CHIPS Act Compliance: Meeting DBA Requirements for Contractors

Navigating CHIPS Act Compliance: How Contractors Can Meet Davis-Bacon Act Requirements

The CHIPS and Science Act (H.R. 4346), signed into law in August 2022, marks a pivotal moment for the U.S. semiconductor industry. With $52.7 billion in federal subsidies aimed at bolstering domestic semiconductor production, the CHIPS Act represents a monumental opportunity for contractors. However, with this opportunity comes with significant responsibility, particularly in complying with the Davis-Bacon Act (DBA) requirements. For contractors and subcontractors involved in CHIPS-funded projects, understanding and adhering to these federal labor laws is crucial to securing funding and avoiding severe penalties.

Understanding the CHIPS Act and the Davis-Bacon Act

The CHIPS Act requires contractors on federally funded construction projects to comply with the DBA. The DBA mandates that contractors and subcontractors pay workers no less than the locally prevailing wages for similar projects. This ensures that workers are compensated fairly and helps maintain a level playing field in the construction industry.

Historical Context: Lessons from the ARRA

This isn't the first time such compliance requirements have been imposed. During the Obama administration, the American Recovery and Reinvestment Act of 2009 (ARRA) included nearly identical provisions. Contractors were required to adhere to all DBA obligations, not just the prevailing wage stipulations. The Biden administration has taken a similar approach with the CHIPS Act, underscoring the importance of comprehensive compliance.

Key Compliance Requirements for CHIPS Act Contractors

Contractors seeking CHIPS Act funding must be prepared to meet several key compliance requirements:

1. Jobsite Postings and Wage Determinations
   Contractors must prominently display Davis-Bacon notices, including applicable wage determinations, at the job site. This ensures that workers are aware of their rights under the DBA.
2. Weekly Payroll and Certified Payrolls
   Workers on DBA-covered projects must be paid weekly. Additionally, contractors are required to submit certified payrolls documenting wages paid to workers each week. These records must be maintained for three years, adding an administrative burden that contractors must plan for.
3. Subcontractor Compliance and Prime Contractor Accountability
   Contracts with subcontractors must include specific clauses ensuring compliance with DBA obligations. Prime contractors are held accountable for their subcontractors' adherence to the law, making it crucial to monitor and enforce compliance across the entire project.
4. Workforce Continuity Plans
   In February 2023, the National Institute of Standards and Technology (NIST) issued an Initial Notice of Funding Opportunity, stipulating that developers seeking CHIPS Act funding must submit detailed workforce plans. These plans must demonstrate access to skilled and unskilled labor and may require agreements with labor unions or a comprehensive workforce continuity strategy.

Comparing CHIPS Act and Inflation Reduction Act (IRA) Compliance

Both the CHIPS Act and the Inflation Reduction Act (IRA) offer significant opportunities for contractors, but they impose different compliance obligations.

IRA Compliance Requirements

The IRA, enacted in August 2022, focuses on clean energy projects and includes strict prevailing wage and apprenticeship requirements. Contractors must meet specific labor hour ratios and maintain weekly certified payrolls to qualify for tax incentives. Unlike the CHIPS Act, the IRA mandates the use of apprentices, with specific participation rules in place.

Key Differences

While both acts expand the DBA’s Prevailing Wage requirements, the CHIPS Act does not impose apprenticeship mandates, though contractors can use apprentices as part of their workforce. Additionally, the compliance oversight for CHIPS projects is managed by the Department of Labor (DOL), whereas the IRS oversees compliance for IRA-related initiatives.

Potential Consequences of Non-Compliance

Non-compliance with the CHIPS Act can result in severe consequences, including:

Penalties and Debarment

Companies that fail to meet prevailing wage standards may face correction payments, termination of contracts, and even debarment from future federal opportunities.

The Importance of Accurate Documentation

Maintaining accurate payroll records, apprentice participation, and other compliance documentation is essential to avoid potential fines and penalties. The lessons learned from past initiatives like ARRA highlight the importance of meticulous record-keeping and proactive compliance strategies.

How Onsi Group Can Help

As leaders in the Prevailing Wage and contracting compliance industry, Onsi Group is here to support your CHIPS Act compliance efforts. We offer a range of services tailored to the unique needs of contractors, including:

• Compliance Consulting: Our experts can guide you through the complex requirements of the DBA and ensure that your project meets all federal labor standards.
• Training Courses and Webinars: Stay up-to-date with the latest regulations through our comprehensive training offerings.
• Auditing and Monitoring Services: We provide detailed audits and ongoing monitoring to help you maintain compliance throughout your project lifecycle.

Contact us today to learn how Onsi Group can help you navigate the CHIPS Act’s compliance requirements and achieve Peace of Mind on your next project.

Conclusion

The CHIPS Act presents a historic opportunity to revitalize the U.S. semiconductor industry. However, with this opportunity comes the responsibility of ensuring strict compliance with federal labor laws, particularly the Davis-Bacon Act. Contractors involved in CHIPS-funded projects must be prepared to meet a range of compliance obligations, from paying prevailing wages to maintaining detailed workforce plans. By partnering with Onsi Group, you can confidently navigate these requirements and secure the funding necessary to bring your project to life.

- Hailey Soupiset & Joshua Hinckley