Here, in the phrase "capacity" means any job title, any occupation, any way. "Capacity" can mean "way" or "manner." For example, suppose someone saw an opportunity for a "lunch wagon" or meal truck, and drove it to the work site where workers could buy lunch. They might not have been employed by the dam company, but they would be "working on the dam." Almost every job in the community depended on the dam-building project. Here's another example of this meaning of "capacity." "The vice president of the United States is the second-highest officer in the executive branch. The vice president is also an officer in the legislative branch, as the president of the Senate. In this capacity, the vice president is empowered to preside over Senate deliberations at any time, but may not vote except to cast a tie-breaking vote." She has a dual job. She is part of the executive branch. She is also an officer in the legislative branch. In one capacity, she assists the President. In her other capacity, she is part of the legislature.

It means that everyone worked on the dam in some way. Another way to say it would be “to some degree.”