  Development work is subject
            to Davis-Bacon wage rates.
 
       o    Work that constitutes reconstruction, a substantial improvement
            in the quality or kind of original equipment and materials, or
            remodeling that alters the nature or type of housing units does
            not qualify as nonroutine maintenance but falls within the
            purview of "development" (24 CFR 968.203).
 
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       o    Substaniality refers to a measurement of scope and context
            with which the nature of work can be determined.  This
            measurement was introduced as a means to differentiate
            between deferred maintenance subject to HUD-determined
            wage rates and development work subject to Davis-Bacon wages
            in a February 4, 1983, letter from the Solicitor of Labor (T.
            Timothy Ryan, Jr.) to HUD's General Counsel (John J.
            Knapp).  The Solicitor expressed substantiality in the
            following terms:  "any repair or replacement necessitated by
            normal wear and tear over time would be considered 'deferred
            maintenance,' provided that the work is not so substantial as
            to constitute reconstruction....since 'reconstruction,
            remodeling, or repair of existing buildings' is specifically
            included in the Act's definition of 'development,' to which the
            Davis-Bacon provisions apply" (emphasis added).
 
            Note:  The Solicitor further advised that "if major rewiring,
            plumbing or structural changes are necessary, or if it is done
            as part of...virtualy complete remodeling..., the work would
            then constitute 'reconstruction' and be subject to Davis-Bacon
            wage rates."  Also, that the conversion of equipment or
            premises such as the conversion from oil to gas heat or the
            surfacing of gravel driveways with asphalt, and replacement or
            alteration of the property which results in "betterment"
            (provided that significant construction activity is involved)
            would be covered by Davis-Bacon.
 
       o    Abatement of asbestos or lead-based paint or suspected
            lead-based paint, and repainting or encapsulation, does not
            constitute nonroutine maintenance and must be treated as
            "development" work (DOL/All Agency Memorandum #153, August
            6,1990).
 
       o    The Davis-Bacon Act, which requires the payment of wage rates
            predetermined by the Secretary of Labor, covers work which
            involves Federal government contracts in excess of $2,000 for
            "construction, alteration, and/or repair, including painting
            and decorating..." (emphasis added).
 
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  B.   Substantiality:  Scope and context of work.
 
       Substantiality is a measurement with which to differentiate between
  CIAP or CGP work which is subject to HUD-determined wage rates and
  that which is subject to Davis-Bacon wage rates.  All CIAP and CGP work
  - nonroutine maintenance and development - is characterized as
  "substantial." Nonroutine maintenance describes such work as "work items
  that ordinarily would be performed on a regular basis in the course of
  upkeep of a property, but have become substantial in scope because they
  have been put off..." (emphasis added).  The DOL Solicitor described
  development in terms of work items that, because of substantiality (i.e.,
  because they are so substantial) could not be considered deferred
  maintenance but rather would constitute reconstruction (i.e.,
  development).  (See definitions of nonroutine maintenance, development
  and substantiality.)
 
       The application of these definitions to actual work for project
  descriptions is not an exact science and can be difficult.  To assist in
  making accurate differentiations between nonroutine maintenance (subject
  to HUD-determined prevailing wage rates) and development (subject to
  Davis-Bacon prevailing wage rates), it is useful to look at proposed work
  projects and substantiality in the following way.
 
       All buildings deteriorate over time unless maintained.  Building
  maintenance and repair, then, may be viewed as a continuum of work
  responses to a building(s) over a period of time, ranging from routine
  daily maintenance, to replacement of failed components, to virtual or
  complete reconstruction or remodeling.  This continuum, which can also be
  referred to as a continuum of substantiality, is a function of both scope
  and context.
 
       Scope refers to the elements of the proposed work:  what specific
  activities are involved, how many, whether replacement (with the same
  kind) or new installation of materials or equipment, conversions, or
  abatement (asbestos, lead-based paint) activities are proposed, etc.
 
       Since CIAP/CGP work is often carried out over time, it is important
  to also consider the context of the specific proposal.  Context refers to
  where or in what circumstance the activities will take place.  In other
  words, is there other work which is being or will be carried out which is
  integrally related to the specific work proposal?  Single work activities
  which are
 
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  presented by themselves may appear to be moderate (and may be
  characterized as nonroutine maintenance) when, in fact, these activities
  are an integral part of an overall remodeling or reconstruction which is
  quite substantial and which constitutes development work.
 
  III. Guidance on the determination of nature of work for painting.
 
       Painting is perhaps the most difficult trade activity to
  characterize for prevailing wage purposes because the trade of painting
  is generally the same with regard to standard work practices and
  procedures regardless of how the work may be characterized (maintenance,
  nonroutine maintenance, or development).  Frequently, painting is
  performed in conjunction with and incidental to other work where the
  painting component takes on the character (or nature) of the overall
  project.  In such cases, it is usually not necessary to determine the
  character of the painting work apart from the other project components.
 
       Painting (and related patching and finishing) may also stand alone
  as a work activity.  For example, painting may be performed as a single
  activity at unit turnover, or as periodic or cyclical painting associated
  with planned routine maintenance and in these cases be assumed to be
  covered by HUD-determined wage rates.  Many assume incorrectly, however,
  from a nature of work and prevailing wage point of view, that any
  repainting as opposed to new construction painting is a maintenance or
  nonroutine maintenance activity in all cases.
 
       The U. S. Housing Act (a Davis-Bacon Related Act) requires the
  application of Davis-Bacon wage rates to "development" work.  The
  Davis-Bacon Act, while having direct application only to contracts
  involving the Federal government, specifically includes "painting" in the
  scope of work covered by Davis-Bacon wage provisions.  This explicit
  coverage of painting within the scope of the Davis-Bacon Act clearly must
  be considered in decisions involving the nature of painting work and the
  application of Davis-Bacon wage rates to such work under the U. S.
  Housing Act of 1937.
 
       As a result of these factors, painting is not an activity that can
  be easily viewed along the continuum of substantiality.  To assist in
  making accurate differentiations between painting work which is
  maintenance, nonroutine maintenance or development for prevailing wage
  determination purposes, the following guidance shall be used:
 
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       o    Maintenance:  Painting work shall be characterized as
            maintenance (and subject to HUD-determined maintenance
            wage rates) where such painting is carried out as part of
            normal maintenance operations.  Such work activities may range
            from simple touch-up in common areas and dwelling units to
            complete repainting of dwelling units at turnover.  "Cycle"
            painting may similarly be characterized as maintenance where
            such painting is undertaken in an on-going, routine scheduled
            activity.
 
       o    Nonroutine maintenance:  Painting work shall be characterized
            as nonroutine maintenance (and subject to HUD-determined
            prevailing wage rates for nonroutine maintenance) where such
            work involves "cycle" painting which has not been carried out
            on an on-going basis and has become substantial in scope (see
            definition of nonroutine maintenance, 24 CFR 968.203) provided
            that entire or nearly entire exteriors and/or interiors are not
            involved (see development, below).  Additionally, painting work
            which is incidental to nonroutine maintenance shall be
            similarly characterized.
 
       o    Development:  Painting work shall be characterized as
            development (and subject to Davis-Bacon wage rates) where
            such work is performed in conjunction with reconstruction or
            virtual reconstruction, remodeling or repair (where "repair" is
            not a nonroutine maintenance activity), or where associated
            with asbestos or lead-based paint abatement activity.  Painting
            work or contracts where entire or a substantial portion of
            building exteriors are involved, and/or where entire or a
            substantial portion of interiors including, for example,
            dwelling units, common spaces, office spaces, mechanical
            spaces, and related areas may be involved, shall also
            constitute development work.           ORIGINAL SIGNED BY
                                                     Richard S. Allan
                                          Deputy Assistant to the Secretary
                                                    for Labor Relations
 
  CONCURRENCE: BANKS        HARTENAU