If a public agency uses a grant agreement to fund construction, does that take the project out from under Oregon's prevailing wage rate law?

Plain-English summary

Oregon's prevailing wage rate (PWR) law requires workers on "public works" to be paid the prevailing wage for their trade in the locality. "Public works" includes construction, reconstruction, major renovation, and painting that a public agency carries on or "contracts for" to serve the public interest. ORS 279C.800(5).

The Public Contracting Code (chapters 279A, 279B, and 279C combined) contains a list of things the Code does not apply to, including "[g]rants." ORS 279A.025(2)(c). BOLI asked the AG whether that grants exemption swept grant-funded construction out from under the PWR.

The AG said no. Two reasons:

1. The grants exemption only excused grants from the parts of the Code that govern acquiring or disbursing contracts and price agreements. It did not reach the substantive PWR provisions, which trigger off the type of project (a "public works") and whether public funds are used, not off the kind of agreement that delivered the funds. ORS 279C.840(1) and 279C.810(2) operate on improvements and projects, not on procurement processes.
2. ORS 279C.810(1)(a)(A) explicitly anticipates one situation where a grant does trigger the PWR: a government grant issued to a nonprofit "for the purpose of construction." That provision would be meaningless if the grants exemption blocked the PWR across the board.

Legislative history confirmed the reading. The co-chair of the Task Group that drafted HB 2341 (the 2003 bill that created the Code) testified that the rewrite was not intended to change the PWR at all, and that the reason grants were placed in the exemption list was to keep public agencies from having to "competitively acquire" federal grant money — not to pull grant-funded construction out of prevailing-wage coverage.

So the bottom-line rule the opinion stated: if a public agency "contracted for" construction within the meaning of ORS 279C.800(5), the project remained subject to the PWR even if the agency used an instrument labeled as a grant. The two PWR carve-outs that mattered for application were elsewhere: ORS 279C.810(2) excused projects under a $50,000 contract price and projects where no public funds were directly or indirectly used.

The opinion was careful to say that it did not decide when a grant agreement would also count as a "contract for" construction within ORS 279C.800(5). That is a fact-specific question about the terms of the particular agreement.

Currency note

This opinion was issued in 2006. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

In particular, the $50,000 PWR contract-price threshold in ORS 279C.810(2) has been changed in later years and the BOLI rules around grant-funded construction have evolved. Anyone trying to figure out today's prevailing-wage exposure on a grant-funded project should check the current version of ORS 279C.810 and BOLI's current rules and guidance.

Background and statutory framework

The Public Contracting Code came together in 2003 (Or Laws 2003, ch 794) when the Legislative Assembly recodified the state's public contracting law into a single scheme. ORS chapters 279A, 279B, and 279C grew out of that effort. ORS 279C.800 to 279C.870 was the recodification of the PWR, brought over largely verbatim from former ORS 279.348 to 279.380. The grants exemption in ORS 279A.025(2)(c) was a new provision added during the 2003 rewrite.

The PWR's basic operating rule sits in ORS 279C.840(1): "the hourly rate of wage to be paid by any contractor or subcontractor to workers upon all public works shall not be less than the prevailing rate of wage for an hour's work in the same trade or occupation in the locality where the labor is performed." A "public works" was defined in ORS 279C.800(5) to include "roads, highways, buildings, structures and improvements of all types, the construction, reconstruction, major renovation or painting of which is carried on or contracted for by any public agency to serve the public interest."

ORS 279C.810(2) carved out two project-level exceptions: contracts under $50,000, and projects "for which no funds of a public agency are directly or indirectly used." ORS 279C.810(1)(a)(A) defined "funds of a public agency" to exclude grant funds provided to a nonprofit "unless the government grant is issued for the purpose of construction." That last clause was the one the AG flagged: it presumes that grants for construction can be public funds for PWR purposes, which only makes sense if the grants exemption in ORS 279A.025(2)(c) does not reach the PWR.

The AG worked through ORS 279A.025(1), which says the Code "applies to all public contracting" except for subsections (2) to (4). "Public contracting" is defined as "procurement activities described in the Code relating to obtaining, modifying or administering public contracts or price agreements." ORS 279A.010(1)(y). "Public contract" expressly excludes grants. ORS 279A.010(1)(x). The grants exemption in subsection (2)(c), then, was operating mostly as a redundancy for grants that were not part of price agreements, and as a clarifier for grants that were part of price agreements.

Read together, the AG concluded that the Code's grants exemption only excuses grant-related activities from Code requirements that govern obtaining, modifying, or administering procurement instruments. The PWR provisions do not work that way. They attach to the project — to whether the project is a "public works," whether the contract price exceeds the threshold, and whether public funds are used. The funding instrument is one piece of the public-funds analysis, but the PWR does not turn off just because a grant agreement was the means of conveying the money.

Legislative history was the closing argument. Task Group co-chair Jessica Harris told the House Committee on Business, Labor and Consumer Affairs that the drafters had "retained for the most part the term 'public agency' in the prevailing wage section for the sole purpose of ensuring that every word of that highly negotiated section did not change." When asked specifically why grants were exempted, she explained that the goal was to avoid forcing agencies to "competitively acquire" federal grants ("you don't go out for a competitive process to acquire a grant; you make an application and you hope and pray you get it"). The drafters also "worked hard to create language, for example, for grants from the federal government for a highway project, to ensure that the acquisition of the grant itself is exempt but the use of the money is not exempt, so you still have to contract it out."

That history closely tracked the AG's text-and-context reading. The grants exemption excused the acquisition of grants from competitive bidding requirements that would otherwise apply to acquisitions. It did not affect the substantive scope of the PWR.

Common questions

Q: At the time of this opinion, did labeling a funding instrument as a "grant" let an agency skip the prevailing wage?
A: No. The opinion concluded that if a public agency "contracted for" construction within the meaning of ORS 279C.800(5), the project remained a public works subject to the PWR even if the agency used a grant agreement to deliver the money. Form did not control substance.

Q: Could an agency use a grant to a private nonprofit to escape PWR coverage?
A: Not categorically. ORS 279C.810(1)(a)(A) treated grants to nonprofits "for the purpose of construction" as funds of a public agency for PWR purposes. The opinion read that provision as proof that the grants exemption could not be a blanket PWR escape hatch.

Q: What were the actual PWR carve-outs that mattered?
A: ORS 279C.810(2). The PWR did not apply to projects with a contract price under $50,000 or to projects "for which no funds of a public agency are directly or indirectly used." The grants exemption in 279A.025(2)(c) was not on that list.

Q: Did the opinion decide when a grant agreement counts as "contracting for" construction?
A: No. Footnote 1 expressly reserved the question of whether a single agreement could be both a "grant" within the meaning of ORS 279A.010(1)(i) and the instrument by which a public agency contracted for construction within ORS 279C.800(5). Whether the PWR applied in any particular case turned on the terms of the agreement and the nature of the project.

Q: What problem was the grants exemption actually meant to solve?
A: According to legislative history, the drafters worried that without an exemption, an agency receiving a federal grant might have to run a competitive procurement process to acquire the grant itself. The grants exemption fixed that, but the drafters also said that the use of the grant money to contract out construction was still subject to the Code's regular requirements.

Q: What about the "every contract for public works" language in ORS 279C.830?
A: That provision required certain specifications in construction contracts. The AG noted that even if the grants exemption did limit ORS 279C.830, the basic PWR obligations in ORS 279C.840(1) and 279C.810(2) ride on the project's character, not on the contracting form.

Citations and references

Statutes and session laws:

• ORS 174.010, 174.020 (statutory construction methodology)
• ORS 279A.010(1)(b) (definition of "contracting agency")
• ORS 279A.010(1)(i) (definition of "grant")
• ORS 279A.010(1)(u) (definition of "procurement")
• ORS 279A.010(1)(x) (definition of "public contract" — does not include grants)
• ORS 279A.010(1)(y) (definition of "public contracting")
• ORS 279A.025(1) (Code applies to all public contracting)
• ORS 279A.025(2)(c) (grants exemption)
• ORS 279A.025(2)(r) (catchall exemption)
• ORS 279C.800(5) ("public works" definition)
• ORS 279C.805 (purpose of PWR)
• ORS 279C.810(1)(a)(A) (grants to nonprofits for construction are public funds)
• ORS 279C.810(2) (PWR carve-outs: under $50,000; no public funds)
• ORS 279C.830 (specifications required in public-works contracts)
• ORS 279C.840(1) (substantive PWR rule)
• Or Laws 2003, ch 794 (Public Contracting Code rewrite)
• Or Laws 2005, ch 360, § 8 (renumbering of 279C.810)

Cases:

• PGE v. Bureau of Labor and Industries, 317 Or 606 (1993), Oregon statutory-construction methodology
• SAIF Corporation v. Walker, 330 Or 102 (2000), context includes case law interpreting the statute
• City of Eugene v. Nalven, 152 Or App 720 (1998), give effect to all relevant statutory provisions

Legislative history:

• House Committee on Business, Labor and Consumer Affairs, HB 2341, January 31, 2003 (testimony of Jessica Harris)
• House Committee on Business, Labor and Consumer Affairs, HB 2341, February 3, 2003 (testimony of Jessica Harris)

Source

• Landing page: https://www.doj.state.or.us/oregon-department-of-justice/office-of-the-attorney-general/attorney-general-opinions/
• Original PDF: https://www.doj.state.or.us/wp-content/uploads/2006/08/op2006-2.pdf

Original opinion text

HARDY MYERS

PETER D. SHEPHERD

Attorney General

Deputy Attorney General

DEPARTMENT OF JUSTICE
GENERAL COUNSEL DIVISION

August 22, 2006

Annette Talbott, Deputy Commissioner
Bureau of Labor and Industries
Portland State Office Bldg.
800 NE Oregon St., #1045
Portland, OR 97232
Re:

Opinion Request OP-2006-2

Dear Ms. Talbott:

Introduction

Oregon's prevailing wage rate law ("PWR") generally requires that workers on "public works" be paid not less than the prevailing rate of wage. ORS 279C.840(1). "Public works" are "improvements" whose "construction, reconstruction, major renovation or painting" ("construction" for short) is "carried on" or "contracted for" by a public agency "to serve the public interest." ORS 279C.800(5). The PWR is codified at ORS 279C.800 to 279C.870. ORS chapters 279A, 279B, and 279C comprise the Oregon Public Contracting Code (Code). See ORS 279A.010(1)(z). ORS 279A.025(2)(c) provides that the Code "does not apply to * * * [g]rants," which are a kind of "agreement" to provide or receive money, property or other assistance. ORS 279A.010(1)(i).

You ask two questions about the intended meaning and effect of ORS 279A.025(2)(c). First, would that statute exempt a public work from the PWR if it were funded in whole or in part by a grant? Second, if a public agency "contracted for" the construction of an improvement within the meaning of ORS 279C.800(5), i.e., if the improvement were a public work, and the instrument by which the agency did so was a "grant," would the public work be exempt from the PWR by virtue of ORS 279A.025(1)(c)?

Based on the analysis below, we conclude that the legislature did not intend for ORS 279A.025(2)(c) to effect an exemption for improvements that would otherwise be subject to the PWR. That is to say, if the terms of an agreement between a public agency and its grantee were such that the agency had "contracted for" the construction of an improvement within the meaning of ORS 279C.800(5), then the project would not be exempted from PWR by ORS 279A.025(2)(c).

Discussion

1. Method for Construing Statutes

To answer your questions, we must interpret the relevant statutes with the goal of determining the legislature's intended meaning. PGE v. Bureau of Labor and Industries, 317 Or 606, 610, 859 P2d 1143 (1993); ORS 174.020. We begin by examining the statute's text and considering statutory and judicially created rules of construction that bear directly on how to read the text, such as "not to insert what has been omitted, or to omit what has been inserted," and to give words of common usage their "plain, natural and ordinary" ("ordinary") meaning. Id. at 611; ORS 174.010. We do not examine the text in isolation but in the context of other provisions of the same statute, prior versions of the statute and other related statutes, as well as case law interpreting those statutes. Id. at 610; SAIF Corporation v. Walker, 330 Or 102, 108, 996 P3d 979 (2000). If the text and context suggest only one possible meaning, our inquiry ends there. PGE, 317 Or at 610-11. If more than one meaning is possible, we examine legislative history to determine which meaning the legislature intended. Id. at 611-12.

2. Text and Context of Grants Exemption

ORS 279A.025(2)(c) provides that "[t]he Public Contracting Code does not apply to * * * [g]rants." The Code defines "grant" to mean a particular type of financing "agreement" under which a "contracting agency" either receives or provides money, property or other assistance. ORS 279A.010(1)(i). A "contracting agency" is a public body authorized by law to conduct a procurement. ORS 279A.010(1)(b). The Code does not define "apply," but it is a word of common usage, so we give it its ordinary meaning. Used as an intransitive verb, as in the statute, "apply" means "to have a valid connection, agreement, or analogy: have a bearing: be pertinent ." WEBSTER'S THIRD NEW INTERNATIONAL DICTIONARY (WEBSTER'S) (unabridged 2002) at 105. Text therefore indicates that the legislature did not intend for the Code to have a bearing on agreements that public bodies make to acquire or disburse grant funding.

Turning to the context of ORS 279A.025(2)(c), we first examine the other subsections of ORS 279A.025. ORS 279A.025(1) provides that "[e]xcept as provided in subsections (2) to (4) of this section, the Public Contracting Code applies to all public contracting." (Emphasis added). According to that text, subsections (2) to (4) serve only to limit subsection (1), so an initial question is what, precisely, is the scope of subsection (1)?

The Code defines "public contracting" to mean "procurement activities described in the [Code] relating to obtaining, modifying or administering public contracts or price agreements." ORS 279A.010(1)(y). Code definitions apply to terms used in the Code "unless the context or a specifically applicable definition requires otherwise." ORS 279A.010(1). Neither context nor a specifically applicable definition require a different interpretation, so ORS 279A.025(1) means that the Code applies to all "procurement activities described in the [Code] relating to obtaining, modifying or administering public contracts or price agreements." The Code defines "procurement" to mean "the act of purchasing, leasing, renting or otherwise acquiring goods or services" and "includes each function and procedure undertaken or required to be undertaken by a contracting agency to enter into a public contract, administer a public contract and obtain the performance of a public contract under the [Code]." ORS 279A.010(1)(u). "Public contract," in turn, means "a sale or other disposal, or a purchase, lease, rental or other acquisition, by a contracting agency [of property or services] * * *. 'Public contract' does not include grants." ORS 279A.010(1)(x). Read in light of those definitions, by specifying that the Code applies to all "public contracting," ORS 279A.025(1) appears to mean that the Code applies to all activities relating to obtaining, modifying and administering public contracts (which do not include grants) and price agreements to acquire or dispose of property or services described in the Code.

Subsections (2) to (4) limit the scope of subsection (1) by exempting certain types of activities relating to obtaining, modifying and administering public contracts and price agreements and certain types of entities when they engage in those activities. Subsection (2) exempts particular kinds of contracts and agreements, e.g., grants (already exempt by virtue of subsection (1) unless the funds are acquired or disbursed by means of a price agreement) and insurance contracts, and particular kinds of acquisitions, disposals, expenditures, and procurements, e.g., contracts for the sale of timber from Forestry Department lands. It also contains a "catchall provision" exempting "[a]ny other public contracting of a public body specifically exempted from the [C]ode by another provision of law." ORS 279A.025(2)(r) (emphasis added). Subsection (3) exempts the "public contracting" activities of particular agencies, and subsection (4) exempts one type of "public contracting," namely, "contracts" made with qualified nonprofit agencies that employ the disabled, from Code provisions concerning "cooperative procurements" and "source selections."

In sum, standing alone, the text of ORS 279A.025(2)(c) indicates that the Code does not apply to agreements to acquire or disburse grant funds. The statute's context indicates, redundantly in part, that the Code does not apply to activities relating to obtaining, modifying or administering public contracts (which do not include agreements to acquire or disburse grant funds) to acquire or disburse grant funds or to activities relating to obtaining, modifying or administering price agreements to acquire or disburse grant funds. While the two meanings differ slightly, they are not actually contradictory. Rather, the meaning indicated by context seems to be an elaboration of the meaning indicated by text. Therefore, we conclude that the Code does not apply to agreements to acquire or disburse grant funds; to activities relating to obtaining, modifying or administering grants; or to activities relating to obtaining, modifying or administering price agreements to acquire or disburse grant funds. With that in mind, we examine the relevant provisions of the PWR.

3. PWR

The fundamental purpose of the PWR is to ensure that the wages and benefits paid to workers on publicly financed construction meet community-established compensation standards. See ORS 279C.805. ORS 279C.840(1) implements that purpose, providing in relevant part:

The hourly rate of wage to be paid by any contractor or subcontractor to workers upon all public works shall not be less than the prevailing rate of wage for an hour's work in the same trade or occupation in the locality where the labor is performed. * * *.

(Emphasis added). A "public works:"

[I]ncludes, but is not limited to, roads, highways, buildings, structures and improvements of all types, the construction, reconstruction, major renovation or painting of which is carried on or contracted for by any public agency to serve the public interest * * *.

ORS 279C.800(5) (emphasis added). Even if an improvement is a "public works," ORS 279C.810(2) provides for two exceptions:

(2) ORS 279C.800 to 279C.870 do not apply to:

(a) Projects for which the contract price does not exceed $50,000. * * *

(b) Projects for which no funds of a public agency are directly or indirectly used. In accordance with ORS chapter 183, the commissioner shall adopt rules to carry out the provisions of this paragraph.

(Emphasis added). In short, by virtue of ORS 279C.840(1), 279C.800(5) and 279C.810(2), the prevailing rate of wage applies to "improvements" (that result from specified governmental action), except for two types of construction "projects," to which it does not apply.

As discussed above, ORS 279A.025(1) and (2)(c) seemingly provide that the Code, and thus ORS 279C.840(1) and 279C.810(2), are to have no application to activities relating to obtaining, modifying and administering contracts or price agreements to acquire or distribute grant funds. But ORS 279C.840(1) and 279C.810(2) would have no application to agreements or activities of that nature, even in the absence of ORS 279A.025(2)(c). ORS 279C.840 and 279C.810(2) are applicable to particular types of improvements and projects. While another provision of the PWR, ORS 279C.830, requires "every contract for public works" to contain particular specifications, the obligation to pay the prevailing wage rate depends on whether an improvement meets the criteria for a "public works," the contract price for the project exceeds $50,000 and the project uses public funds. For those reasons, if on a particular project one of the requirements for the application of PWR were satisfied by a grant agreement or the funds it provided, it would remain true that ORS 279C.840(1) and 279C.810(2) have nothing to do with obtaining, modifying or administering agreements.

Finally, ORS 279C.810(1)(a)(A) assumes, and explicitly recognizes, one situation in which projects funded by grants are subject to the PWR. ORS 279C.810(1)(a)(A) provides that "'[f]unds of a public agency' does not include * * * [f]unds provided in the form of a government grant to a nonprofit organization, unless the government grant is issued for the purpose of construction." That provision can mean only that grants issued to nonprofit corporations for the purpose of construction are funds of a public agency. Moreover, the provision implies that grants issued to other than nonprofits are funds of a public agency. Interpreting ORS 279A.025(2)(c) to be a blanket exemption from the PWR for all public works projects that use grant funds would render ORS 279C.810(1)(a)(A) meaningless. We are to interpret statutes, if possible, in a way that gives effect to all provisions. See ORS 174.010 ("where there are several provisions or particulars such construction is, if possible, to be adopted as will give effect to all"); City of Eugene v. Nalven, 152 Or App 720, 725-26, 955 P2d 263, rev den, 327 Or 431, 966 P2d 221 (1998) (courts are obligated "to give effect to all relevant statutory provisions.").

To summarize, contracts to acquire or disburse grant funding are not subject to the Code. ORS 279A.025(1). We also conclude that the meaning most likely intended by the legislature for ORS 279A.025(2)(c) is that grant agreements are exempted from code provisions relating to obtaining, modifying or administering price agreements. Because the PWR provisions that trigger the obligation to pay the prevailing rate of wage relate to the type of improvement or project and not to obtaining, modifying or administering agreements, they do not implicate the grants exemption. It follows that ORS 279A.025(2)(c) has no affect on whether an improvement is, or is not, subject to the PWR.

We cannot say that the meaning of ORS 279A.025(2)(c) is entirely free from doubt, however, so we next consider legislative history.

4. Legislative History

In 2003, the Legislative Assembly enacted the Code in order to assemble the state's public contracting laws in a single, comprehensive statutory scheme. Or Laws 2003, ch 794. Much of that effort consisted of recodifying pre-existing statutes. The PWR is one of the instances in which the legislature simply reenacted preexisting statutes verbatim, recodifying former ORS 279.348 to 279.380 as ORS 279C.800 to 279C.870. The legislature also added new provisions to the Code, one of which was the grants exemption, ORS 279A.025(2)(c).

The Code originated as HB 2341 and was the product of the House Work Group on Public Contracting Law. The House Work Group in turn approved of and worked with the assistance of the Task Group on ORS 279 Rewrite, which was comprised of stakeholders. Jessica Harris of Associated General Contractors was one of the co-chairs of that Task Group and she testified extensively before the legislature about the rewrite.

At the first legislative hearing on HB 2341, Representative Schaufler asked Ms. Harris whether the rewrite affected the applicability of the PWR:

In this bill and its amendments as it exists and how it may be rewritten, is there or will there be any change, any impact, take anything away from prevailing wage language, law or rates and/or labor's ability to negotiate contracts, and when I say labor, I mean unions?

Ms. Harris responded:

There is no change to the prevailing wage section. * * * [W]e have retained for the most part the term "public agency" in the prevailing wage section for the sole purpose of ensuring that every word of that highly negotiated section did not change.

[The stakeholders] took great care not to make any changes to that section. Largely because, as we talked about in the guiding principles, no change was to be made in the public improvement section unless there was complete consensus to do so. And we knew that opening up the prevailing wage section to any discussion thereof would only create and wreak havoc, so we did not touch it.

Testimony of Jessica Harris, House Committee on Business, Labor and Consumer Affairs (HB 2341), January 31, 2003, Tape 13, side B, at 196 to 249.

At the second legislative hearing on HB 2341, Ms. Harris discussed the grants exemption. Representative Rosenbaum asked:

Can you tell me, donations which would be received by a school of books. Is that also an exception to his statute? How are we able to receive things without violating the public contracting?

Ms. Harris responded:

Grant is defined to include gifts and bequests * * *. In other words, yes, those gifts and bequests can be accepted and they are not required to be acquired through a competitive process.

We specifically included grants [in the exemptions] because in our estimation and especially in the estimation of the Housing and Community Services Department that the receipt of grants from the federal government may need to be competitively acquired, which is beyond absurd. For example, because you don't go out for a competitive process to acquire a grant; you make an application and you hope and pray you get it. So, it is because you acquire it and because the acquisition of things is subject to the Code, we specifically exempted grants, and we worked hard to create language, for example, for grants from the federal government for a highway project, to ensure that the acquisition of the grant itself is exempt but the use of the money is not exempt, so you still have to contract it out.

Testimony of Jessica Harris, House Committee on Business, Labor and Consumer Affairs (HB 2341), February 3, 2003, Tape 15, side A, at 412 to end.

Legislative history therefore demonstrates that the purpose of the grants exemption was to exempt the acquisition of grants from competitive bidding requirements that otherwise apply to contracts to acquire property. That history supports an interpretation exempting grant agreements only from Code provisions that relate to obtaining, modifying or administering public contracts and price agreements to acquire or disburse grant funds. There is no suggestion that the drafters or the legislature intended the grants exemption to limit the scope of the PWR. In fact the opposite is true. In response to a question from a legislator about whether the Code rewrite would limit the PWR in any way, the co-chair of the Rewrite Task Group told the House Committee that the drafters had not made any changes to the prevailing wage rate laws.

Conclusion

In conclusion, the text, context and legislative history of ORS 279A.025(2)(c) tell us that the legislature did not intend for its exemption of grants from the Public Contracting Code to affect the scope of the prevailing wage rate law or to eliminate the obligation to pay prevailing wages for work on improvements that meet the criteria established by ORS 279C.840(1) and 279C.810(2). In particular, we conclude that if the terms of an agreement between a public agency and its grantee were such that the agency had "contracted for" the construction of an improvement within the meaning of ORS 279C.800(5), then the project would not be exempted from PWR by ORS 279A.025(2)(c).

Sincerely,

Donald C. Arnold
Chief Counsel
General Counsel Division
DCA:DNH:AEA:clr/GEN267418