NEWSROOM

By Benjamin Minnick, Daily Journal of Commerce

As the number of private-sector projects dries up, more contractors are turning to public jobs. But, the public sector may hold a surprise for the unsuspecting nonunion contractor: prevailing-wage jobs.

Nonunion construction companies bidding on those jobs must pay the prevailingwage package, which typically mirrors what area union workers get in wages and benefits.

“Union contractors have a far greater advantage when bidding on federal and state jobs due to their health and welfare plan,” said Cathy Crawford, an officer at Davis-Bacon Pension Plans in Redmond.

Davis-Bacon Pension Plans sets up pension plans for nonunion contractors, allowing them to better compete with union contractors on prevailing-wage and federal Davis-Bacon Act jobs.

Prevailing-wage jobs involve state and local municipalities and are covered by what is referred to as “little Davis-Bacon” laws. Public jobs within Washington state that aren’t federally funded are covered by prevailing-wage laws.

Crawford said union contractors might pay $25 an hour in base pay for each worker and another $7 an hour in fringe benefi ts to cover items such as health insurance, training and a pension. A nonunion contractor bidding against those union contractors would pay the base wage, but the $7 in fringes could end up as <br>additional wages for the worker if the nonunion contractor doesn’t have a qualified and bonafide benefit program.

The disadvantage comes when the nonunion contractor without a benefit plan has to shell out additional taxes on the $7 per hour that would have gone to fringes.

Crawford said her firm’s pension plans give nonunion contractors a place to park those fringe benefits, thus avoiding the additional taxes and putting them on par with union contractors on public jobs.

Company founder and President Dan Sweeney said nonunion contractors in the state see about 20 percent savings in their payroll taxes and general liability insurance premiums on public jobs when they have a benefit plan.

Those numbers can add up. Sweeney gave three examples of how much his clients saved last year: An underground utility contractor with 70 workers saved about $232,000; a road-repair company with seven workers saved $22,000; and a 60-person firm repairing roads and utilities saved $137,000.

If all those savings are on the table, why aren’t more contractors doing it?

“It’s definitely a lack of knowledge,” Crawford said.

Sweeney said he talked recently with leaders of a Midwest-based general contractor with a local office that does $300 million in annual volume in public jobs in four states. “They had no idea that they could do anything but pay their staff in cash,” he said.

“The biggest problem with the new contractors coming into the (public bidding) marketplace is getting the office people savvy about the additional paperwork required,” he said, which can include different requirements from different public agencies.

Sweeney said employers may also be worried that their workers won’t like $7 an hour disappearing from their paychecks. He said workers still have possession and control of that money, but don’t usually realize its importance until it accumulates to $2,000 or $3,000 in a pension plan.

“The point is the employee will never lose the benefits,” he said. Sweeney said one advantage his pension plans have over union plans is that workers are fully vested from the start.

Doug Peterson, labor relations director at the Associated General Contractors of Washington, said local union pension plans have five-year “cliff ” vesting periods. That means if a worker leaves the union before five years, he or she loses all retirement benefits.

Another bonus nonunion employees get when working on public projects is higher overall wages, according to Crawford. She said construction workers in many cases make more on public versus private jobs, but couldn’t say exactly how much more.

Kathleen Garrity, who heads up the Associated Builders & Contractors of Western Washington, an open-shop contractors’ association, said some ABC members pay the same or more than prevailing wage, while others pay less. “It depends on the employer,” she said.

Garrity said nonunion workers typically put in more hours each year because union workers are sent back to the hiring hall when they finish a job.

Crawford said her firm works with about 300 employers and covers about 10,000 worker accounts, but the potential market is at least five to six times that.

She said it’s impossible to identify which contractors are nonunion and work on prevailing-wage jobs without calling each one. That’s just what her firm is doing: Over the years it has compiled a list of 12,274 companies that have appeared as public bidders from the newspaper.

But, one of the problems of calling on a list that big is that some contractors go out of business while others shift between prevailing-wage and privatesector jobs, according to Crawford.

“Even we don’t know how large the pool is,” she said, but the pool is huge. Crawford said there are only two other firms, in Texas and Arizona, that specialize in pensions for nonunion contractors seeking prevailing-wage work.

She said there are hundreds of pension administrators that can do a plan, but they don’t know enough about Davis-Bacon laws.

“We only deal with construction companies,” she said.

Crawford said the public bidding realm is becoming more crowded with nonunion contractors. Jobs that used to have five bidders now have 20, and half of them are nonunion, she said.

“With the economy the way it is today we have seen private work dry up,” Crawford said, and there’s going to be a ton of public work available if incoming President Barack Obama addresses the nation’s crumbling infrastructure.

Benjamin Minnick can be reached by e-mail at benm@djc.com or by phone at (206) 622-8272. Reprinted with permission from Benjamin Minnick at the Daily Journal of Commerce.