Administration of Minimum Wage Rate Determinations Subject to Provisions of the Davis-Bacon Act

Published by the Government Accountability Office on 1977-03-08.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                         DCCUMENT RESUME

02535 - [A1732733] (Restricted)

[Administration of Minimum wage Rate Determinations Subject to
Provisions of the Davis-Bacon Act]. March 8, 1977. 5 pp.

Report to John Kane, Area Director, Department of Housing and
Urban Development: Milwaukee Area Office, WI; by G. F.
Stromvall, Regional Manager, Field Operations Div.: Regional
Office (Chicago).

izsue Area: Consumer and Worker Protection (900).
Contact: Field Operations Div.: Regional Office (Chicago).
Budget Vunction: Education, Manpower, and Social Services: Other
    LaboL Services (505).
Organization Concerned: Department of Labor.
Authority: DaTis-Bacon Act.

         The Davis-Bacon Act requires that workers employed on
Federal or federally assisted construction projects costing in
excess of $2,000 be paid minimum wages and benefits based on
prevailing rates, as determined by the Secretary of Labor.
Federal contracting agencies are responsible for enforcing
minimum wage provisions pursuant to regulations issued by the
Department of Labor (DOL).  Findings/Conclusions: The Milwaukee
Area Office sponsored training workshops and delegated
enforcement responsibilities to grantees. Housing and Urban
Development (BUD) instructions require actions to ensure
contractor compliance. The area office retained responsibility
for monitoring grantees' enforcement practices, but HUD
representatives visited the Beloit project only once and did not
visit the Sheboygan site. On the Sheboygan project, several
instances of noncompliance were identified, including failure to
interview workers, failure to follow conformance procedures,
failure to obtain registration papers, and omission of
applicable area wage determination from contract specifications.
One wage payment violation and some inaccuracies were disclosed.
On the Beloit project, it was found that the grantee had not
interviewed employees, nor established procedures to ensure that
contractors submitted payrolls, nor resolved .-nderpayments of
wages. A limited payroll examinaticn revealed two examples of
violations. In general, it was believed that the grantees and
HUD were ineffective in assuring ccntractor compliance with
labor standards. (HTV)
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  Mr. John ¥ane, Area Dire-tor
  U.S. Department of Housing and Urban Development                                             Cv                 .. ZC//$i
  Milwaukee Area Office
  744 N. 4th Street
  Hil.waukee, Wisconsin 53203

  Dear Hr. Kane:

        '£he General A~ccountfig Office is reviewing the Department of Labor's
  (DOL) and Federal contracting agencies' administration and enforcement of
   dinimur, wage rate determinations issued for Federal or federally-assisted
  conastrcFion prfcects subject to the labor standard provisions of the
  Davis-a-co.. A:tC    The review is being performed at DOL and selected
  Fedcral c<-..   utLing agencies and contractor sites in various regions. In
  Regioa 7 we te-.w.ed two Departmev.n of Housing and Urban Development
  (UW i:,t -,.d;.oojects administered by the Milwaukee Area Office.

        abce      -avix-I-cmn
                          Act requires that all workers employed on a Federal
 or fe!i.zilly-asststed construction project costing in excess of $2,000
 besaid      *drnrm wages and fringe benefits and that these be based on
  rates t!i -.cretary of Labor determines as prevailing on sitilar projects
  Sn the area. Every construction contract subject to the act must contain
 a provision stipulating that contractors and subcontractors must pay the
 workers at least once a week wages not less than those determined by the
 Secretary to be prevailing.

       Federal contracting agencies are responsible for enforcing the
 riituam wage provisions of the Davis-Bacon Act. Enforcement is carried
 omit pursuant to regulations and procedures issued by DOL which is also
 r,-ponsible for coordinating and monitoring the enforcement activities of
 Federal agencies. An objective of our review was to determine whether
 the enforcement efforts by DOL and Federal contracting agencies are ade-
 quate to ensure that contractors and subcontractors are complying with
 the iimirum wage provisions of the act.

      We reviewed enforcctent and monitoring practices of the Milwaukee
 Area Office and the respective grantees for the two HUD funded construc-
 tion projects shown as follows.
     and            Construction           HUD                         DOL wage
   location             cost             program      Grantee        determination

Extension of open     $125,600     Community       Sheboygan            76-WI-14,
  pedestrian mall                 development      Dept. of City         3/18/76i/
  Sheboygan, Wi.                                   Development

One duplex and 13    $290,000          Section 8   Wisconsin            76-WI-41,
  single family                                    Housing Finance       4/5t76
  homes, Beloit, Wi.                               Authority

a / The project determination instructed the grantee to use DOL ar _a
    wage determination WIS 75-2048, 3/14/75.


     The Milwaukee Area Office is responsible for enforcing wage standards
on BUD funded construction projects in Wisconsin and instructing grantees
on their responsibilities under the act. Accordingly, the Area Office
sponsored training workshops on how to enforce the labor standards and
delegated enforcement responsibilities to the grantees.

     BUD instructions require grantees take actions, including the follow-
ing, to ensure contractors and subcontractors comply with the act.

     -- Obtain and review weekly certified payrolls.

     -- Interview a sufficient number of employees at the construction
        site and ascertain that they are paid the proper wage.

     -- Conform worker classifications that are not covered by the wage

     -- Obtain written evidence that each apprentice is registered by the
        appropriate State or Federal agency.

      The Area Office retained responsibility for monitoring the grantees'
enforcement practices at the Sheboygan and Beloit projects. In addition,
the Area Office retained responsibility for interviewing construction
workers at the Beloit site. However, HEn representatives visited the
Belait project only once and did not visit the Sheboygan site.

     The grantees' enforcement efforts on the Sheboygan and Beloit
projects are discussed below.

Sheboygan project
     Five prime contractors and one subcontractor worked on the
construction project for extending the open pedestrian mall. These
contractors employed about 52 laborers and mechanics. Our inquiries
identified the following instances of noncompliance with the act.

     -Neither      the grantee nor HUD representatives interviewed
       construction workers.

     -The grantee did not follow conformance procedures. The
       certified payrolls included seven worker classifications
       that were not shown an the wage determination.

     -Two, contractors did not submit certified payrolls weekly
       and two did not submit payrolls at 11. The grantee did
       not have a procedure to ensure timely receipt of
        certified payrolls.

     -The grantee did not obtain registration par-rs for one
       apprentice who worked on the project.

     -The grantee omitted the applicable area wage determination
       from the contract specifications, although the project
       wage determination was included.

     We examined one certified payroll for three of the five prime
contractors and one subcontractor as follows.
                                                           Pay period
     'Contractor                   Location                  ended

  Peters Construction           Milwaukee. Wi.               6/26/76
  Sch4elk Electric              Sheboygan Falls, Wi.          6/4176
  RL A. Honold Co.               Sheboygsn,'   .              7/3/76
  Buteyn Excavating              Shboygan, Wi.               6/19/76

 .Our limited payroll examination disclosed one wage payment violation
.and other inaccuracies summarized below.
     -- Peters underpaid a carpenter $3.50. The contractor used an
        obsolete union pay scale fiich was $0.20 an hour lover than
        the wage rate shown in the wage determination.
     -Peters, soaold, and Buteyn submitted inaccurate eertified
       payrolls that did not agree with wage rates and/or hours
       worked shows on supporting payroll and time records.

Beloit project

     One prime contractor and 13 subcontractors worked on the project
for construction of one duplex and 13 single family homes. The
contractors employed 55 laborers and mechanics.

     In July and October 1976 HUD representatives reviewed the
grantee's enforcement .practices on this and other projects. BUD
reported that' the grantee had sot:

     -- interviewed employees;

     -established procedures to ensure tiat contractors submitted
       required payrolls; and

     -- resolved underpayments of wages.

     While some corrective actions were initiated by the grantee, our
inquiries indicated instances of noncompliance with the act or weak-
nesses in enforcement as shown below.

     -BUD interviewed only one of the 55 employees who worked on the
       project, and the gratcee did not interview any employees.

    -The grantee did not follow conformance procedures In every
      insta.ce. One contractor used an "Insulator" classification
      for which a wage determination had not been requested. As the
      result of our inquiry, the grantee requested clarification of
      two other classifications used by one subcontractor.

    -- The grantee normally received certified payrolls on a monthly
      basis instead of weekly.
     We examined one certified payroll for 10 of the'13 subcontractors
as follows.

                                                           Pay period
             Contractor                location              ended

    City Wide Insulation           Rockford, Il.             8125176
    Bob Salberg                    Rockford, Il.             7/14/76
     Uepp Plumbing & Beating       Janeville, Wi.            8125/76
    Wilson & Shipler               Beloit, Wi.               7/17/76
    Gary HcNeal                    Rockford, Il.            9/24/76
    McGrath Electric               Janesville, Wi.          9122/76
    S & S Construci:.on            Oregon, U1.              8/2a876
    Rockford Floorcrafters         Bockford, -ID.          10129/76
    Alpine Decorators              Rockford, IU.           10/22/76
    Hallmark Drywall               M aldison, Vi.          ll/12/76
Our limited payroll examination and related inquiries identified the
following wage payment violations.

     -City Wide paid!an insulator $2.85 an hour less than the
       rate included in the wage determination. Since the insulator
       worked 4-112 hours on t:c project, he was underpaid $12.83.

     -Hallmark paid two laborers $3.35 an hour less than the rate
       included in the wage determination.  The two laborers
       delivered drywall and performed cleaning services at the
       prcject site and at other construction sites. Hallmark did
       not report the two laborers on the certified payrolls and
       did not allocate their time among the various jobs. There-
       fore, we could not quantify the underpayment.

     In our opinion, the grantees and BUD were ineffective in assuring
that contractors complied with the labor standards of the Davis-Bacon
Act and that employees working on the Sheboygan and Beloit projects
had been paid the wages stipulated by DOL.

     Since BUD is responsible for enforcing the provisions of the act,
we are referring these matters to you for appropriate investigation of
contractors' violations and the grantees' failure to carry out enforce-
ment responsibilities. We would appreciate being advised of the
results of any investigations and actions taken by HUD and the grantees
on noncompliance and contractors' violations.

     * copy of this letter is being sent to the Regional Ad-inistrator,
Department of Housing and Urban Development, Region V, Chicago, Illinois,
and to the Regionial Administrator, Employment Standards Administration,
Department of Labor, Region V, Chicago, Illinois.

                                 Sincerely yours,

                                 Regional Hanager