What Contractors Need to Know About the CHIPS Act and Davis-Bacon Compliance
What Is the CHIPS Act?
The CHIPS and Science Act of 2022 is a $280 billion federal law that includes $52.7 billion specifically for domestic semiconductor research, development, and manufacturing. CHIPS stands for Creating Helpful Incentives to Produce Semiconductors. This landmark legislation is part of a broader effort to reshore critical manufacturing and reduce dependency on foreign chipmakers.
Why does this matter? Semiconductors are the “brains” behind almost every piece of modern technology—from smartphones and laptops to vehicles and military defense systems. Without them, much of our economy and infrastructure grinds to a halt.
Why Was the CHIPS Act Created?
In 2020 and 2021, global supply chains were severely disrupted, highlighting the vulnerability of the U.S. in semiconductor production. At the time, more than 75% of all chip manufacturing took place in East Asia, primarily in Taiwan and South Korea.
Key reasons behind the CHIPS Act:
National Security: The U.S. needs secure access to chips for defense systems, aerospace, and cybersecurity.
Economic Competitiveness: Without strong domestic production, the U.S. risks falling behind in the global tech race.
Job Creation: The Act is expected to create tens of thousands of high-paying jobs, especially in construction, engineering, and advanced manufacturing.
Infrastructure Investment: Funding will be allocated toward new facilities, research hubs, clean rooms, and other technology-related infrastructure.
This legislation aligns closely with President Biden’s broader goals for the Build Back Better and Infrastructure Investment and Jobs Act (IIJA).
How Does the CHIPS Act Impact the Construction and Contracting Industry?
If you’re a prime contractor, subcontractor, or labor compliance officer, here’s what you need to know:
1. Massive Demand for Skilled Trades
Billions in CHIPS funding are being invested in new fabrication facilities (“fabs”) across the country. These projects require:
Electricians
HVAC installers
Plumbers
Drywallers
Clean room technicians
General laborers
Construction is already underway in states like Arizona, Ohio, Texas, and New York.
2. Davis-Bacon Act Applies
All CHIPS-funded projects must follow the Davis-Bacon and Related Acts (DBRA). This means:
Workers must be paid locally prevailing wages.
Employers must classify workers correctly.
You’ll need to submit Certified Payroll Reports (CPRs).
Agencies or third-party monitors may conduct audits and interviews.
Not compliant? You risk:
Back wages owed
Liquidated damages
Loss of future bids
Civil penalties
3. Local Hire and Targeted Worker Requirements
In cities like Los Angeles, CHIPS-related construction may also require compliance with local hire ordinances such as the LA Local Hire Program or Measure JJJ. This often includes:
Hiring a certain percentage of Transitional or Targeted Workers
Documenting worker eligibility (e.g., veterans, foster youth, formerly incarcerated)
Submitting documentation to the Bureau of Contract Administration (BCA)
Learn more on the City of LA BCA site.
4. Project Labor Agreements (PLAs)
Project Labor Agreements also govern many CHIPS-funded builds. These agreements often require union labor, apprenticeships, and tracking of the workforce. Even non-union contractors can participate—but they must abide by the PLA terms.
How CHIPS Projects Work with Davis-Bacon and Federal Oversight
Here’s how the process usually works:
CHIPS Funding Awarded: The Company receives funding to build or expand facilities.
Construction Bid Opens: Contractors submit proposals to the prime.
Compliance Required: Bids must include wage determinations, DBRA compliance plans, and certified payroll capacity.
Work Begins: Weekly reports, on-site interviews, jobsite posters, and wage classifications must be maintained.
Audits and Closeout: DOL, DOE, or local agencies may conduct a final audit.
This is where labor compliance consultants become essential—especially for primes juggling multiple subcontractors.
Tips for Contractors Navigating CHIPS Act Projects
Know Your Wage Determinations: Use the DOL Wage Lookup Tool.
Train your team: Ensure supervisors and forepersons understand the proper job classifications and timekeeping procedures.
Keep detailed records: Maintain I-9s, CPR certifications, sign-in sheets, and records of worker interviews.
Submit payroll on time: Delays can result in missed payments or trigger penalties.
Work with a Third-Party Labor Compliance Monitor
Suppose you're a general contractor bidding on CHIPS-funded projects. In that case, it's crucial to have a Third-Party Labor Compliance Monitor on your team to ensure Davis-Bacon compliance, reduce audit risk, and keep certified payroll on track.
Contact us at Davis Bacon Solutions for expert support in:
Certified payroll reporting
Worker classification and wage guidance
Subcontractor compliance tracking
On-site interviews and audits
We help you stay compliant, avoid costly penalties, and keep your projects moving forward with confidence.
Upcoming Opportunities and Where to Find Them
CHIPS-funded projects are rolling out nationwide, and contractors who are prepped and compliant have a chance to secure significant new work in the coming years. If you’re looking to find and bid on CHIPS-related construction opportunities, here are the best places to start:
SAM.gov – The official U.S. government site for federal contract opportunities
Grants.gov – For R&D and infrastructure grants tied to CHIPS Act funding
State and Local Public Works Portals – Your city or state Department of Public Works may list semiconductor-related contracts
California-Specific Resources:
These platforms are frequently updated with RFPs (Requests for Proposals), ITBs (Invitations to Bid), and subcontracting opportunities tied to CHIPS Act initiatives.