The opinion of the court was delivered by: Judge Smith-ribner
AND NOW, this 29th day of September, 2009, IT IS HEREBY ORDERED that the above-captioned opinion filed July 9, 2009, shall be designated OPINION rather than MEMORANDUM OPINION and it shall be reported.
BEFORE: HONORABLE BONNIE BRIGANCE LEADBETTER, President Judge, HONORABLE BERNARD L. McGINLEY, Judge, HONORABLE DORIS A. SMITH-RIBNER, Judge, HONORABLE RENÉE COHN JUBELIRER, Judge, HONORABLE ROBERT SIMPSON, Judge, HONORABLE MARY HANNAH LEAVITT, Judge, HONORABLE JOHNNY J. BUTLER, Judge.
Adams County Interfaith Housing Corporation (ACIHC) petitions for review of the order of the Pennsylvania Prevailing Wage Appeals Board (Board) denying ACIHC's grievance from a refusal by the Secretary of Labor and Industry (Secretary), through the Bureau of Labor Law Compliance (Bureau), to promulgate a wage rate classification for "Residential Construction" under the Pennsylvania Prevailing Wage Act (Act)*fn1 and apply it to ACIHC's project involving renovation of nine to ten units of residential housing for persons with disabilities (Project). Specifically, ACIHC wants residential construction wage rates under provisions of an act known as the Davis-Bacon Act in 40 U.S.C. §3142(a) to be applied to the Project based upon legislative intent and the circumstances of this case.
ACIHC raises the following questions. It asks whether the Secretary violated the Act by failing to promulgate residential wage rates; whether his refusal to apply federal residential rates was arbitrary and capricious; whether it violated equal protection where federal residential rates were applied to other projects based on the same guidelines; whether the Davis-Bacon Act and the HOME Investment Partnerships Program (HOME)*fn2 pre-empt application of higher Pennsylvania rates; and whether the Board erred in concluding that ACIHC could not file a grievance.
ACIHC is a private, non-profit organization that provides affordable housing to low-income persons in and around Adams County, with funding mainly through programs administered by the United States Department of Housing and Urban Development. ACIHC plans to renovate a building in Gettysburg, Adams County, to provide affordable housing for persons with disabilities. The building, "Anthony's Place," would contain nine to ten units and be less than four stories in height. The Project is financed in part by a $500,000 federal HOME grant. In 2006 ACIHC requested a predetermination of prevailing wage rates that applied to the Project, and on November 28, 2006 the Bureau notified ACIHC that state rates for the classification of "Building Construction" applied. Federal law recognizes four construction classifications (Residential, Building, Heavy and Highway), but Pennsylvania recognizes three (Building, Heavy and Highway).*fn3 Also, federal law requires applying Davis-Bacon residential rates to federally subsidized residential construction containing twelve or more units, but it is silent regarding those projects containing fewer units.
On December 1, 2006, ACIHC objected to the Bureau's prevailing-rate predetermination notice, arguing that the Bureau should apply Davis-Bacon residential rates and noting that in 2000 those rates were applied to non-student housing that is less than four stories high. The Bureau denied ACIHC's objection, and it requested reconsideration. On February 5 and 6, 2007, ACIHC advertized a request for proposals for the Project and asked contractors to submit bids using the state Building Construction rates and the Davis-Bacon residential rates. Using the state rates increased the Project's cost by 40 percent, or $290,664. On February 20, 2007, the Bureau denied reconsideration and stated as follows:
Labor and Industry utilizes federal residential rates only for university housing..
The Bureau has not adopted residential rates for other construction in the Commonwealth. The Bureau does not apply residential rates to other construction according to its wide legal discretion to issue and determine rates..
The Bureau is not bound by the issuance of federal Davis-Bacon residential rates for non-student housing in 2000..
Reproduced Record (R.R.) at 10a (emphasis original).
ACIHC timely filed a grievance with the Board, which it denied. The Board first determined that "qualitative challenges to wage rates" had to be filed as an appeal under Section 8 of the Act, 43 P.S. §165-8, and that ACIHC waived its right to object to the predetermination by filing a grievance under Section 2.2(e) of the Act, added by Section 3 of the Act of August 9, 1963, P.L. 653, 43 P.S. §165-2.2(e). It found no discriminatory effect or evidence of a discriminatory purpose.
Moreover, ACIHC's involvement in the Project was insufficient to establish that it is "similarly situated to others who may be involved in state-wide college residential housing construction for purposes of setting prevailing wage rates." Board's Opinion, p. 11. As to the claim that the Bureau's failure to issue residential rates under 34 Pa. Code §9.105(d)*fn4 was arbitrary and capricious, the Board stated in relevant part as follows:
[T]he courts have held that the Secretary has broad discretion under 34 Pa. Code § 9.105 in promulgating wage rates. "The determination of prevailing wages is an act largely committed to the Secretary's legislative[ly] authorized discretion. . The Secretary's exercise of discretion is not subject to reversal, absent proof of fraud, bad faith or a blatant abuse of discretion." [IBEW, Local Union No. 98 v. Department of Labor and Industry, 816 A.2d 1220, 1223 (Pa. Cmwlth. 2003)]....
As there is no indication of a flagrant abuse of discretion, fraud, or bad faith in failing to issue separate residential rates, it is not up to us to substitute our own ...