Davis-Bacon Act

Labor Now Verifies Wage Data, but Verification Process Needs Improvement Gao ID: HEHS-99-21 January 11, 1999

The Davis-Bacon Act, enacted in 1931, is intended to protect workers and communities from the economic disruption caused by contractors hiring workers from outside the local area, where wages are lower, thus obtaining federal construction contracts by underbidding contractors that pay local wage rates. The act requires that employers pay locally prevailing wage rates, including fringe benefits, to laborers and mechanics employed on the more than $40 billion of federal construction projects a year. In earlier reports, GAO has expressed concern that the Department of Labor's procedures for determining prevailing wage rates were vulnerable to the use of inaccurate or fraudulent data, which could lead to the payment of wages that are either lower than what workers should receive or higher than the actual prevailing wages, which would inflate federal construction costs at the taxpayers' expense. The House Appropriations Committee directed Labor to ensure that part of the funds appropriated for the wage survey program be used to randomly sample all data submissions to verify their accuracy. Moreover, the committee specified that Labor select a sample of all wage data submissions for on-site data verification against actual payroll records. This report reviews these verification activities. GAO discusses (1) what Labor has done in response to the Committee's directive and (2) the likely effect of these efforts on the accuracy and timeliness of Davis-Bacon wage determinations.

GAO noted that: (1) in response to a Committee directive and GAO's recommendation, Labor has implemented a program to verify wage survey data submitted on standardized wage data forms by construction contractors and interested third parties, such as contractor associations and trade unions; (2) to verify these data, Labor has developed procedures to select samples of these forms for telephone verification that differ depending on whether the forms are submitted by contractors or third parties; (3) in addition, Labor has hired a private accounting firm to conduct on-site verification reviews; (4) as of September 30, 1998, the accounting firm had issued final reports for 9 of the 85 geographic area surveys scheduled for audit from April 1997 to June 1998 and had identified errors in wages reported in about 70 percent of the wage data forms reviewed; (5) in both the telephone and on-site verification processes, all data--regardless of the entity that submitted them--are verified only with the contractors; (6) even though Labor has identified and corrected numerous errors in the wage data submitted, its verification efforts will have limited impact on the accuracy of the wage determinations and will increase the time required to issue them; (7) specifically, errors the accounting firm identified and corrected in all nine area surveys averaged 76 cents per hour; (8) but, because Labor was only able to correct the limited number of wage data forms verified, which contain a small portion of the wage rates submitted, on average, changes to these wage determinations will be less than 10 cents per hour, according to Labor officials' estimates; (9) the extent to which correcting the errors found through verification will improve the accuracy of wage determinations is limited by: (a) the Committee directive to use a random sample of wage data forms for verification, given the characteristics of the wage data with respect to the universe being sampled; and (b) the procedures Labor uses to implement this directive; (10) for example, in its procedures, Labor assumes that data from contractors that refuse access to supporting documentation are correct and includes the wages in calculating wage determinations; and (11) while the time needed for verification reduced timeliness of wage determinations, telephone verification added less time to the process than did on-site verification--an estimated average of 2 weeks as compared with an average of 211 days for the 30 area surveys for which the auditor completed preliminary reports.


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