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DAVIS-BACON EXPOSED (07/13/2011)

By Maurice Baskin, Construction Executive Magazine

A recent congressional hearing held before the House Education and Workforce Committee’s Subcommittee on Workforce Protections highlighted systemic failures in the U.S. Department of Labor’s administration of the Davis-Bacon Act, which mandates prevailing wages for employees of contractors and subcontractors performing work on federally financed construction projects. Testimony at the hearing revealed the DOL’s wage survey process is fundamentally flawed and wage determinations issued by the department are grossly inflating the prevailing wage.

The congressional hearing focused on a report recently issued by the Government Accountability Office entitled “Davis-Bacon Act: Methodological Changes Needed to Improve Wage Survey” (April 6, 2011). The GAO report identifies “persisting shortcomings in the representativeness of survey results and the sufficiency of data gathered for Labor’s county-focused wage determinations.”

Notwithstanding cosmetic changes in survey collection and processing procedures, the GAO found the DOL failed to address previous independent findings of systemic failures in the wage survey process. In addition, the report found the DOL “cannot determine whether its wage determinations accurately reflect prevailing wages,” and “does not currently have a program to systematically follow up with or analyze all non-respondents.”

The GAO also confirmed the pro-union bias of DOL surveys because open shop contractors have greater difficulty compiling their wage information and less reason to report the data to the federal government.

These findings are not new. The GAO found similar flaws in the wage survey process in previous reports during the 1990s, as did the DOL’s own inspector general in a devastating report issued in 2004. Despite the advent of better computer survey technology, nothing substantive has changed with regard to the DOL’s outdated survey methods. A comparison of two simple numbers pointed out at the hearing proves the inherent failure of the DOL’s wage survey process. According to the Bureau of Labor Statistics (BLS), only 13 percent of construction workers in the United States are covered by any union agreement; yet, according to the latest GAO report, 63 percent of all DOL wage determinations report that wages set by union agreements are prevailing.

As a result of the wage rate inflation, the Congressional Budget Office (CBO) determined the Davis-Bacon Act raises federal construction costs by $15.7 billion annually. Testimony at the congressional hearing revealed the Davis-Bacon Act further increases costs because of the DOL’s confusing and often unpublished work restrictions, which prevent contractors from building federal projects with the same level of efficiency that applies to private work.

What Can Be Done?
The recent GAO report may reinvigorate the movement to repeal the Davis-Bacon Act. In the meantime, efforts are ongoing to expose and challenge the DOL’s erroneous wage determinations. A number of local coalitions are pursuing challenges in different parts of the country.

In a pending case, Associated Builders and Contractors and other groups are challenging a DOL decision to adopt, without any substantive investigation, a state wage survey that greatly inflated the wage rates for highway construction. In abdicating its wage survey responsibilities, the DOL cited certain language in the Federal Highway Act that calls on the DOL to give “consideration” to state highway rates. However, the DOL doesn’t have the authority to abdicate its wage survey responsibilities altogether, without any examination or assurance that the state highway rates are being issued in conformity with the requirements of the governing regulations.

In another case, a coalition of low-cost housing developers challenged a wage determination issued by the DOL that imported wage data from a labor market that was hundreds of miles away from the county for which the wage rates were supposed to be determined. Again, there is no authority for the DOL to engage in this statewide survey process; in fact, the Davis-Bacon Act expressly forbids it.

In yet another example, a coalition of developers and contractors demanded reconsideration of a published wage determination that improperly counts union workers making different wage rates as if they each have earned a single rate for survey purposes—again with the result of inflating the wage survey outcome.

The DOL’s reaction to wage survey challenges has been to delay responding or to deny the violations of the regulations that are taking place. The department’s actions only serve to strengthen the case for congressional action and a possible judicial challenge.