Davis-Bacon: Lessons Learned

Dec 5, 2017 10:00:00 AM |

Lyn Powers

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Davis-Bacon.jpgThe first time I read “Davis-Bacon Labor Standards: A Contractor’s Guide to Prevailing Wage Requirements for Federally-Assisted Construction Projects,” the document review process seemed simple and straightforward. However, after years of reviewing, digging down into the details and reading articles about Davis-Bacon and its origin, it’s not quite as straightforward as one might think.   

The original purpose of the act was to pay all workers an amount equal to the local wage for the area where construction occurred. It became apparent that communities were getting penalized when contractors brought “out of town” workers to the job site and paid them less than the local wage. Doing this ultimately forced lower wages within the community. 

New York Representative Robert Bacon of Long Island noticed this problem. Several times, Bacon attempted to pass a bill addressing the issue, but without success. However, when the issue of local wages dropping became problematic during the Great Depression, Congress finally took action at the request of President Hoover. As a result, former Labor Secretary James Davis sponsored a bill in the Senate which attempted to eliminate the falling wages. The sponsored bill, which we now know as the Davis-Bacon Act (DBA), was passed on March 3, 1931.

Some changes were made to the bill over the next few years. One of the changes dropped the threshold for DBA requirements from $5,000 to $2,000. Since this change occurred in 1935, there have been no amendments to this threshold to adjust for inflation. $2,000 in 1935 is the equivalent of a whopping $36,000 today. 

Facets of the bill like the inflation issue sparked the U.S. Congress General Accounting Office (now called the Government Accountability Office) to publish a report in 1979 summarizing reasons why the Davis-Bacon Act should be repealed. Three of the areas they noted, which make the act obsolete, were:

  • Significant changes in economic conditions, the economic character of the construction industry, and passage of other wage laws
  • The Department of Labor’s inability to develop an effective program to issue and maintain current and accurate wage determinations
  • Unnecessary construction and administrative costs

Other than four emergency suspensions, for varying lengths of time, the act still remains in effect today. So, as much as Congress may disagree with the act, it’s here to stay which means agencies are required to comply. 

Now, remember when I said the review process seemed simple and straightforward? Well, it can be at times, but here are some important lessons learned taken note of over the years:

  • Certified payroll reports – Not all persons who work on the project are reported on the weekly certified payroll report, nor is a weekly report required for every week of the project. It’s important to know who is classified as reportable and when the reports are needed.
  • Apprenticeships – apprentices are those training to become a skilled worker. The duration of their apprenticeship varies depending on the program, but either way, knowledge of their position within the program is very important when determining their minimum rate of pay.
  • Apprentice/Journeyman ratio – each program has their own ratio, but no matter the ratio, apprentices and journeymen must work together on a daily basis.
  • Wage determination – outdated/obsolete wage determinations can occur and must be re-requested if the notice of award is delayed after the bid opening .
  • Overtime – payroll is required to be paid weekly and reported weekly. Therefore, anything over 40 hours is considered overtime; however, fringe is only calculated as straight time.
  • Payroll interviews – the information observed and reported during the interview must match the certified payroll reports .

Collectively, HORNE LLP has reviewed thousands of certified payroll reports. When audited, a very small percentage of those reports reviewed contained errors, so it’s apparent that we have mastered this skill over the years. The lessons learned listed above came through years of experience and have helped us sharpen our skills needed to become a powerhouse in the Davis-Bacon world!

 

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THIS POST WAS WRITTEN BY Lyn Powers

Lyn is a supervisor at HORNE, with more than six years of experience in project compliance. She has worked on various projects, almost all of which have had a component of the federal Davis Bacon Act, progress reporting, income verification, Section 3, and/or auditing of qualified program expenses.