Streamlining Davis-Bacon

HUD's Davis-Bacon Streamlining Program represents a key component in Labor Relations' efforts to improve program operations. Under Streamlining, the Office of Labor Relations took a bold but measured look at our overall mission and what we did on a daily basis to carry it out. We identified processes and paperwork that did not contribute outcomes commensurate with the effort needed. They were eliminated. We identified those activities which most contributed to our mission and enhanced their impact. These activities make up our basic labor standards administration and enforcement protocol. Finally, we refocused our resources. Davis-Bacon Streamlining was launched for all HUD clients and local contracting agencies in April 1997.

Comments

The Office of Labor Relations welcomes comments and suggestions about the Davis-Bacon Streamlining Program, particularly suggestions for additional Streamlining measures.

Overview

This section provides a brief overview of Davis-Bacon Streamlining and Labor Standards Administration and Enforcement Objectives:

1. Apply Federal labor standards properly. Make certain that labor standards, including Davis-Bacon prevailing wage rates, are applied where required. Ensure that any exemptions or exclusions are identified.
   
   
2. Through education and advice, support contractor compliance with labor standards. Provide basic training and technical support to contractors to ensure that they understand their obligations under prevailing wage and reporting requirements.
   
   
3. Monitor contractor performance. Perform reviews of payroll submissions and other information to help ensure contractor compliance with labor standards provisions and the payment of prevailing wages to workers.
   
   
4. Investigate probable violations and complaints of underpayment. Throughly explore any evidence of violations, especially allegations of underpayment.
   
   
5. Pursue debarment against repeat labor standards violators. HUD will not tolerate contractors who violate the law.
   

Achieving the Objectives

With those key objectives in mind, we identified an initial 12 measures that would improve our day-to-day operations supporting those objectives. These 12 measures form the foundation of Moving Forward è Making Sense:

1. Local contracting agencies (LCAs) do not have to obtain Davis-Bacon wage decisions from HUD. In the past, all local contracting agencies (e.g., Public housing agencies, Indian housing authorities, Community Development Block Grant recipients) were required to obtain from HUD a Davis-Bacon wage determination for each covered contract or project. This process sometimes caused delays (waiting to receive the wage decision; backlogs at HUD) but in any case created additional burden on both the LCAs and HUD staff.
   
   Now, LCAs do not need to obtain wage decisions from HUD but can use any alternative access available including an on-line subscription service. The point is, it's not necessary for the LCA to get the wage decision from HUD - it's only necessary that the LCA has the appropriate wage decision from whatever source. Of course, LCAs are welcome to continue receiving wage decisions through HUD if they so choose.
   
   
2. Preconstruction conferences are optional for labor standards purposes. Many contractors engaged in Davis-Bacon contracts are already familiar with the wage and reporting requirements. In these cases, it's not necessary or particularly useful for the contracting agency to conduct a "Pre-Con" explaining labor standards provisions to the experienced contractor. There are many good reasons to hold a Pre-Con, scheduling inspections and draws, for example. But a labor standards presentation for an experienced contractor isn't necessarily one of them. Additionally, contractor education on labor standards doesn't have to occur at a preconstruction conference. For example, it may be more convenient to schedule a labor standards discussion at another time or in a conference call. LCAs may use their discretion to determine whether labor standards training for contractors is necessary and how best to provide that training.
   
   We do want to make certain that contractors understand fully their obligations under Federal labor standards and to that end we have published a Contractor's Guide to Davis-Bacon. This Guide explains in plain English Davis-Bacon prevailing wage and reporting requirements. It also discusses common errors and how to correct them.
   
   
3. Use wage decision transcripts for projects. Generally speaking, there are 3 copies of the applicable Davis-Bacon wage decision serving each project or contract: The first copy goes in the bid or contract specifications to let the contractor know the wage rates that must be observed on the job and to obligate the contractor to comply; a second copy is posted on the job site so the laborers and mechanics know what wage rate is assigned to their classification; and a third copy is used by the contract administrator to monitor contractor compliance (payroll reviews). Many times, Davis-Bacon wage determinations are several pages long and may cover more than one county and/or more than one kind of construction (residential and building, for example). These wage decisions can be difficult to read, especially for people who don't read wage decisions often or if you're in a hurry. For these reasons, we developed a Project Wage Rate Sheet - a one-page transcript of the wage rates applicable to a particular contract or project.
   
   The Project Wage Rate Sheet is prepared after the wage decision "locks-in" (after the effective date). It does not replace the wage decision but simply lays out for easy reference all of the work classifications and wage rates that apply to that contract. A Project Wage Rate Sheet will remove any doubt a contractor may have about the wage rates that must be paid to any particular classification and can quickly disclose any misunderstanding. Posted on the job site with the wage decision, a Project Wage Rate Sheet is fast and easy for workers to review to make sure that they are paid no less than the rate to which they are entitled. And, finally, as part of the contract file, a Project Wage Rate Sheet makes payroll review spot-checks much more efficient since there's no need to flip between pages for different rates. Even the process to complete the Project Wage Rate Sheet can be helpful by identifying work classifications that are missing from the wage decision and that are needed for the project and will need to be conformed (i.e., Additional Classifications and Wage Rates).
   
   Project Wage Rate Sheets are optional. We offer the format as a tool to help contract administrators work as efficiently as possible and to improve the effectiveness of our labor standards program.
   
   
4. Discontinue start of construction notice. Previously, LCAs were required to send to HUD a start of construction notice for each contract or project. Because there are other reporting systems that are required by Federal regulation that can capture this information for HUD use, we have discontinued this requirement. (See item #12 below concerning required reports.)
   
   
5. LCAs can develop their own enforcement file system. Federal regulations require that contract administrators maintain full documentation of labor standards administration and enforcement activities. Earlier instructions from HUD to LCAs included guidance on what a "proper" enforcement file system should contain, some guidance described the number and types of files required. LCAs are free now to develop their own filing systems for labor standards purposes provided that the "system" allows that specific files can be made available upon request by authorized representatives of HUD and the DOL; and that the certified payrolls and related documents are preserved for a period of not less than three years after completion of the contract or project. It's also important that the contract administrator is able to retrieve from the files the documentation evidencing that all actions required for labor standards administration and enforcement were taken.
   
   
6. Discontinue date stamp on certified payroll report (CPR) receipt. Contract Administrators were required to date stamp CPRs and related documents upon receipt from the contractor. As a routine practice, date stamping payrolls was found to involve far more effort than any benefit warranted. Accordingly, this requirement has been eliminated.
   
   
7. Discontinue date/initial on each CPR when reviewed. The person(s) conducting reviews of certified payrolls was required to date and initial each payroll as it was reviewed. As with date stamping, this practice was found not to have a benefit that equaled the effort required. What is important is that the payrolls and related submissions are reviewed and any discrepancies are corrected.
   
   
8. Target enforcement activities at willful violators. While any violation disclosed on a covered project must be rectified, the focus of our enforcement activities is on willful violators. These employers know what is required of them to comply with Davis-Bacon wage rates but purposely underpay their employees. These cases involve the most egregious violations, the most wage restitution, and the employers we most want debarred from further participation in HUD programs.
   
   
9. Target on-site employee (HUD-11) interviews. DOL Davis-Bacon regulations require contracting agencies to include in their enforcement protocol on-site interviews with the laborers and mechanics performing the contract or project work. On-site interviews with the workers provide another perspective of the employer's performance with respect to labor standards ~ a means to test the accuracy of the payroll reports. (The data collected in the interview is often recorded on a HUD Form 11, Record of Employee Interview. On-site interviews are sometimes referred to as HUD-11 interviews.) More importantly, perhaps, the interviewer can provide a firsthand account of his or her observations on-site including the number of workers on-the-job or in a particular crew and the duties they were performing.
   
   HUD recognizes that on-site interviews are an invaluable tool in Davis-Bacon enforcement and that it is a resource that should be used to its greatest advantage. Accordingly, we strongly encourage Contract Administrators to target on-site interviews to projects, contracts, employers where violations are suspected and the interview data can be most useful. Targeting may mean that no interviews are conducted on certain contracts where remote monitoring (such a payroll reviews) indicates full compliance so that more interviews may be conducted where problems are indicated. Targeting does not mean closing our eyes but, rather, focusing our sights on potential violations.
   
   
10. Limit CPR reviews to "spot checks" and HUD-11 comparison. Goal: Detect falsification. Since our enforcement activities are aimed at willful violators, and since willful violators must conceal the underpayment ~ falsify payroll reports and/or related documents ~ in order to give the appearance of compliance, our reviews of payrolls and related submissions are aimed at detecting falsification.
    
    Davis-Bacon compliance basically involves three factors: 1. the type (classification) of work performed; ‚ 2. the number of hours worked; and 3. the prevailing rate for that classification. A fourth factor involves the actual payment of wages either in by check or cash. In order to conceal underpayment, a willfully violating employer must falsify the payroll report as it pertains to one or more of these factors. There are four falsification indicators that are easy to detect on payrolls in a "spot check":
    
    
1. Ratio of laborers to mechanics. Look for excessive use of laborers over mechanics. Generally, there should be no more than one laborer for each mechanic (1:1) except for landscaping, or cement or other paving work.
   
   Indicative of: Misclassification. Workers are performing mechanic's duties but are misclassified and paid at lower Laborers' wage rates.
   
   
2. Too few or irregular hours. Look for employees that never work 40 hours a week; for crews that work in a scattered fashion; for hours reported in tenths or hundredths (e.g., 13.6 hours). Most people are on a 40-hour workweek. Most crews work together on a job site. Most employers and employees track work hours by whole, half and quarter hours not by tenths or hundredths.
   
   Indicative of: Falsification of hours. Actual work hours are reduced to "fit" in a fabricated calculation: (Reduced hours) x (Rate required on wage decision) = Actual gross wages based on lower rate of pay.
   
   
3. Discrepancies in wage computations. Look for gross wages in "round" numbers (e.g., $700) that don't agree with product of reported hours multiplied by the rate of pay. For example, a payroll showing 20 hours times $33.68 (the rate on the wage decision) and gross wages of $700. (20 hours times $33.68 equals $673.60 not $700.)
   
   Indicative of: Piece work or lower (but more "even") hourly rate such as $17.50 (40 hours times $17.50 equals $700). The employer can't make the fabricated calculation "fit" precisely because the Davis-Bacon wage rate is not an even figure.
   
   
4. Extraordinary deductions. Look for unidentified or disproportionate deductions, for example an employee whose savings account deduction is nearly as much or more than weekly take home pay.
   
   Indicative of: Kickbacks or basic underpayment. The employer takes his "cut" from the back end of the computation (after gross earnings) rather than the front end (falsifying the classification, hours or wage rate).
   


11. Routine CPR review results can be communicated informally and documented with memo to the file. Many payroll reviews will disclose minor discrepancies that do not involve or suggest falsification or willful violations. Rather than prepare a written notice to the contractor for such routine corrections (as was required in the past), the Contract Administrator may communicate these results informally, by telephone, for example. A memo to the file or other record of the communication should be maintained in the enforcement file so that the Contract Administrator can "track" outstanding requests and closure on corrective actions. Determinations involving willful violations, falsification and/or large findings of underpayment must be communicated to the prime contractor in writing, particularly if withholding from contract payments is contemplated.
    
    
12. Improve reporting systems on labor standards administration and enforcement. DOL regulations establish and require our compliance with 2 systems of enforcement reports (see 29 CFR §5.7). The first system (§5.7(a)) operates on a case-by-case basis: a report must be made whenever a single employer is found to have underpaid its employees by $1,000 or more, or where there is reason to believe the violations are willful or aggravated. These reports are the means by which debarment is recommended. The second system (§5.7(b)) operates semi-annually and involves a synopsis of all covered contracting activity and all labor standards enforcement.

HUD is committed to utilizing these required reporting systems as fully as possible to further our key objectives. Ensuring that enforcement reports are accurate, timely and fully documented (where necessary) is a priority for HUD and contracting agencies. Guidance for these reports is available at this site: See Labor Relations Letter LR-92-02; and Semi-Annual Report instructions and forms.