Recovery Act
Officials' Views Vary on Impacts of Davis-Bacon Act Prevailing Wage Provision Gao ID: GAO-10-421 February 24, 2010The American Recovery and Reinvestment Act of 2009 (Recovery Act) has the broad purpose of stimulating the economy. It includes substantial appropriations for construction projects that, under the act's prevailing wage provision, are subject to Davis-Bacon Act requirements. That is, contractors must pay laborers and mechanics who work on those projects at least the prevailing wage rates set for their local area by the Secretary of Labor. In addition, contractors must submit certified payrolls and pay their workers weekly. Prior to the Recovery Act, some federal programs with construction projects were already subject to Davis-Bacon Act requirements. Others, however, are subject to the requirements for the first time because the Recovery Act extended the requirements to all construction projects supported by the act. GAO was asked to (1) identify the programs that are newly affected by the Recovery Act's prevailing wage provision and (2) examine the extent to which that provision is expected to affect each of those newly affected programs. GAO obtained data from 27 agencies and spoke with federal, state, and local officials as well as contractors involved with the newly affected programs. Although GAO is not making recommendations in this report, these findings may be helpful in considering and designing legislation with similar objectives.
Fortyprograms are newly subject to Davis-Bacon requirements as a result of the Recovery Act's prevailing wage provision, according to federal agency officials. Of these, 33 programs existed prior to the Recovery Act and are subject to Davis-Bacon requirements for the first time under the act, while 7 are newly created programs. Together, the 40 programs account for about $102 billion of the $309 billion that was appropriated by the Recovery Act for projects and activities. However, a smaller amount of these funds will be subject to Davis-Bacon requirements because not all of the funds will be used for construction activities and only a portion of those funds will be used to pay labor wages. For those programs that are newly subject to Davis-Bacon requirements, officials had mixed views on the impact of these requirements on program costs and goal achievement. In some cases, officials said Davis-Bacon requirements would have little or no impact on program costs for a few reasons, such as (1) the program having a small amount of construction activities, (2) prevailing wage rates that were in line with expectations, and (3) companies' previous experience with weekly payrolls. In other cases, officials said the requirements would have a moderate to large impact on program costs and/or goals. For example, officials from the Department of Energy's (DOE) Energy Efficiency and Conservation Block Grants program anticipated a potentially large cost impact as a result of the significant amount of funds to be spent on construction labor wages. Officials from DOE's Weatherization Assistance Program reported that weatherization projects in buildings taller than four stories will require workers to be paid a commercial prevailing wage rate under the Davis-Bacon Act that is higher than what would otherwise be used and could potentially reduce the number of homes weatherized. Additionally, weatherization officials said that Davis-Bacon requirements affected the program's timing because prevailing wage rates for weatherization workers were not fully available until September 2009. Further, officials from the Department of Housing and Urban Development's Lead Hazard Reduction Program noted that Davis-Bacon requirements would require a more detailed payroll tracking system that could be particularly burdensome for small companies. Those officials also explained that because administrative costs are likely to increase, the department is in the process of increasing the cap on how much recipients can spend on administrative costs.
GAO-10-421, Recovery Act: Officials' Views Vary on Impacts of Davis-Bacon Act Prevailing Wage Provision
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Report to the Senate Republican Leader:
United States Government Accountability Office:
GAO:
February 2010:
Recovery Act:
Officials' Views Vary on Impacts of Davis-Bacon Act Prevailing Wage
Provision:
GAO-10-421:
GAO Highlights:
Highlights of GAO-10-241, a report to the Chairman, Subcommittee on
Disability Assistance and Memorial Affairs, Committee on Veterans'
Affairs, House of Representatives.
Why GAO Did This Study:
Many individuals receiving monthly compensation and pension benefits
from the Department of Veterans Affairs (VA) have mental impairments
that prevent them from managing their finances. VA‘s Fiduciary Program
selects and oversees third parties, called fiduciaries, to help manage
and protect beneficiaries‘ funds. GAO examined (1) how effective
program policies and procedures are in monitoring fiduciaries and
safeguarding beneficiary assets, and (2) challenges VA faces in
improving program performance and oversight. GAO reviewed program
policies, analyzed a nationally representative random sample of case
files, interviewed Central Office managers and staff, and conducted
three site visits to Fiduciary Program offices which accounted for 25
percent of program beneficiaries. During these visits GAO interviewed
regional office managers and staff and conducted 32 file reviews.
What GAO Found:
VA‘s Fiduciary Program has policies in place that are intended to
ensure that qualified fiduciaries are selected and regularly
monitored; however, insufficient staff compliance with some policies
and weaknesses in others hinder VA‘s ability to safeguard veterans‘
benefits. For example, VA was late in conducting required follow-up
visits to monitor fiduciaries or provided insufficient documentation
to show whether these visits were conducted in about 18 percent of the
cases GAO reviewed. In addition, while GAO estimated that nearly 40
percent of fiduciaries who were required to submit financial reports
to demonstrate how beneficiary funds are managed turned their reports
in late, VA did not always take actions to obtain them on time or
provide documentation that an attempt had been made, as required by VA
policy. GAO also found that files did not always contain documentation
that a bond was secured when required to safeguard beneficiary estates
or that the requirement was waived. Fiduciary Program managers and
staff said that they did not always comply with VA policies due, in
part, to a lack of time, resources, and staff. In addition, VA‘s
policies for conducting on-site reviews of professional fiduciaries
who manage funds for multiple beneficiaries do not ensure these
fiduciaries are effectively identified and monitored. For example, VA‘
s policy may not ensure that all fiduciaries who need to be reviewed
are identified because the agency‘s policy allows the use of the
fiduciary‘s name”which may be entered inconsistently”to match them to
beneficiaries rather than requiring a unique identifier, such as a
Social Security number. Moreover, VA does not have a nationwide
quality review process to ensure that these reviews are conducted
properly and consistently.
GAO identified two key challenges that hinder VA‘s ability to improve
Fiduciary Program performance and oversight. First, managers and staff
in the three regional offices visited said VA‘s electronic fiduciary
case management system does not provide sufficient information and is
cumbersome to use. For example, the system limits staff‘s ability to
track multiple actions on a case or enter all needed information.
Also, the system does not generate comprehensive management reports
that would facilitate effective oversight. In addition, managers and
staff indicated that available training may not be sufficient to
ensure they have the necessary expertise to carry out program
responsibilities. Moreover, many managers and staff had less than 2
years of program experience, and the lack of sufficient training may
have contributed to inconsistent compliance with some program
policies. VA is developing standardized training that it expects to
implement some time in fiscal year 2010. VA is also piloting a
consolidated Fiduciary Program unit covering 14 western units, in
part, to address program challenges. While the pilot is intended to
improve program performance and oversight, managers and staff noted
that difficulties, such as not having resources in place and up-to-
date case files, impeded effective implementation. VA has not yet
evaluated the impact and effectiveness of this model.
What GAO Recommends:
GAO recommends that VA strengthen Fiduciary Program policies for
monitoring fiduciaries; improve staff compliance with program
policies; evaluate alternative approaches to meet electronic case
management system needs; and evaluate the effectiveness of
consolidating 14 western Fiduciary Program units. VA agreed with our
recommendations and noted plans to address them.
View [hyperlink, http://www.gao.gov/products/GAO-10-241] or key
components. For more information, contact Daniel Bertoini at (202) 512-
7215 or bertonid@gao.gov.
[End of section]
Contents:
Letter:
Background:
Federal Agency Officials Reported That 40 Programs Are Newly Subject
to Davis-Bacon Requirements because of the Recovery Act's Prevailing
Wage Provision:
Program Officials' Views on Davis-Bacon Requirements:
Agency Comments and Our Evaluation:
Appendix I: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Programs That are Newly Subject to Davis-Bacon Requirements
under the Recovery Act by Agency:
Table 2: Expected Impact of Davis-Bacon Requirements on Program Costs
as Reported by Federal Officials Responsible for 40 Programs Newly
Subject to the Davis-Bacon Act Requirements:
Table 3: Expected Impact of Davis-Bacon Requirements on the Ability to
Achieve Program and Recovery Act Goals, as Reported by Federal
Officials Responsible for 40 Programs Newly Subject to the Davis-Bacon
Act Requirements:
Abbreviations:
DOE: Department of Energy:
Recovery Act: American Recovery and Reinvestment Act of 2009:
TIGER: Transportation Investment Generating Economic Recovery:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
February 24, 2010:
The Honorable Mitch McConnell:
Republican Leader:
United States Senate:
Dear Leader McConnell:
The nation faces what is generally reported to be the most serious
economic crisis since the Great Depression. In response, the American
Recovery and Reinvestment Act of 2009 (Recovery Act) was enacted to
promote economic recovery, make investments, and minimize and avoid
reductions in state and local government services.[Footnote 1] In
early 2009, the Congressional Budget Office estimated that the
combined spending and tax provisions in the Recovery Act will cost an
estimated $787 billion from 2009 through 2019. Of that total, more
than a third comes from Division A of the act, which provides
substantial funding for, among other things, construction and
infrastructure projects.[Footnote 2] These projects, which are
supported by various federal agencies, encompass construction,
alteration, and repair efforts for roads, bridges, public transit,
water systems, and federal buildings and facilities.
Under the Recovery Act's prevailing wage provision, all construction
projects funded directly by or assisted in whole or in part by the
federal government through Division A of the act are subject to the
requirements of the Davis-Bacon Act.[Footnote 3] That is, all laborers
and mechanics employed by contractors and subcontractors must be paid
at least the prevailing wage rate, including fringe benefits, in the
local area in which they are employed, as determined by the Secretary
of Labor. In addition, contractors are required to pay these workers
weekly and submit weekly certified payroll records to the contracting
or administering agency. Prior to the Recovery Act, numerous federal
programs that included construction projects were subject to the Davis-
Bacon Act. Because these programs were already required to comply with
Davis-Bacon requirements, they were not newly affected by the Recovery
Act's prevailing wage provision. However, because the Recovery Act
extended Davis-Bacon requirements to all construction projects that it
supported through Division A of the act, some federal programs became
subject to these requirements for the first time.
In this context, you asked us to (1) identify programs that are newly
affected by the Recovery Act's prevailing wage provision and (2)
examine the extent to which that provision is expected to affect each
of those newly affected programs. Separately, we are also reporting on
the extent to which federal requirements, including Davis-Bacon
requirements, are expected to affect the timing of Recovery Act
projects.[Footnote 4]
To identify programs that are newly affected by the Recovery Act's
prevailing wage provision, we requested data from 27 of the agencies
that received funding under Division A of the act.[Footnote 5]
Although the Recovery Act was initially estimated to provide $787
billion in spending and tax provisions, we focused on the
appropriation portion because the act's prevailing wage provision only
applied to Division A.[Footnote 6]
The 27 federal agencies we reviewed consisted of departments and
independent agencies that received funding for almost all projects
under the act. Specifically, the departments of:
* Agriculture:
* Commerce:
* Defense:
* U.S. Army Corps of Engineers[Footnote 7]
* Education:
* Energy:
* Health and Human Services:
* Homeland Security:
* Housing and Urban Development:
* Interior:
* Justice:
* Labor:
* State:
* Transportation:
* Treasury:
* Veterans Affairs:
The independent agencies included the:
* Corporation for National and Community Service:
* Environmental Protection Agency:
* Federal Communications Commission:
* General Services Administration:
* National Aeronautics and Space Administration:
* National Endowment for the Arts:
* National Science Foundation:
* Small Business Administration:
* Smithsonian Institution:
* Social Security Administration:
* U.S. Agency for International Development:
We asked each agency to specify which of its programs were newly
subject to Davis-Bacon requirements under the Recovery Act. We
verified the agency-provided data with agency officials and checked
their appropriation figures with appropriation values in the Recovery
Act. We also interviewed officials from the Department of Labor and
the Congressional Research Service to learn about the universe of
newly subject programs and the application of Davis-Bacon
requirements. To examine the extent to which the Recovery Act's
prevailing wage provision is expected to affect each newly affected
program, we conducted semi-structured interviews with federal
officials from most of these programs, and for the other programs we
obtained federal officials' written responses to our questions. We
also interviewed state and local officials in the 16 states and the
District of Columbia that we are reviewing for our bimonthly reports
to Congress on Recovery Act implementation.[Footnote 8] These 16
states are Arizona, California, Colorado, Florida, Georgia, Illinois,
Iowa, Massachusetts, Michigan, Mississippi, New Jersey, New York,
North Carolina, Ohio, Pennsylvania, and Texas.[Footnote 9] We also
conducted interviews with, and obtained relevant documentation from,
two national contractor associations (Associated General Contractors
of America and Associated Builders and Contractors); a national union
(AFL-CIO); the National Association of State Auditors, Comptrollers
and Treasurers; the National Association of Counties; and the National
Governors Association. To further understand how Davis-Bacon
requirements might affect specific programs that are newly subject to
those requirements, we interviewed and collected additional data from
state and local officials and contractors associated with five of the
programs that fell within the scope of our work.[Footnote 10] We
selected these five programs because they existed prior to the
Recovery Act, are currently being implemented, and have a significant
portion of their funding going toward construction activities. The
local officials and contractors interviewed were referrals identified
by federal and state officials. We ensured a range of officials and
contractors were selected by asking for contacts from geographically
disbursed states for different Recovery Act programs. The examples we
provide in this report are illustrative only and not generalizable.
We conducted this performance audit from September 2009 to February
2010 in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit
to obtain sufficient, appropriate evidence to provide a reasonable
basis for our findings and conclusions based on our audit objectives.
We believe that the evidence obtained provides a reasonable basis for
our findings and conclusions based on our audit objectives.
Background:
The Davis-Bacon Act requires contractors and subcontractors working on
federally funded contracts in excess of $2,000 to pay at least locally
prevailing wages to laborers and mechanics.[Footnote 11] The act
covers both new construction and the alteration or repair of existing
public buildings and works. The Department of Labor sets prevailing
wage rates for various job categories in a local area on the basis of
periodic surveys it conducts of contractors, unions, public officials,
and other interested parties.[Footnote 12] The Davis-Bacon Act stems
from a Depression-era practice of transporting workers from lower-
paying areas to bypass local workers who would demand a higher wage.
The prevailing wage requirement was meant to prevent this practice by
ensuring that workers on federal projects were paid at least the
locally prevailing wage. Congress has extended this requirement beyond
projects funded directly by the federal government by including Davis-
Bacon Act prevailing wage provisions in numerous related laws under
which federal agencies assist construction projects through grants,
loans, guarantees, insurance, and other methods. Examples of related
laws include the Federal-Aid Highway Acts, the Housing and Community
Development Act of 1974, and the Federal Water Pollution Control Act.
[Footnote 13] Contractors on projects subject to Davis-Bacon
requirements may also be subject to additional prevailing wage
requirements under state and local laws.
In addition to paying no less than locally prevailing wages,
contractors for construction projects that are subject to the Davis-
Bacon Act must pay their workers on a weekly basis and submit weekly
certified payroll records. The federal contracting or administering
agency has primary responsibility for enforcing these requirements,
while the Department of Labor has coordination and oversight
responsibilities, including the authority to establish regulations and
investigate compliance with labor standards as warranted.
The prevailing wage provision in section 1606 of the Recovery Act
broadly applies Davis-Bacon requirements to all construction projects
funded directly or assisted by the federal government under Division A
of the act.[Footnote 14] It reinforces Davis-Bacon Act coverage of
construction projects where the federal government is a party to the
contract, extends it to projects assisted in whole or in part by
Division A of the act, and overrides any limitation to Davis-Bacon
coverage in related laws under which federal agencies provide
financial assistance, such as grants and loan guarantees, to
recipients to use for construction projects. It also extends the
prevailing wage requirement to some federally assisted projects that
would not otherwise be subject to that requirement.
Federal Agency Officials Reported That 40 Programs Are Newly Subject
to Davis-Bacon Requirements because of the Recovery Act's Prevailing
Wage Provision:
According to federal agency officials, 40 programs are newly subject
to Davis-Bacon requirements as a result of the Recovery Act's
prevailing wage provision, as shown in table 1.[Footnote 15] These
programs are spread across 12 of 27 federal agencies that received
funding under Division A of the act. Most of the programs existed
prior to the Recovery Act and are subject to Davis-Bacon requirements
for the first time under the act, while some are newly created
programs.
Table 1: Programs That are Newly Subject to Davis-Bacon Requirements
under the Recovery Act by Agency (Dollars in millions):
Agency: Department of Commerce;
Program: Broadband Technology Opportunities Program[A];
Recovery Act funding: $4,700.
Agency: Department of Education;
Program: State Fiscal Stabilization Fund[A];
Recovery Act funding: $53,600.
Agency: Department of Energy;
Program: Biomass Program;
Recovery Act funding: $787.
Agency: Department of Energy;
Program: Clean Coal Power Initiative;
Recovery Act funding: $800.
Agency: Department of Energy;
Program: Electricity Delivery and Energy Reliability Program;
Recovery Act funding: $4,500.
Agency: Department of Energy;
Program: Energy Efficiency and Conservation Block Grants;
Recovery Act funding: $3,200.
Agency: Department of Energy;
Program: Fuel Cell Technologies Program;
Recovery Act funding: $43.
Agency: Department of Energy;
Program: Geothermal Technologies Program;
Recovery Act funding: $400.
Agency: Department of Energy;
Program: Industrial Carbon Capture and Storage[A];
Recovery Act funding: $1,520.
Agency: Department of Energy;
Program: Industrial Technologies Program;
Recovery Act funding: $266.
Agency: Department of Energy;
Program: Innovative Technology Loan Guarantee Program[B,C];
Recovery Act funding: $4,000.
Agency: Department of Energy;
Program: Solar Energy Technologies Program;
Recovery Act funding: $118.
Agency: Department of Energy;
Program: State Energy Program;
Recovery Act funding: $3,100.
Agency: Department of Energy;
Program: Vehicle Technologies Program;
Recovery Act funding: $2,815.
Agency: Department of Energy;
Program: Weatherization Assistance Program;
Recovery Act funding: $5,000.
Agency: Department of Energy;
Program: Wind and Hydropower Technologies Program;
Recovery Act funding: $140.
Agency: Department of Health and Human Services;
Program: Capital Improvement Program and Facility Investment Program
for Health Centers;
Recovery Act funding: $1,500.
Agency: Department of Health and Human Services;
Program: National Center for Research Resources Extramural
Construction Program;
Recovery Act funding: $1,000.
Agency: Department of Homeland Security;
Program: Recovery Act Assistance to Firefighters Fire Station
Construction Grants[A];
Recovery Act funding: $210.
Agency: Department of Housing and Urban Development;
Program: Green Retrofit Program for Multifamily Housing[A,C];
Recovery Act funding: $250.
Agency: Department of Housing and Urban Development;
Program: Lead Hazard Reduction Program;
Recovery Act funding: $100.
Agency: Department of Housing and Urban Development;
Program: Tax Credit Assistance Program[A];
Recovery Act funding: $2,250.
Agency: Department of the Interior;
Program: Challenge Grant Program;
Recovery Act funding: $40.
Agency: Department of the Interior;
Program: Colorado River Basin Salinity Control Program;
Recovery Act funding: $10.
Agency: Department of the Interior;
Program: Fish and Wildlife Coordination Act;
Recovery Act funding: $20.
Agency: Department of the Interior;
Program: Recreation Resources Management Program;
Recovery Act funding: $10.
Agency: Department of the Interior;
Program: Water Reclamation and Reuse Program;
Recovery Act funding: $135.
Agency: Department of Justice;
Program: Correctional Facilities on Tribal Lands Program;
Recovery Act funding: $225.
Agency: Department of Justice;
Program: Edward Byrne Memorial Justice Assistance Grant Program;
Recovery Act funding: $2,000.
Agency: Department of Justice;
Program: Transitional Housing Assistance Grants for Victims of
Domestic Violence, Dating Violence, Stalking, or Sexual Assault
Program;
Recovery Act funding: $50.
Agency: Department of Transportation;
Program: Supplemental Grants for Assistance to Small Shipyards;
Recovery Act funding: $100.
Agency: Department of Transportation;
Program: Transportation Investment Generating Economic Recovery
Discretionary Grants [A,C];
Recovery Act funding: $1,500.
Agency: Department of the Treasury;
Program: Community Development Financial Institutions Financial and
Technical Assistance Program;
Recovery Act funding: $90.
Agency: Department of the Treasury;
Program: Native American Community Development Financial Institutions
Assistance Program;
Recovery Act funding: $8.
Agency: Environmental Protection Agency;
Program: Clean Water State Revolving Fund;
Recovery Act funding: $4,000.
Agency: Environmental Protection Agency;
Program: Diesel Emission Reduction Act Grants;
Recovery Act funding: $300.
Agency: Environmental Protection Agency;
Program: Drinking Water State Revolving Fund;
Recovery Act funding: $2,000.
Agency: Environmental Protection Agency;
Program: Leaking Underground Storage Tank Program;
Recovery Act funding: $200.
Agency: National Science Foundation;
Program: Academic Research Infrastructure Program--Recovery and
Reinvestment;
Recovery Act funding: $200.
Agency: National Science Foundation;
Program: Major Research Equipment and Facilities Construction;
Recovery Act funding: $400.
Total, 40 programs:
Recovery Act funding: $101,587.
Source: GAO analysis of federal agency data.
Note: The numbers in this table are rounded to the nearest million.
[A] This program was newly created by the Recovery Act.
[B] Public Law 111-47 rescinded $2 billion from the $6 billion
provided for the Innovative Technology Loan Guarantee Program under
the Recovery Act.
[C] The Recovery Act provision for this program includes a Davis-Bacon
Act provision.
[End of table]
These 40 programs account for about $102 billion of the $309 billion
that was appropriated by the Recovery Act for projects and activities,
but a smaller amount of these funds will be subject to Davis-Bacon
requirements because not all of the funds will be used for
construction activities and only a portion of those funds will be used
to pay labor wages. For example, the Environmental Protection Agency's
Diesel Emission Reduction Act Grants program--intended to accelerate
emission reductions from older diesel engines--received $300 million
under the Recovery Act. Program officials reported that less than 10
percent of those funds will be used for construction activities, and
less than 5 percent of the funds will likely be spent on labor wages.
[Footnote 16] Officials for another program--the Department of
Education's State Fiscal Stabilization Fund, which accounts for more
than half of the $102 billion available for programs that are newly
subject to Davis-Bacon requirements--expected only a small percentage
of the program's funds to be used for construction activities.
[Footnote 17] Moreover, none of the federal officials responsible for
the 40 programs expected more than half of their program's Recovery
Act funding to be spent on labor wages covered by the Davis-Bacon
prevailing wage requirement.
All 40 programs that are newly subject to Davis-Bacon requirements
have the federal government providing recipients with financial
assistance, such as grants and loan guarantees, that can be used for
construction activities. Thirty-three of the 40 programs existed prior
to the Recovery Act. Federal officials responsible for 27 of the 33
existing programs reported that their programs were not previously
subject to Davis-Bacon requirements because existing law did not
require their projects to comply with those requirements. For example,
the Department of Energy's Weatherization Assistance Program--which
enables low-income families to reduce their energy bills by making
long-term energy efficiency improvements to their homes--has been in
place since 1976 but had not been required to comply with Davis-Bacon
requirements prior to the Recovery Act.[Footnote 18] Officials for 5
other existing programs reported that their programs were not
previously subject to Davis-Bacon requirements because they did not
previously fund construction projects. For example, prior to the
Recovery Act, the Department of Energy's Industrial Technologies
Program funded research and development projects that did not involve
construction work, while the Recovery Act provided the program funding
for construction activities covered by Davis-Bacon requirements.
[Footnote 19] Officials for one existing program did not provide a
response in time for our report about why their program was not
previously subject to Davis-Bacon requirements. Finally, officials for
7 of the 40 programs stated that their programs were newly created by
the Recovery Act. Officials for 2 of these new programs--the
Department of Commerce's Broadband Technology Opportunities Program
and the Department of Education's State Fiscal Stabilization Fund--
indicated that, while these programs were subject to Davis-Bacon
requirements for the first time under the Recovery Act, existing law
would have made their projects subject to the requirements regardless
of the Recovery Act's prevailing wage provision.[Footnote 20]
Officials for the other 5 new programs indicated their projects would
not have been subject to Davis-Bacon requirements if not for the
Recovery Act.
The 40 programs were in different stages of implementation at the time
of our review. Most program officials reported that financial
assistance awards had been made and that some level of project
implementation was under way. For example, the Department of Housing
and Urban Development's Lead Hazard Reduction Program--which provides
grants to states, localities, and Indian tribes to abate lead hazards
and make homes healthy--had awarded its Recovery Act grants by May
2009 and reported that abatement efforts were under way.[Footnote 21]
Officials responsible for some programs indicated that applications
were under review and that Recovery Act projects were not yet being
implemented. For example, Department of Transportation officials
reported they were in the process of reviewing applications for the
Transportation Investment Generating Economic Recovery (TIGER)
Discretionary Grants program in advance of a February 2010 award
deadline.[Footnote 22]
Program Officials' Views on Davis-Bacon Requirements:
Federal, state, and local officials involved with the 40 Recovery Act
programs that are newly subject to Davis-Bacon requirements differed
on whether those requirements would increase program costs. However,
these officials generally did not expect Davis-Bacon requirements to
inhibit their ability to achieve Recovery Act and program goals.
Federal officials responsible for most of the programs did not expect
Davis-Bacon requirements to affect the timing of their program's
Recovery Act efforts, though officials for some programs expected an
impact.
Program Officials Differed on Whether Davis-Bacon Requirements Would
Increase Programs' Costs:
Federal officials responsible for programs that are newly subject to
Davis-Bacon requirements--the prevailing wage rate requirement and the
administrative requirements associated with weekly payroll processes--
had mixed views on the extent to which they expected these
requirements to affect program costs, as table 2 shows.
Table 2: Expected Impact of Davis-Bacon Requirements on Program Costs
as Reported by Federal Officials Responsible for 40 Programs Newly
Subject to the Davis-Bacon Act Requirements:
Prevailing wage rate:
Little to no impact: 23;
Moderate impact: 4;
Large impact: 4;
Other[A]: 9;
Total: 40.
Administrative requirements:
Little to no impact: 18;
Moderate impact: 6;
Large impact: 7;
Other[A]: 9;
Total: 40.
Source: GAO analysis of information from interviews and correspondence
with federal officials.
[A] This category includes those that responded do not know, too early
to tell, or mixed impact.
[End of table]
Officials for the 40 programs provided a range of explanations for the
extent to which the prevailing wage rate requirement might impact
program costs. Specifically:
* Little to no impact. Department of Energy officials responsible for
two programs said construction firms generally pay prevailing wage
rates as a standard practice and therefore the prevailing wage rate
requirement would have no impact on program costs. According to other
program officials, the impact would be small because a relatively
small amount of program funds are to be spent on construction
activities that are subject to Davis-Bacon requirements. For example,
Department of Justice officials responsible for the Transitional
Housing Assistance Grants for Victims of Domestic Violence, Dating
Violence, Stalking, or Sexual Assault Program said only a small number
of grantees requested funds for construction and that less than 5
percent would be allocated for this purpose.[Footnote 23] Department
of Energy officials responsible for the Geothermal Technologies
program noted that the prevailing wage rates were in line with what
they expected, and Electricity Delivery and Energy Reliability program
officials said existing wage rates paid by utility companies were
generally high already so any increase in wage expenses due to
prevailing wage rates would probably be minimal.[Footnote 24]
* Moderate impact. Officials from the Department of Energy's
Weatherization Assistance Program explained that the prevailing wage
rate requirement will have at least a moderate impact on program
costs. They explained that weatherization projects in buildings taller
than four stories will require that workers be paid commercial
prevailing wage rates that are higher than the wage rates that would
otherwise be used for weatherization projects.[Footnote 25] Department
of Energy officials responsible for the Wind and Hydropower
Technologies program explained that the prevailing wage rates for
construction workers are sometimes 20 percent higher than what would
have been paid for similar work and could increase labor costs by 20
percent.[Footnote 26] Conversely, these officials said the payment of
higher wages could attract a more highly trained laborer and thus
possibly result in savings in rework or in adherence to safety
guidelines.[Footnote 27]
* Large impact. Department of Energy officials from the State Energy
Program explained that in some of the areas hardest hit economically,
construction workers are paid less than the prevailing wage rate for
the county.[Footnote 28] Therefore, paying the Davis-Bacon prevailing
wage rate will increase costs. Likewise, Department of Justice
officials responsible for the Correctional Facilities on Tribal Lands
Program explained that in some cases the prevailing wage rate may be
significantly higher than what the tribe would normally pay for
construction.[Footnote 29] Department of Energy officials responsible
for the Energy Efficiency and Conservation Block Grants program
anticipated a potentially large impact as a result of the large number
of grantees and significant proportion of funds that would be spent on
construction labor wages.[Footnote 30]
State and local officials we interviewed also had mixed views about
the expected impact of the prevailing wage rate requirement on program
costs. District of Columbia weatherization officials explained that
the prevailing wage rates were generally in line with what they would
expect to pay and some state weatherization officials in California
said the prevailing wage rates may be less than what some service
providers are currently paying. Data provided by State Energy Program
officials in Georgia indicated that contractor wage rates are higher
than Davis-Bacon prevailing wage rates in a subset of counties.
Conversely, Iowa state weatherization officials explained that the
average cost increase would be about 9 percent per home, and one local
Lead Hazard Reduction Program official reported that, based on
historical experience, the prevailing wage rate requirement could
increase program costs by 10 to 13 percent per home. One Mississippi
contractor we interviewed said the wage rates would not have an impact
on costs because the hourly rates that the company pays its employees
are and always have been higher than the Davis-Bacon rates. As table 2
also shows, federal officials reported mixed views on the extent to
which they expected Davis-Bacon administrative requirements, such as
paying workers weekly, to affect program administrative costs. For
example:
* Little to no impact. Department of Health and Human Services
officials responsible for the Capital Improvement Program and Facility
Investment Program for Health Centers said the requirements should
have no impact on program costs since grantees were asked to include
Davis-Bacon compliance in their proposals. Department of Energy
officials responsible for the Solar Energy Technologies program
expected the administrative requirements to have a small impact
because less than 5 percent of funds will be used for construction-
related activities subject to Davis-Bacon requirements. Department of
Housing and Urban Development officials responsible for the Green
Retrofit Program for Multifamily Housing said the administrative
requirements would have a small impact because the grant recipients
had previous experience with the Davis-Bacon requirements through
other federal housing programs and were accustomed to requirements
such as paying workers on a weekly basis.[Footnote 31] Environmental
Protection Agency officials responsible for the Diesel Emission
Reduction Act Grants program said the impact would be small because
the majority of the grant funds are used to purchase equipment and are
therefore not subject to the administrative requirements. These
program officials added that while the requirements are new to most
grantees, the grantees will become familiar with them over time.
* Moderate impact. State Energy Program officials noted that many
construction companies involved with their projects do not maintain
payroll records sufficient to meet Davis-Bacon requirements, and as a
result, the administrative requirement to pay workers weekly may add
to their administrative costs.
* Large impact. Federal officials responsible for the Weatherization
Assistance Program and the Lead Hazard Reduction Program said Davis-
Bacon administrative requirements would require a more detailed
payroll tracking system, which would be particularly burdensome for
small companies. According to Weatherization Assistance Program
officials, smaller companies are the ones, generally speaking, that do
not usually have experience with the Davis-Bacon requirement for
certified weekly payrolls. For these employers, who often employ fewer
than five people, it is particularly burdensome to certify payrolls
weekly. Lead Hazard Reduction Program officials explained that
additional administrative duties necessary for weekly payroll
processing will increase administrative costs. To accommodate this
increase, the agency is in the process of increasing the cap on how
much recipients can spend on administrative costs from 10 to 15
percent of their award.
State and local officials we interviewed had mixed views on the impact
of Davis-Bacon administrative requirements on program costs. Clean
Water State Revolving Fund officials in Georgia and the District of
Columbia said they do not anticipate any additional costs as a result
of the administrative requirements, whereas program officials in
Mississippi and New Jersey noted the requirements would likely
increase project costs.[Footnote 32] Local agencies involved with the
Weatherization Assistance Program in California, Michigan, New York,
and Ohio reported hiring new staff to process Davis-Bacon paperwork,
and local weatherization officials from California noted that the
administrative requirements might be particularly burdensome on
smaller businesses. Local officials responsible for a Lead Hazard
Reduction program in New York said their subcontractor is familiar
with the administrative requirements, and the subcontractor has not
indicated that these requirements are problematic.
Program Officials Generally Expected Davis-Bacon Requirements to Have
Little Impact on Achieving Program and Recovery Act Goals:
Despite these potential cost increases for some Recovery Act programs,
most federal officials said the Davis-Bacon requirements will have
little, if any, impact on their ability to support their program and
Recovery Act goals. Federal officials responsible for 15 of the 40
programs said Davis-Bacon requirements would have no impact on their
program's ability to achieve its goals, and officials from 12 programs
reported that the requirements would have little impact (see table 3).
However, federal officials from four programs--the Weatherization
Assistance Program, State Energy Program, Energy Efficiency and
Conservation Block Grants, and Correctional Facilities on Tribal Lands
Program--noted that the Davis-Bacon requirements could have a large
impact on their ability to support the Recovery Act goal of preserving
or creating new jobs. For example, Weatherization Assistance Program
officials said that Davis-Bacon requirements will have a large impact
in urban areas because they have to pay commercial construction rates
to weatherize buildings over four stories tall. These commercial
construction wage rates are higher than the wage rates officials were
expecting to pay and officials said program goals would be affected
because they will have to reduce the number of homes weatherized.
Table 3: Expected Impact of Davis-Bacon Requirements on the Ability to
Achieve Program and Recovery Act Goals, as Reported by Federal
Officials Responsible for 40 Programs Newly Subject to the Davis-Bacon
Act Requirements:
Program goals:
Little to no impact: 27;
Moderate impact: 5;
Large impact: 1;
Other[A]: 7;
Total: 40.
Recovery Act goals[B]:
Little to no impact: 26;
Moderate impact: 3;
Large impact: 4;
Other[A]: 7;
Total: 40.
Source: GAO analysis of information from interviews and correspondence
with federal officials.
[A] This category includes those that responded do not know, unclear,
too soon to tell, or mixed impact.
[B] Data reported here are focused on the Recovery Act goal of
preserving or creating new jobs.
[End of table]
State and local officials we interviewed and collected data from also
reported that the Davis-Bacon requirements would generally have little
impact on their ability to achieve program and Recovery Act goals.
California state officials responsible for the State Energy Program
stated that even though the requirements may have been an inhibiting
factor for some applicants, they do not believe that the requirements
will negatively affect the ability to achieve energy policy goals.
While Ohio state officials responsible for weatherization said their
program goals have not been affected, District of Columbia Lead Hazard
Reduction program officials said they had to reduce the number of
homes to be treated. Florida officials responsible for the Clean Water
State Revolving Fund and Drinking Water State Revolving Fund programs
reported that the addition of Davis-Bacon requirements had little
impact on their program's ability to support the underlying Recovery
Act goals, such as creating jobs, in part due to the ultra-competitive
behavior during the economic downturn and the enormous demand for
environmental infrastructure funding. Conversely, Michigan state
weatherization officials said the requirements might affect their
ability to support the Recovery Act goal of job creation, especially
for smaller businesses and contractors. According to these officials,
some smaller local contractors who performed weatherization work
before the Recovery Act sometimes may not have the capacity to take
advantage of the Recovery Act weatherization work because of
requirements such as the weekly payroll certifications.
Program Officials Generally Did Not Expect Davis-Bacon Requirements to
Affect the Timing of Recovery Act Efforts:
According to federal officials responsible for most programs that are
newly subject to Davis-Bacon requirements, the requirements are not
likely to affect the timing of their program's Recovery Act efforts.
However, officials for some programs expected an impact on their
program's timing.
Federal officials for 23 of the 40 programs said they did not expect
Davis-Bacon requirements to affect their program's timing. For
example, an official for the National Science Foundation's Academic
Research Infrastructure Program--Recovery and Reinvestment noted that
while they had to spend time consulting with the Office of Management
and Budget and the Department of Labor on Davis-Bacon requirements,
this effort had not significantly altered the program's
timing.[Footnote 33] Federal officials for 2 programs were uncertain
about how Davis-Bacon requirements might affect their program's
timing, while officials for 7 programs did not provide a response in
time for our report.
In contrast, federal officials for 8 programs expected Davis-Bacon
requirements to have an impact on the timing of their program's
Recovery Act efforts. For example, officials with the Department of
Energy's Weatherization Assistance Program stated that Davis-Bacon
requirements had significantly affected their program's timing because
the program is newly subject to the requirements so prevailing wage
rates for weatherization workers were not immediately available. Some
states decided to wait to begin weatherizing homes until the
Department of Labor had determined county-by-county prevailing wage
rates for their state to avoid having to pay back wages to
weatherization workers who started working before the prevailing wage
rates were known.[Footnote 34] For example, state weatherization
officials in Arizona said that all but one of their local service
providers decided to wait to weatherize homes using Recovery Act funds
until the prevailing wage rates were determined because they were
concerned about the time required to reconcile differences in wage
rates. The timing of the Weatherization Assistance Program's Recovery
Act efforts was also affected by concerns about complying with Davis-
Bacon requirements. For example, Pennsylvania weatherization officials
stated that delays occurred because some local agencies had initially
submitted management plans that had not included language describing
how they would comply with those requirements. Officials with the
Department of Energy's Energy Efficiency and Conservation Block Grants
and State Energy Program also expected Davis-Bacon requirements to
affect the timing of their Recovery Act efforts, while officials with
the Department of Housing and Urban Development's Lead Hazard
Reduction Program reported that grantees were provided additional time
to complete their work plans to ensure contractors understood the
requirements.
Agency Comments and Our Evaluation:
We provided a draft of this report to all 27 agencies and the Office
of Management and Budget for their review and comment. Two agencies
provided technical comments that were incorporated into the report as
appropriate. The other agencies had no comments. We also provided a
copy of relevant sections of the report to GAO teams responsible for
reviewing Recovery Act work in the states mentioned in this report. In
some cases, those teams forwarded relevant sections to officials
within those states. We included these comments as appropriate.
As agreed with your office, unless you publicly announce the contents
of this report earlier, we plan no further distribution until 30 days
from the report date. At that time, we will send copies to all 27
agencies reviewed in this report, and other interested parties. The
report will also be available at no charge on the GAO Web site at
[hyperlink, http://www.gao.gov].
If you or your staff members have any questions about this report,
please contact me at (202) 512-3841 or daltonp@gao.gov. Contact points
for our Offices of Congressional Relations and Public Affairs may be
found on the last page of this report. GAO staff who made major
contributions to this report are listed in appendix I.
Sincerely Yours,
Signed by:
Patricia A. Dalton:
Managing Director, Natural Resources and Environment:
[End of section]
Appendix I: GAO Contact and Staff Acknowledgments:
GAO Contact:
Patricia A. Dalton, (202) 512-3841 or daltonp@gao.gov:
Staff Acknowledgments:
Other key contributors to this report were Mark Gaffigan, (Director),
Ric Cheston (Assistant Director), Kim Gianopoulos (Assistant
Director), David Marroni (Analyst-in-Charge), Angela Miles, and Alise
Nacson. Important contributions were also made by Anne Rhodes-Kline,
Carol Herrnstadt Shulman, and Barbara Timmerman.
[End of section]
Footnotes:
[1] Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009).
[2] The Recovery Act consists of two divisions, Division A and
Division B. Division A--titled "Appropriations Provisions" in the act--
consists primarily of discretionary spending, with some exceptions.
Examples of discretionary projects and activities include federal
construction projects and certain research activities. Division B
consists of mainly mandatory spending and revenue provisions, with
some exceptions, and includes tax, unemployment, health, state fiscal
relief, and some other provisions.
[3] Pub. L. No. 111-5, § 1606, 123 Stat. 115, 303 (Feb. 17, 2009).
[4] GAO, Recovery Act: Project Selection and Starts Are Influenced by
Certain Federal Requirements and Other Factors, [hyperlink,
http://www.gao.gov/products/GAO-10-383] (Washington, D.C.: Feb. 10,
2010).
[5] GAO and the Recovery Act Accountability and Transparency Board
received small amounts of Recovery Act funds to conduct oversight
activities--not for construction purposes--and were excluded from our
analysis, since by definition they will not have Recovery Act programs
that are newly subject to Davis-Bacon Act requirements.
[6] The Recovery Act's prevailing wage provision--Section 1606--only
applied to the provisions in Division A of the act. Section 1601 in
Division B of the act applied Davis-Bacon requirements to projects
financed with certain tax-favored bonds.
[7] The U.S. Army Corps of Engineers is the part of the Army that has
both military and civilian responsibilities.
[8] The Recovery Act specifies several roles for GAO, including
conducting bimonthly reviews of selected states' and localities' use
of funds made available under the act. The fourth report in response
to the act's mandate is GAO, Recovery Act: Status of States' and
Localities' Use of Funds and Efforts to Ensure Accountability,
[hyperlink, http://www.gao.gov/products/GAO-10-231] (Washington, D.C.:
Dec. 10, 2009).
[9] The states selected for our bimonthly reviews contain about 65
percent of the U.S. population and are estimated to receive
collectively about two-thirds of the intergovernmental federal
assistance funds available through the Recovery Act. We selected these
states and the District of Columbia on the basis of federal outlay
projections; percentage of the U.S. population represented,
unemployment rates, and changes; and a mix of states' poverty levels,
geographic coverage, and representation of both urban and rural areas.
[10] The five programs were the Weatherization Assistance Program,
State Energy Program, Clean Water State Revolving Fund, Drinking Water
State Revolving Fund, and the Lead Hazard Reduction Program.
[11] Laborers and mechanics include workers whose duties are manual or
physical in nature, including workers who use tools or perform a
trade. Typically, a wage determination will have prevailing wage rates
for different occupations and classifications.
[12] The local area used in making a wage determination will normally
be a county.
[13] For a list of Davis-Bacon related laws, see 29 C.F.R. Part 1,
Appendix A, Statutes Related to the Davis-Bacon Act Requiring Payment
of Wages at Rates Predetermined by the Secretary of Labor.
[14] Both the Bureau of Indian Affairs' Construction appropriation
provision and the Indian Health Service's Indian Health Facilities
appropriation provision included an exemption for certain tribal
contracts from Section 1606.
[15] Other provisions in the Recovery Act define the scope or
reiterate the application of Davis-Bacon requirements to projects
supported through Recovery Act appropriations for the Department of
Housing and Urban Development's Green Retrofit Program for Multifamily
Housing, the Department of Energy's Innovative Technology Loan
Guarantee Program, and the Department of Transportation's
Transportation Investment Generating Economic Recovery Discretionary
Grants.
[16] The program objective of the Environmental Protection Agency's
Diesel Emission Reduction Grants program is to reduce diesel
emissions. The agency will award grants to address the emissions of in-
use diesel engines by promoting a variety of cost-effective emission
reduction strategies, including switching to cleaner fuels;
retrofitting, repowering, or replacing eligible vehicles and
equipment; and implementing idle reduction strategies.
[17] The State Fiscal Stabilization Fund, administered by the
Department of Education, was created in part to help state and local
governments stabilize their budgets by minimizing budgetary cuts in
education and other essential government services, such as public
safety.
[18] The Recovery Act appropriated $5 billion for the Weatherization
Assistance Program, which the Department of Energy is distributing to
each of the states, the District of Columbia, and seven territories
and Indian tribes. The program seeks to assist low-income families by
making such long-term energy-efficiency improvements to their homes as
installing insulation; sealing leaks; and modernizing heating
equipment, air circulation fans, and air conditioning equipment.
[19] The Department of Energy's Industrial Technologies Program
partners with U.S. industry in a coordinated program of research and
development, validation, and dissemination of energy efficiency
technologies and operating practices.
[20] The Department of Commerce's National Telecommunications and
Information Administration administers the Recovery Act's Broadband
Technology Opportunities Program, which manages competitive grants to
a variety of entities for broadband infrastructure, public computer
centers, and innovative projects to simulate demand for, and adoption
of, broadband.
[21] The Department of Housing and Urban Development's Lead Hazard
Reduction Program has made nearly $100 million in Recovery Act funding
available to help eliminate dangerous lead-based paint and other
health and safety hazards from low-incomes homes.
[22] The Department of Transportation's TIGER Discretionary Grants
program will award grants for capital investments in surface
transportation infrastructure on a competitive basis to projects that
have a significant impact on the nation, a metropolitan area, or a
region.
[23] The Department of Justice's Transitional Housing Assistance
Grants for Victims of Domestic Violence, Dating Violence, Stalking, or
Sexual Assault Program focuses on a holistic, victim-centered approach
to provide transitional housing services that move individuals into
permanent housing. Grants support programs that provide assistance to
victims of domestic violence, dating violence, sexual assault, and
stalking who are in need of transitional housing, short-term housing
assistance, and related support services.
[24] The Department of Energy's Geothermal Technologies Program
develops innovative geothermal energy technologies to find, access,
and use the nation's geothermal resources. The department's
Electricity Delivery and Energy Reliability program supports
activities to modernize the electric grid.
[25] The Department of Labor determined that revised prevailing wage
rates for weatherization workers were limited to multifamily
residential buildings of four or fewer stories. However, the
department's commercial prevailing wage rates (which apply to
plumbers, carpenters, and other laborers) apply to multifamily
residential buildings of five or more stories. As a result, local
agencies conducting weatherization work on multifamily units in high-
rise buildings must pay their workers wage rates that can be
significantly higher than what local agencies pay weatherization
workers for residential housing units.
[26] The Department of Energy's Wind and Hydropower Technologies
Program leads the nation's efforts to improve the performance, lower
the costs, and accelerate the deployment of wind and water power
technologies through partnerships with the Department of Energy's
national laboratories to conduct research and development activities
through competitively selected, cost-shared research and development
projects with industry and in partnership with federal, state, and
other stakeholder groups.
[27] Some studies we reviewed in 2008 also concluded that higher wages
attracted high-quality, highly skilled labor; enhanced productivity;
and possibly offset potential labor cost savings from lower wages.
These studies were performed by the National Alliance for Fair
Contracting, a labor management organization, and the Construction
Labor Research Council, an organization that researches construction
labor costs, and were conducted in 1995 and 2004. We reported this in
GAO, Federal-Aid Highways: Federal Requirements for Highways May
Influence Funding Decisions and Create Challenges, but Benefits and
Costs Are Not Tracked, [hyperlink,
http://www.gao.gov/products/GAO-09-36] (Washington, D.C.: Dec. 12,
2008).
[28] The goals established for the Department of Energy's State Energy
Program are to increase energy efficiency to reduce energy costs and
consumption for consumers, businesses, and government; reduce reliance
on imported energy; improve the reliability of electricity and fuel
supply and the delivery of energy services; and reduce the impacts of
energy production and use on the environment.
[29] The Department of Justice's Correctional Facilities on Tribal
Lands Program assists tribes in cost effectively constructing and
renovating correctional facilities associated with the incarceration
and rehabilitation of juvenile and adult offenders subject to tribal
jurisdiction. This funding allows tribes to explore community-based
alternatives to help control and prevent jail overcrowding due to
alcohol and other substance abuse.
[30] The Department of Energy's Energy Efficiency and Conservation
Block Grants program funds competitive and formula grants to units of
local and state government and Indian tribes to develop and implement
projects to improve energy efficiency and reduce energy use and fossil
fuel emissions in their communities.
[31] The Green Retrofit Program for Multifamily Housing makes grants
and loans to existing Department of Housing and Urban Development-
assisted multifamily eligible property owners to facilitate utility-
saving and other green building benefits by retrofitting accepted
properties for reduced energy demand, reduced water consumption, lower
operating costs, improved resident quality of life (including comfort,
and indoor air quality), and reduced overall impact on the environment.
[32] The Environmental Protection Agency's Clean Water State Revolving
Fund provides funds to states to establish state loan revolving funds
that finance infrastructure improvements for public wastewater systems
and other water quality projects.
[33] The Academic Research Infrastructure Program--Recovery and
Reinvestment is intended to enhance the nation's existing research
facilities to enable next-generation research infrastructure that
integrates shared resources across user communities.
[34] In July 2009, the Department of Energy and the Department of
Labor issued a joint memorandum to Weatherization Assistance Program
grantees authorizing them to begin weatherizing homes using Recovery
Act funds, provided they paid construction workers at least the
Department of Labor's wage rates for residential construction, or an
appropriate alternative category, and compensated workers for any
differences if the Department of Labor established a higher local
prevailing wage rate for weatherization workers. The Department of
Labor completed its initial determination of wage rates for
weatherization workers in each county in the United States by
September 3, 2009. The wage rates were revised in December 2009.
[End of section]
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