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Streamlining
Davis-Bacon
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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:
- 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.
- 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.
- 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.
- Investigate probable violations and complaints of underpayment.
Throughly explore any evidence of violations, especially allegations
of underpayment.
- 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:
- 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.
- 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.
- 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.
- 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.)
- 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.
- 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.
- 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.
- 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.
- 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.
- 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":
- 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.
- 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.
- 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.
- 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).
- 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.
- 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.
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