United States General Accounting Office

GAO Report to Congressional Requesters

May 1996 DAVIS-BACON ACT

Process Changes Could

Raise Confidence That

Wage Rates Are Based

on Accurate Data

G O A

years

1921 - 1996

GAO/HEHS-96-130

GAO United States

General Accounting Office

Washington, D.C. 20548

Health, Education, and

Human Services Division

B-271489 

May 31, 1996

The Honorable Pete Hoekstra

Chairman, Subcommittee on Oversight

 and Investigations

Committee on Economic and Educational

 Opportunities

House of Representatives

The Honorable Cass Ballenger

Chairman, Subcommittee on Workforce

 Protections

Committee on Economic and Educational

 Opportunities

House of Representatives

The Davis-Bacon Act requires employers on federal construction projects

to pay workers wages at or above the level determined by the Department

of Labor to be prevailing in a geographic area.1

 In recent years, the act has

drawn controversy, with critics charging that it artificially inflates federal

construction costs. The Congressional Budget Office estimates that for

fiscal year 1996, the federal government will contract about $42 billion in

construction projects throughout the nation. Given the magnitude of these

expenditures, inaccurate wage determinations could lead either to

excessive government construction costs or to large numbers of workers

receiving wages and fringe benefits that are lower than required by the

law.

In early 1995, allegations of the use of inaccurate and fraudulent wage data

to determine the prevailing wages paid on federally funded construction

projects in one geographic area precipitated a criminal investigation by the

Department of Justice that is still ongoing. On the basis of its own review,

Labor concluded that data weaknesses warranted a redetermination of the

area’s prevailing wage rates, which it issued in April 1996.

Because of your concern about whether Labor’s procedures under the

Davis-Bacon Act allow the use of data that could result in inaccurate wage

determinations throughout the nation, you asked us to

1

Labor’s regulations define a prevailing wage as the wage paid to the majority (more than 50 percent)

of the workers in the job classification on similar projects in the area during the period in question. If

the same wage is not paid to a majority of those employed in the classification, the prevailing wage will

be the average of the wages paid, weighted by the total employed in the classification. (See app. II.)

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B-271489 

• identify the steps used by Labor to collect data and determine and report

the prevailing wages to be paid on federally funded construction projects,

• determine whether specific weaknesses exist in the wage determination

process that could have resulted in the use of inaccurate or fraudulent

data, and

• assess the extent to which Labor is addressing any identified process

weaknesses.

To respond to your request, we collected information from Labor’s Wage

and Hour Division (WHD); interviewed Labor officials and staff in

Washington, D.C., Atlanta, and Philadelphia; surveyed staff in Labor’s six

regions; and obtained the views of representatives of individual employers,

construction unions, and industry associations. We focused on the policies

and procedures that Labor had in place to prevent the use of inaccurate or

fraudulent wage data. We did not verify the accuracy of the wage

determination data Labor used or explore the adequacy of Labor’s survey

response rates or its calculation of prevailing wages. We conducted our

review from October 1995 to April 1996 in accordance with generally

accepted government auditing standards. Appendix I provides more

information on our study objectives, scope, and methodology.

Results in Brief Labor sets prevailing wage rates for construction job classifications in

some 3,000 individual counties or groups of counties and for four different

types of construction. Labor’s decisions are based on voluntarily

submitted wage and benefit data from employers and third parties,2

 such

as unions or trade groups, on construction projects. Any interested party

can appeal Labor’s final wage determination. Although Labor has a

process in place to determine prevailing wage rates, we found that it

contains internal control weaknesses that contribute to the lack of

confidence in the resulting wage determinations. These weaknesses

include limitations in Labor’s verification of wage and fringe benefit data,

limited computer capabilities, and an appeals process that may be difficult

for interested parties to access. Such weaknesses can lead to increased

government construction costs or result in lower wages and fringe benefits

being paid to construction workers than required by the law.

In August 1995, Labor began requiring all regional staff to conduct

additional verification of some third-party wage survey data. While this

change may improve the accuracy of the wage survey data received from

2

Labor defines third-party data as project wage and fringe benefits data for a specified construction

project that are submitted for use in a wage survey by any party other than an employer or other

payroll holder.

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B-271489 

third parties, it does not address the problem of erroneous data being

submitted by employers. For the long term, Labor has requested about

$4 million in its fiscal year 1997 budget to develop, evaluate, and

implement alternative reliable methodologies that would provide accurate

and timely wage determinations at reasonable cost. Although Labor’s

long-term initiative is a positive step, in the interim, verification

weaknesses in Labor’s process and limited public awareness of its appeals

process remain.

Background The Davis-Bacon Act (40 U.S.C. 276a) requires workers on federal

construction projects valued in excess of $2,000 to be paid, at a minimum,

wages and fringe benefits3

 that the Secretary of Labor determines to be

prevailing for corresponding classes of workers in the locality where the

contract is to be performed. The act covers every contract to which the

United States or the District of Columbia is a party, for construction,

alteration, or repair of public buildings or public works. The $2,000

threshold for projects covered by the Davis-Bacon Act has not changed

since 1935.

WHD, within Labor’s Employment Standards Administration (ESA), has

responsibility for administering the Davis-Bacon Act through

approximately 50 staff in the Washington, D.C., headquarters and in its six

regional offices. Its duties include the collection of wage and fringe

benefits data on construction projects for the calculation of local

prevailing wage rates. For fiscal year 1996, the Congressional Budget

Office estimates that $42 billion will be spent on the construction of

federal projects.

Labor’s Administrative Review Board hears appeals of prevailing wage

determinations issued under the Davis-Bacon Act and upheld by the WHD

Administrator. The Office of the Solicitor provides legal advice and

assistance to Labor personnel relative to the administration and

enforcement of the Davis-Bacon Act and represents WHD in Davis-Bacon

wage determination cases before the Administrative Review Board.

Labor collects wage and fringe benefit data through voluntary

participation in a wage survey. Although the survey form does not

explicitly so inform participants, failure to supply truthful answers can

have serious consequences. It is a crime under federal law (18 U.S.C.

3

Fringe benefits considered in computing the prevailing wage rate include holiday and vacation pay,

health insurance, and pension benefits. (See fig. II.3.)

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1001) to knowingly submit false data to the government, and it is a crime

under federal law (18 U.S.C. 1341) to use the U.S. mail for fraudulent

purposes.

In previous reviews of the Davis-Bacon Act,4

 we raised concerns about the

accuracy of Labor’s wage determinations. In 1979, we pointed out that the

act appeared to be impractical to administer due to the magnitude of the

task of producing an estimated 12,400 accurate and timely prevailing wage

determinations. Since then, Labor has implemented regulatory changes

that have addressed some of our specific concerns about the process used

to determine prevailing wages. For example, rules were changed to

generally prohibit (1) including federal contracts in the area wage surveys

and (2) mixing prevailing wage data from surveys of urban and rural areas.

An additional change has likely resulted in more wage determinations

being based on the average wage of an area rather than on the wage

specified in area collective bargaining agreements. Technological

improvements have also improved Labor’s ability to administer the

Davis-Bacon wage determination process.5

 Despite these changes, in 1994,

we found continuing verification problems with the data that Labor uses to

make prevailing wage determinations.

The Congress is currently considering separate bills that would either

repeal or reform the Davis-Bacon Act. Two bills (S. 141 and H.R.

500) would repeal the Davis-Bacon Act. Two other bills (H.R. 2472 and S.

1183) would reform the act. The two latter bills would change the way that

Labor determines and enforces wage decisions in the construction

industry. These reform bills include provisions that would (l) increase the

$2,000 threshold for construction projects covered by Labor’s wage

surveys and (2) expand Labor’s enforcement authority.6

Thirty-two states have “little Davis-Bacon” laws requiring the payment of

prevailing wages on certain state-funded construction projects. Of these,

15 states conduct their own wage surveys as part of their prevailing wage

4

The Davis-Bacon Act Should Be Repealed (GAO/HRD-79-18, Apr. 27, 1979) and Davis-Bacon Act

(GAO/HEHS-94-95R, Feb. 7, 1994).

5

In a 1994 report, both employers and employee representatives we interviewed also noted that

additional staffing and training could improve the accuracy of Davis-Bacon prevailing wage

determinations. See Workplace Regulation: Information on Selected Employer and Union Experiences

(GAO/HEHS-94-138, Vol. I, June 30, 1994).

6

We also discussed changes to the Davis-Bacon Act in our report, Addressing the Deficit: Budgetary

Implications of Selected GAO Work for Fiscal Year 1996 (GAO/OCG-95-2, Mar. 15, 1995). In this report,

we identified reforming or repealing the Davis-Bacon Act as an option that the Congress might wish to

consider.

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B-271489 

rate determination process. Three of the remaining 17 states—

Connecticut, Kentucky, and Oklahoma—have recently used the federal

wage determinations as the basis for the prevailing rates on state

construction projects, while the others generally base their wage rates on

the union rate.7

Recent Events Resurface

Concerns With Labor’s

Process

In January 1995, federal Labor and Oklahoma state labor officials received

reports about possible inaccuracies in the results of a recent survey

conducted by Labor that set prevailing wages for work on certain types of

construction projects in the Oklahoma City and Tulsa areas. Based on this

information, Labor directed an audit of the wage data used in the

Oklahoma City survey. Labor’s review found that inaccuracies did exist in

the wage determinations issued for some heavy construction and building

construction job classifications in the Oklahoma City area. In March 1995,

Labor issued a revised determination for certain heavy construction job

classifications for the Oklahoma City area. Labor also reviewed the wage

survey data of the remaining heavy construction job classifications for the

Oklahoma City and Tulsa areas and issued revised wage rates in May 1995.

During this period, believing the initial survey rates to be incorrect,

Oklahoma state labor officials independently directed a review of the

third-party data used in the contested survey.8

 This investigation detected

several occurrences of potentially inaccurate and fraudulent wage and

fringe benefit information reported by third parties, which served to

increase the federal prevailing wage rate for certain construction job

classifications. In July 1995, Labor received the Oklahoma state Labor

Commissioner’s report alleging that fraudulent data were submitted and

used in the original wage determinations.9

 This report however, did not

challenge the revised wage determinations for heavy construction that

Labor had issued in March and May 1995.

In July 1995, Labor then initiated a review of the building construction

wage surveys for Oklahoma that had been collected at the same time as

the initial heavy construction wage survey data. Based on a determination

that potential data verification problems existed in the building

7

A 1995 state Supreme Court decision ruled the Oklahoma prevailing wage law to be unconstitutional

because the law’s piggyback provision for setting prevailing wages delegated too much authority to the

federal government.

8

At the time, the Oklahoma state little Davis-Bacon law based prevailing wages for state projects, such

as schools or prisons, on federal wage determinations.

9

The Department of Justice is currently investigating charges of fraudulent and inaccurate reporting of

wage data on Labor’s initial Oklahoma City wage survey.

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construction survey, Labor withdrew its wage determinations for all

Oklahoma City building construction job classifications in August 1995.

In April 1996, Labor issued new wage determinations for heavy

construction based on completely new survey data and for building

construction based on complete verification and analysis of previously

conducted building construction survey data. The new determinations

established prevailing rates that were higher in some instances and lower

in others than the wage determinations in place in January 1995. As of

mid-May 1996, these new determinations had not been contested.

Labor’s Office of the Inspector General is currently surveying the extent to

which fraudulent or inaccurate wage data were used by Labor in 1995 to

determine prevailing wages under the Davis-Bacon Act in several of

Labor’s regions. The study is expected to be completed in the fall of 1996.

Labor’s Wage

Determination

Process Based on

Voluntary Survey

Participation

Labor’s procedures for determining prevailing wages for individual

counties or groups of counties are based on a survey of the wages and

fringe benefits paid to workers in similar job classifications on comparable

construction projects in the particular area. This information is collected

through the voluntary submission of data from employers and third parties

on construction projects surveyed for each wage determination. Labor’s

wage determination process consists of four basic stages: planning and

scheduling surveys, conducting the surveys, clarifying and analyzing

respondents’ wage data, and issuing the wage determinations. In addition,

any employer or interested party10 who wishes to contest or appeal

Labor’s final wage determination can do so.

Labor encourages the submission of wage information from all employers

and third parties, including employee unions and industry associations

that are not directly involved with the surveyed projects. In fiscal year

1995, Labor completed about 100 prevailing wage surveys, gathering wage

and fringe benefit data from over 37,000 employers and third parties.

Labor surveys wages and fringe benefits paid to workers in different job

classifications for four basic types of construction (building, residential,

heavy, and highway) covering more than 3,000 counties or groups of

counties within the United States. Given the large number of prevailing

wage determinations and Labor’s limited resources, Labor develops an

10Interested parties may include the employers or contractors; contractor associations; construction

workers; labor unions; and federal, state, and local agencies.

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B-271489 

annual plan to identify those geographic areas or counties for which wage

determinations are most in need of revision. (See app. II for a detailed

description of Labor’s prevailing wage determination and appeal

procedures.) For each area designated for survey, Labor identifies the

counties for which the wage determination should be conducted and

determines what construction projects will be surveyed.

Labor places primary responsibility for the collection and compilation of

the relevant wage data on about 30 staff distributed among six Labor

regional offices. The survey is distributed to the participant population,

which includes the general contractor for each construction project

identified as comparable and within the survey’s geographic area. In

surveying the general contractors, Labor requests information on

subcontractors to solicit their participation. Labor also surveys interested

third parties, such as local unions and construction industry associations

that are located or active in the survey area.

Once the data submissions are returned, the analysts review and analyze

the returned wage survey forms—WD-10 wage reporting forms.11 They

follow up with the employer or third parties to clarify any information that

seems discrepant, inaccurate, or confusing.12 The analysts then use this

information to create computer-generated recommended prevailing wages

for key construction job classifications.13

These recommended prevailing wages are reviewed and approved by

Labor’s National Office in Washington, D.C. Labor publishes the

Davis-Bacon final wage determinations in printed reports and on its

electronic bulletin board, allowing updates to be rapidly communicated to

contracting and assisting agencies. Modifications to wage determinations

are published in the Federal Register. Any interested party has the

opportunity to review or contest, through a written or telephone request, a

final wage determination issued by Labor in Washington, D.C. (See app. II

for details on Labor’s appeals process.)

11See app. II for a sample WD-10 wage reporting form and other forms used in the Davis-Bacon

prevailing wage determination process.

12Before August 1995, when Labor received information on the same project from both the employer

and a third party, wage analysts were not required to contact the employer to resolve any

discrepancies between them.

13In accordance with its regulations, Labor determines an area’s prevailing wage rate based on a

50-percent rule, which states that if the same wage is not paid to a majority of workers employed in the

classification, the prevailing wage shall be the average of the wages paid, weighted by the total

employed in the classification.

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B-271489 

Weaknesses in Labor’s

Procedures Could

Lead to Inaccurate

Prevailing Wage Rates

Labor’s wage determination procedures contain weaknesses that could

permit the use of fraudulent or inaccurate data for setting prevailing wage

rates. These weaknesses include limitations in the degree to which Labor

verifies the accuracy of the survey wage and fringe benefit data it receives,

limited computer capabilities and safeguards to review wage data before

calculating prevailing wage rates, and an appeals process that may not be

well publicized. Labor’s failure to prevent the use of fraudulent or

inaccurate data may result in wages and fringe benefits being paid to

construction workers that are lower than those prevailing. Erroneous

prevailing wage rates could also lead to excessive government

construction costs and undermine confidence in the system among survey

respondents, reducing their future participation.

Verification of Wage Data

Largely Limited to

Telephone Contacts

Labor’s regional staff rely primarily on telephone responses from

employers or third parties to verify the information received on the WD-10

wage reporting forms. Staff in Labor’s regional offices that have

Davis-Bacon operations reported that most of their verifications of data

submissions—clarifications concerning accuracy, appropriateness, or

inclusion—were conducted by telephone. Labor’s procedures also do not

require and Labor staff rarely request supporting documentation—for

example, payroll records—that supplement the WD-10 wage reporting

forms submitted by employers.14 Labor officials and staff told us that if an

employer insists that the wages reported are accurate, Labor’s wage

analysts generally accepted what was communicated verbally by

telephone.

Analysts conduct telephone verification with the employer on all

third-party data that appear to be inaccurate. For example, when

employers and third parties submit wage information on the same project,

verification is conducted by contacting the employer in the event of a

discrepancy between data received from the employer and a third party.15

However, Labor officials and staff told us that, before August 1995, there

was no requirement to contact the employer regarding the verification of

third-party data. Typically, if there was some question regarding

third-party data, staff generally resolved the matter by contacting the third

party only, rather than verifying the information with the employer.

14The only additional documentation typically requested is a list from a project’s employers—general

contractors—of the subcontractors who also work on a project.

15Third-party data submissions generally account for about one-third of all wage survey submissions.

However, in some metropolitan areas, third parties may account for over one-half of all data

submissions received.

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B-271489 

Labor headquarters officials also said that because of resource constraints,

regional staff do not conduct on-site inspections or reviews of employer

payroll records to verify wage survey data.16 In recent years, Labor has

reduced the number of staff allocated to Davis-Bacon wage-setting

activities. For example, the number of staff in Labor’s regional offices

assigned to the Davis-Bacon wage determination process—who have

primary responsibility for the wage survey process—decreased from a

total of 36 staff in fiscal year 1992 to 27 staff in fiscal year 1995, and Labor

officials in one region also told us that staff had only received two training

courses in the last 6 years. Labor’s regional staff told us that this staff

decline has challenged their ability to collect and review wage survey data

for accuracy and consistency.

Limited Computer

Capabilities Hinder Ability

to Detect Erroneous Data

Labor officials reported a lack of both computer software and hardware

that could assist wage analysts in their reviews. They said that Labor staff

depend on past experience and eyeballing the wage data for accuracy and

consistency. For example, Labor offices do not have computer software

that could detect grossly inaccurate data reported in Labor’s surveys.

Regional staff reported only one computer edit feature in the current

system that could eliminate duplicate entry of data received in the wage

surveys. As a result, several review functions that could be performed by

computers are conducted by visual reviews by one or more wage analysts

or supervisory wage analysts in Labor’s regional offices.

Labor’s ability to review wage survey data is also hindered by a lack of

up-to-date computer hardware. For example, in the Atlanta and

Philadelphia regional offices, most of the computer hardware is old and

outdated. In these offices, because of the computers’ limited memory

capabilities, Labor staff told us that they are unable to store historical data

on prior wage determinations that would allow wage analysts to compare

current with prior recommendations for wage determinations in a given

locality.

These limitations could be significant given the large number of survey

forms received and the frequency of errors on the WD-10 reporting forms.

In 1995, Labor received wage data from over 37,000 employers and third

parties, and Labor staff reported that submissions with some form of data

error were quite common. The frequency of errors could be caused in part

by employer confusion in completing the wage reporting forms.

16Labor officials also noted that the agency does not have the authority under the Davis-Bacon Act to

inspect wage records for private projects without an employer’s permission; however, at least one of

the reform bills would provide such authority.

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Depending on the employer’s size and level of automation, completing the

WD-10 reporting forms could be somewhat difficult and time consuming.

For example, the employer must not only compute the hourly wages paid

to each worker who was employed on the particular project in a certain

job classification but must also determine the time period when the most

workers were employed in each particular job classification.17

Representatives of an employer association, a union, and state labor

officials also told us that many smaller, nonunion employers do not have

the capability to easily report information on the WD-10 wage reporting

forms.18

Although Labor staff reported that wage surveys with data errors are fairly

common, agency officials believe that it is very unlikely that erroneous

wage data went undetected and were used in the prevailing wage

determination. They said that a key responsibility of Labor’s wage analysts

is to closely scrutinize the WD-10 wage reporting forms and contact

employers as necessary for clarification. Labor officials contended that,

over time, this interaction with employers and third parties permitted

Labor staff to develop considerable knowledge of and expertise in the

construction industry in their geographic areas and to easily detect wage

survey data that are inaccurate, incomplete, or inconsistent.

Although Labor officials also acknowledged that additional staff, enhanced

computer capabilities, and the provision of more training and outreach to

employers and third parties on how to participate in the surveys could

improve their review of wage survey data and reduce errors, they said that

all these options require additional resources that are currently

unavailable.

Lack of Awareness of the

Appeals Process May Limit

Its Effectiveness

Labor’s regulations provide any interested party, such as an employee,

employer or contractor, or representatives of associations or unions, the

opportunity to request a reconsideration of Labor’s prevailing wage

determinations. A formal request for reconsideration must be in writing

and accompanied by a full statement of the interested party’s views and

any supporting wage data or other pertinent information. Instead of

formally requesting a reconsideration, an interested party may make

informal inquiries by telephone or in writing for quick resolution of

17This is the so-called peak week calculation required for completion by the WD-10 wage reporting

form. The employer must identify the names, addresses, and telephone numbers of all subcontractors

that worked on the particular project included in the survey. (See app. II.)

18They also believed that more education and training programs offered by Labor could improve survey

participants’ understanding of information required on the survey forms.

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questions about wage determinations. Labor’s regional officials handle

informal inquiries about wage determinations, with WHD’s National Office

staff getting involved only in the formal reconsiderations. Labor reported

that most inquiries on its wage determinations are informal and are

generally resolved quickly over the telephone at the regional offices.

If an informal inquiry is not resolved to the satisfaction of the interested

party, he or she may submit a formal request for reconsideration to either

the regional or National Office. On formal requests for reconsideration,

regional offices may or may not make recommendations before referring

them to the National Office for a decision. A successful request for

reconsideration typically results in Labor modifying an existing

determination or conducting a new wage survey. An interested party may

appeal an unsuccessful request to Labor’s Administrative Review Board

for adjudication. Labor officials said it is extremely rare for anyone to

make formal requests for reconsideration of a determination, reporting

that there had been only one such case in the last 5 years. Labor officials

interpreted this record as a vindication of complaints about the accuracy

and fairness of the prevailing wage determinations issued.

The small number of formal appeals could also be evidence of interested

parties’ lack of awareness of their rights and the difficulty they faced in

collecting the evidence necessary to sustain a case. Representatives of

construction unions and industry trade associations told us that employers

were generally unaware of their rights to appeal Labor’s final wage

determinations. In addition, officials with the Oklahoma Department of

Labor told us that even if an interested party wanted to appeal a wage

determination to the National Office and the Administrative Review Board,

the length of time it takes to independently verify wage data submissions

could discourage such an action. For example, for their 1995 study of

wage rates in Oklahoma City, an intra-agency team took 1 month to fully

investigate and verify the information for only three construction projects.

A private employer or organization wishing to appeal a determination on

the basis that the wage information used was inaccurate might experience

similar difficulties.

Labor officials reported that for an interested party to contest a new wage

determination successfully, it must present evidence demonstrating that

the survey wage rates do not reflect the pattern of wages paid in a

particular area. The amount of evidence to warrant a new survey will vary

according to a variety of factors, including the quality of the evidence and

the amount of construction activity in an area. Labor officials contended

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that collecting information to contest a wage survey is not difficult for

most interested parties who inquire. They said that most inquiries

originate either from contractors who have access to wage rates on their

own projects; unions who have access to collective bargaining rates; or

project grantees, such as local governments, who have access to the wage

rates paid on their other projects. However, Labor officials acknowledged

that it could be difficult for an interested party to challenge a wage

determination on the basis that the wage data submitted by employers

were inaccurate.

Consequences of Wage

Determinations Based on

Erroneous Data

Wage determinations based on erroneous data could result in wages and

fringe benefits paid to workers that are higher or lower than would

otherwise be prevailing on federal construction projects. For example,

although they considered it unlikely, Labor officials acknowledged that

there could be an incentive for third parties, particularly union

contractors, to report higher wages than those being paid on a particular

construction project. The reporting of higher wages could influence the

prevailing wages in a local area toward the typically higher union rate or at

least minimize any wage differential between the unionized wage rate and

the prevailing wage to be paid on Davis-Bacon construction projects.

The use of inaccurate data could also lead to lower wages for construction

workers on federal projects than would otherwise be prevailing. Industry

association members and officials told us that in several parts of the

country, employers, especially nonunion contractors, paid wages on their

private projects below the prevailing wage levels specified by the

Davis-Bacon Act in their areas.19 These officials told us that this

differential sometimes proved problematic for contractors in retaining

their skilled labor force. For example, an official of an employer

association told us that an employer who successfully bid on a

Davis-Bacon contract but who typically paid wages below the prevailing

rate would be required to pay the workers employed on the new project at

the higher Davis-Bacon wage rates. Depending on the local labor market

conditions, when the project was completed, these workers typically

received their pre-Davis-Bacon, lower wages and fringe benefits on any

future work. In such cases, some employees became disgruntled, believing

that they were being cheated, or suffered lower morale that sometimes led

19In at least some parts of the country, nonunion wages determine the vast majority of prevailing wage

determinations. For example, in Labor’s Atlanta region, nonunion wage rates dominated 72 percent of

all existing wage determinations. In these determinations, prevailing wages were determined by a

weighted average of the submitted wage data.

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B-271489 

to increased staff turnover.20 Given these conditions, Labor officials

acknowledged that an employer in a largely nonunion area who had been

paying lower than average wages would have an incentive to “chisel” or

report wages and fringe benefits levels somewhat lower than what he or

she was actually paying, in an attempt to lower the Davis-Bacon rate.21

To the extent that the submission of fraudulent or inaccurate data is

perceived by the construction industry to be a widespread problem, it

could also erode survey participation support among the interested

parties. Officials from one industry association reported that despite

training classes and other assistance it provides, it was difficult for the

association to foster employer survey participation, especially among the

nonunion contractors. To the extent that participants’ beliefs about

erroneous data being used as the basis for Labor’s wage determinations

became widespread, the number of survey respondents would likely

decrease.

Labor’s Short- and

Long-Term Initiatives

to Improve Wage

Determination

Process

At least partially in response to the problems detected in the Oklahoma

wage surveys, Labor has proposed both short- and long-term initiatives to

improve the accuracy of the data used in prevailing wage determinations.

In August 1995, Labor implemented a procedural change requiring its

regional wage analysts to conduct telephone verifications with the

employer on all third-party data that appear to be inaccurate or discrepant.

In addition, the new policy requires analysts to verify with the employers

at least a 10-percent sample of third-party data that appear to be accurate.

Under this requirement, Labor staff first attempt to verify this information

by telephone with the employer. If Labor staff are unable to contact the

employer, they will then contact the third party to request supporting

documentation verifying the submitted wage information on the specific

construction project. This new requirement was linked with training for all

regional office staff that reemphasized agency procedures for analyzing

and verifying employer and third-party data received in its wage surveys.

Although the new procedures may improve the accuracy of data received

from third parties, Labor’s change does not include enhanced verification

of the majority of the data used in most wage determinations; that is, data

20Depending on local labor market conditions, if the employer did not bid on the Davis-Bacon project,

he or she could still be affected if skilled workers quit to search for work on the new, higher wage

federally funded project.

21Labor officials said that it is much more likely for some employers to report data selectively in an

effort to lower the prevailing wage rate. For example, a contractor may only submit data on those

projects where the wages paid were relatively low, ignoring projects where they have paid a somewhat

higher wage.

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B-271489 

directly received from employers. In addition, the new procedures do not

move toward encouraging the use of Labor’s appeals process.

Labor has proposed placing a statement on the WD-10 survey reporting

form that would inform respondents that they could be prosecuted if they

willfully falsify data in the Davis-Bacon wage surveys. Labor officials

solicited comments on this proposal in the Federal Register in

February 1996, with the comment period ending in May 1996.

Labor has also proposed a long-term strategy to review the entire

Davis-Bacon wage determination process. In late 1995, Labor established

an ongoing task group to identify various strategies for improving the

process it uses to determine prevailing wages. Labor officials held

meetings with contractors knowledgeable about the Davis-Bacon

prevailing wage determination process. These continuing discussions have

led to the identification of various weaknesses in the wage determination

process and steps Labor might take to address them.

Labor has acknowledged the weaknesses identified by the task group; for

example, the system’s vulnerability to manipulation through the

submission of false data that can erode the accuracy of some of its wage

determinations. In response, in its fiscal year 1997 budget request, Labor

asked for about $4 million to develop, evaluate, and implement alternative

reliable methodologies or procedures that will yield accurate and timely

wage determinations at reasonable cost. These alternatives would include

• exploring the feasibility of replacing the current labor-intensive wage

survey process with the development of econometric models from which

occupational wage rates could be extrapolated from existing sources of

wage data and

• privatizing the wage survey process using alternative technologies that

would derive prevailing wage rates from a sample design rather than from

a universe survey as is currently used.

If such alternatives are not feasible for all localities and occupational job

classifications, Labor would focus on enhancing the existing survey

process, including the improvement of data verification procedures, the

fostering of employer participation, and the expansion of the geographic

scope of the Davis-Bacon surveys. Labor anticipates completing its

evaluation of the wage determination process in late 1996 and it expects to

consider any recommendations that may result from the Office of the

Inspector General study, which should be completed about the same time.

Page 14 GAO/HEHS-96-130 Davis-Bacon Prevailing Wages
B-271489 

In the interim, absent any additional action, Labor’s procedures will still

contain many of the weaknesses that we have identified. These could

result in the use of erroneous data in its determination of prevailing wages.

Conclusions Labor’s responsibilities to establish prevailing wage rates have a

significant impact on the $42 billion to be spent in fiscal year 1996 in

federal construction contract business and the wages paid to construction

workers. Although Labor has worked to improve the accuracy of its wage

determinations, a lack of confidence still exists with Labor’s process.

Labor has begun to address process weaknesses, including the exploration

of alternative reliable methodologies for collecting the information it

needs to make the wage determinations. In addition, if it discovers that

such alternatives are not feasible for all localities, Labor plans to take

other action to improve its existing survey process. Labor’s actions are

clearly positive steps; however, what is missing from Labor’s plans is a

short-term solution to the existing system’s vulnerability to the use of

fraudulent or inaccurate data.

Even if Labor obtains the additional funds that it requested to improve its

process, it would take some time to identify and implement improvements.

In the meanwhile, Labor would continue to issue new wage

determinations and enforce compliance with existing ones that may be

based on fraudulent or inaccurate data. Such data can lead to the payment

of wages that are either lower than what workers should receive by law or

else higher than the actual prevailing wages, which would inflate federal

construction costs at the taxpayer’s expense. Although we have not

established the extent to which such data have been used, the system’s

long-standing vulnerabilities and a lack of confidence by some critics in

the accuracy of the wage determinations suggest that immediate changes

are in order.

We believe that Labor needs to improve its verification of wage data

submitted by employers—similar to the change it made in verification of

third-party submissions. More specifically, Labor should apply to employer

submissions a comparable approach of selecting a sample for more

intensive review. When a submission is selected for review, Labor should

ask the employer to provide additional documentation supporting the

wage data. Although Labor has indicated that it is unable to do more

intensive verification because of limited staff resources, Labor does not

Page 15 GAO/HEHS-96-130 Davis-Bacon Prevailing Wages
B-271489 

appear to have explored proposals to target its scarce resources more

effectively toward verification efforts.

Labor also needs to revisit its procedures to appeal wage determinations

to improve their accessibility. At a minimum, it needs to publicize the

availability of the appeals process to all interested parties and the rights of

those parties to obtain information on the data used to develop the wage

determinations believed to be questionable. For example, Labor could

place a statement either with its issuance of each wage determination, on

its wage survey forms, or in some other manner, informing interested

parties of their rights to request summary information on a wage

determination (that is, the WD-22a construction project wage summary

report) and of the procedures for initiating an appeal.

Recommendations While Labor continues in the long term to evaluate the Davis-Bacon wage

determination process, we recommend that the Secretary of Labor require

the Assistant Secretary for Employment Standards to request a sample of

participating employers to submit appropriate documentation on their

data submissions or to conduct a limited number of on-site inspection

reviews of employer wage data.

Because Labor’s appeals process can serve as an additional internal

control to guard against the use of fraudulent or inaccurate data in the

wage determination process, we recommend that the Secretary of Labor

require the Assistant Secretary for Employment Standards to inform

employers, unions, and other interested parties of their rights to request

summary information on a wage determination and of the agency’s

procedures for initiating an appeal of a wage determination.

Agency Comments The Department of Labor concurs with our recommendations and stated

that it is developing an action plan, consistent with available resources, to

implement the recommendations while it continues to evaluate

longer-term revisions to the Davis-Bacon wage determination process.

However, Labor disagreed with our chacterization of a “pervasive” lack of

confidence in the wage determinations on the part of employers and other

affected parties. We agree with Labor’s comment and deleted that

characterization from our conclusions. Labor also provided information to

clarify the report’s chronology regarding action to correct wage

determinations in Oklahoma, and we have revised our description as

necessary. Finally, Labor provided some technical corrections, which we

Page 16 GAO/HEHS-96-130 Davis-Bacon Prevailing Wages
B-271489 

incorporated as appropriate in the report. Labor’s comments are included

in appendix III.

As agreed with your office, we are sending copies of this report to the

appropriate congressional committees, the Secretary of Labor, the

Assistant Secretary of the Employment Standards Administration, WHD

officials in Atlanta and Philadelphia, and the respective regional offices

that participated in our telephone survey. We will also make copies

available to others on request. Major contributors to this report are listed

in appendix IV.

Carlotta C. Joyner

Director, Education and

 Employment Issues

Page 17 GAO/HEHS-96-130 Davis-Bacon Prevailing Wages
Contents

Letter 1

Appendix I 

Objectives, Scope,

and Methodology

20

Methodology 20

Analysis of the Wage Determination Process 21

Analysis of Recent Changes to the Process 21

Limitations of Our Review 21

Appendix II 

Labor’s Wage

Determination and

Appeals Process

Under the

Davis-Bacon Act

23

Stage 1: Planning and Scheduling Survey Activity 26

Stage 2: Conducting Surveys of Participants 28

Stage 3: Clarifying and Analyzing Respondents’ Data 30

Stage 4: Issuing the Wage Determinations 32

Labor’s Appeals Process 32

Transmittal Letters and Forms Used in Labor’s Davis-Bacon

Prevailing Wage Determination Process

33

Appendix III 

Comments From the

Department of Labor

40

Appendix IV 

Major Contributors to

This Report

42

Related GAO Products 44

Figures Figure II.1: Labor’s Davis-Bacon Wage Determination Process 25

Figure II.2: Labor’s Transmittal Letter to Accompany the Form

WD-10 Sent to Contractors

34

Figure II.3: Labor’s Transmittal Letter to Accompany the Form

WD-10 Sent to Interested Parties

35

Figure II.4: Front of Labor’s Form WD-10 36

Figure II.5: Back of Labor’s Form WD-10 37

Figure II.6: Labor’s Form WD-22a 38

Figure II.7: Labor’s Form WD-22 39

Page 18 GAO/HEHS-96-130 Davis-Bacon Prevailing Wages
Contents

Abbreviations

CBA collective bargaining agreement

CRA Construction Resource Analysis

ESA Employment Standards Administration

RSPR Regional Survey Planning Report

WHD Wage and Hour Division

Page 19 GAO/HEHS-96-130 Davis-Bacon Prevailing Wages
Appendix I 

Objectives, Scope, and Methodology

We were asked by the Chairmen of the Subcommittee on Oversight and

Investigations and the Subcommittee on Workforce Protections of the

House Committee on Economic and Educational Opportunities to study

potential weaknesses in the process that the Department of Labor uses to

make prevailing wage determinations under the Davis-Bacon Act of 1931.

More specifically, the objectives of our review were to (1) identify the

steps used by Labor to collect data and determine and report the

prevailing wages to be paid on federally funded construction projects,

(2) determine whether specific weaknesses in the process could have

resulted in the use of inaccurate or fraudulent data in its prevailing wage

determinations, and (3) assess the extent to which Labor is addressing any

identified process weaknesses.

Methodology To respond to this request, we collected information from Labor’s WHD on

the Davis-Bacon prevailing wage determination process, including Labor’s

survey procedures and its implementing regulations. To understand the

procedures for collecting, determining, and reporting survey wage data,

we interviewed Labor officials and staff in Washington, D.C.; Atlanta; and

Philadelphia. We also surveyed staff in Labor’s six regions with

Davis-Bacon operations to ascertain the procedures used to review and

verify wage and fringe benefits survey data. We also collected information

from these regions on the procedures available to appeal Labor’s wage

determinations and the frequency of those appeals.

We also obtained the views of representatives of individual employers,

construction unions, and industry associations regarding potential

weaknesses in Labor’s wage determination process and on possible

options to address those weaknesses. For example, we spoke with

representatives from the Associated Builders and Contractors,

Incorporated; the International Union of Operating Engineers; and the

National Alliance for Fair Contracting to obtain the views of groups most

directly affected by the administration of the Davis-Bacon Act. In addition,

we spoke with representatives from the State of Oklahoma Department of

Labor and the F.W. Dodge Division of McGraw-Hill Information Systems.

We also reviewed the social science literature on the Davis-Bacon Act,

focusing on those articles that addressed issues on the wage determination

process.

Page 20 GAO/HEHS-96-130 Davis-Bacon Prevailing Wages
Appendix I 

Objectives, Scope, and Methodology

Analysis of the Wage

Determination

Process

To identify the steps in the survey and wage determination process, we

reviewed Labor’s documents, including the Davis-Bacon Construction

Wage Determinations Manual of Operations, and Davis-Bacon training

materials for wage analysts. We interviewed Labor officials at the National

Office in Washington, D.C., to clarify our understanding of the policies and

procedures used in the wage determination process and to obtain

information on changes to the process implemented in 1995.

We visited Labor’s regional offices in Atlanta and Philadelphia, where we

interviewed the regional administrators and wage specialists and analysts

about how the process works and obtained their perspectives on

weaknesses in the process. We chose to conduct on-site visits in the

Atlanta and Philadelphia regional offices on the basis of regional

personnel experiences in the prevailing wage process, the dollar value of

federal construction, and the degree of unionization. The remaining four

regional offices were contacted by telephone and questioned about

specific aspects of the survey process dealing with data integrity and the

appeals process.

Analysis of Recent

Changes to the

Process

We reviewed Labor’s recent procedural changes to improve the

Davis-Bacon wage determination process. We also spoke with federal

Labor officials in the Washington, D.C., office about efforts recently

instituted as well as actions being considered. We also reviewed Labor’s

1996 draft report of proposals to evaluate ways to improve the full

Davis-Bacon prevailing wage determinations process, including Labor’s

fiscal year 1997 budget request for additional funds to contract for the

development, evaluation, and implementation of alternative reliable

methodologies.

Labor’s recent changes to the wage determination process were assessed

on the basis of their potential to strengthen those areas we found

potentially vulnerable to the inclusion of inaccurate or fraudulent data. We

did not evaluate the actual impact of these changes.

Limitations of Our

Review

Because we limited our analysis of the wage survey and determination

process to issues directly related to the detection of inaccurate or

fraudulent data, we did not attempt to determine the extent to which any

identified weaknesses in Labor’s process were actually contributing to

inaccurate prevailing wage determinations. We also did not verify the

accuracy of the wage determination data Labor used or explore the

Page 21 GAO/HEHS-96-130 Davis-Bacon Prevailing Wages
Appendix I 

Objectives, Scope, and Methodology

adequacy of Labor’s survey response rates or its calculation of prevailing

wages.

Page 22 GAO/HEHS-96-130 Davis-Bacon Prevailing Wages
Appendix II 

Labor’s Wage Determination and Appeals

Process Under the Davis-Bacon Act

The Davis-Bacon Act requires that workers employed on federal

construction contracts valued in excess of $2,000 be paid, at a minimum,

wages and fringe benefits that the Secretary of Labor determines to be

prevailing22 for corresponding classes of workers employed on projects

that are similar in character to the contract work in the area where the

construction takes place.

To determine the prevailing wages and fringe benefits in various areas

throughout the United States, Labor’s WHD periodically surveys wages and

fringe benefits paid to workers in four basic types of construction

(building, residential, highway, and heavy).23 Labor has designated the

county as the basic geographic unit for data collection, although Labor

also conducts some surveys setting prevailing wage rates for groups of

counties. Wage rates are issued for a series of job classifications in the

four basic types of construction, so each wage determination requires the

calculation of prevailing wages for many different trades, such as

electrician, plumber, carpenter, and drywall installer. For example, the

prevailing wage rates for the Washington, D.C., metropolitan area include

wage rates for 143 different construction trade occupations. Because there

are over 3,000 counties, more than 12,000 surveys could be conducted

each year if every county in the United States was surveyed. In fiscal year

1995, Labor completed about 100 prevailing wage surveys, gathering wage

and fringe benefit data from over 37,000 employers and interested parties.

As shown in figure II.1, Labor’s wage determination process consists of

four basic stages:

• planning and scheduling surveys of employers’ wages and fringe benefits

in similar job classifications on comparable construction projects;

• conducting surveys of employers and third parties,24 such as

representatives of unions or industry associations, on construction

projects;

• clarifying and analyzing respondents’ data; and

22Labor regulations define the prevailing wage as the wage paid to the majority (more than 50 percent)

of the workers in the job classification on similar projects in the area during the period in question. If

the same wage is not paid to a majority of those employed in the classification, the prevailing wage will

be the average of the wages paid, weighted by the total employed in the classification.

23Heavy construction is a catch-all grouping that includes projects not properly classified under the

other three types of construction; for example, dredging and sewer projects.

24Labor defines third-party data as project wage and fringe benefit data that are submitted for use in a

wage survey by any party other than an employer or other payroll holder.

Page 23 GAO/HEHS-96-130 Davis-Bacon Prevailing Wages
Appendix II 

Labor’s Wage Determination and Appeals

Process Under the Davis-Bacon Act

• issuing the wage determinations.25

In addition, an interested party, such as a contractor; labor union; or

federal, state, or local agency, may seek review and reconsideration of

Labor’s final wage determinations through an appeals process.

25A wage determination is the listing of wage and fringe benefits rates for each classification of

workers that the WHD Administrator has determined to be prevailing in a given area for a type of

construction. Each wage determination involves establishing prevailing wage rates for many

occupations.

Page 24 GAO/HEHS-96-130 Davis-Bacon Prevailing Wages
Appendix II 

Labor’s Wage Determination and Appeals

Process Under the Davis-Bacon Act

Figure II.1: Labor’s Davis-Bacon Wage Determination Process

Stage 1: Planning Stage 2: Survey Stage 4: Issuance Appeals Stage 3: Data

Clarification and Analysis

Review Results/

Recommend Action

Appeals Process

Ongoing

After Issuance

Obtain Active

Project File

Determine Projects

to Be Surveyed

Announce

Survey

Conduct

Survey

Determine

Adequacy of Data

Send

Acknowledgement

Letters

Compute

Prevailing Rates

National Office

Regional Office

Clarify and

Analyze Data

Transmit Results/

Recommendations

Issue Wage

Determination

Record and

Tabulate Data

Plan Annual

Survey Activity for

the Region

Page 25 GAO/HEHS-96-130 Davis-Bacon Prevailing Wages
Appendix II 

Labor’s Wage Determination and Appeals

Process Under the Davis-Bacon Act

Stage 1: Planning and

Scheduling Survey

Activity

Labor annually identifies the geographic areas that it plans to survey.

Because it has limited resources, a key task of Labor’s staff is to identify

those counties and types of construction most in need of a new survey.26

In selecting areas for inclusion in planned surveys, the regional offices

establish priorities based on criteria that include

• the need for a new survey based on the volume of federal construction in

the area;

• the age of the most recent survey; and

• requests or complaints from interested parties, such as state and county

agencies, unions, and contractors’ associations.

If a type of construction in a particular county is covered by a wage

determination based on collective bargaining agreements (CBA) and Labor

has no indication that the situation has changed such that a wage

determination should now reflect nonunion rates, an updated wage

determination may be based on updated CBAs. The unions submit their

updated CBAs directly to the National Office.

The Regional Survey

Planning Report Shows

Where Federally Financed

Construction Is

Concentrated

Planning begins in the third quarter of each fiscal year when the National

Office provides regional offices with the Regional Survey Planning Report

(RSPR). The RSPR provides data obtained under contract with the F.W.

Dodge Division of McGraw-Hill Information Systems. The data show the

number and value of active construction projects by region, state, county,

and type of construction and give the percentage of total construction that

is federally financed.27 Labor uses the F.W. Dodge data because they

comprise the only continuous nationwide database on construction

projects. Labor supplements the F.W. Dodge data with additional

information provided to the National Office by federal agencies regarding

their planned construction projects. The RSPR also includes the date of the

most recent survey for each county and whether the existing wage

determinations for each county are union, nonunion, or a combination of

both.

Using this information, the regional offices, in consultation with the

National Office, designate the counties and type of construction to be

included in the upcoming regional surveys. Although Labor usually

26In 1996, the average age of a wage survey is more than 7 years.

27The F.W. Dodge data consider a project to be active from the time on-site work begins (ground

breaking) until it is released to and accepted by the owner.

Page 26 GAO/HEHS-96-130 Davis-Bacon Prevailing Wages
Appendix II 

Labor’s Wage Determination and Appeals

Process Under the Davis-Bacon Act

designates the county as the geographic unit for data collection, in some

cases more than one county is included in a specific data gathering effort.

The regional offices determine the resources required to conduct each of

the priority surveys. When all available resources have been allocated, the

regional offices transmit to the National Office for review their schedules

of the surveys they plan to do: the types of construction, geographic areas,

and time periods that define each survey.

When Labor’s National Office approves all regional offices’ preliminary

survey schedules, it assembles them in a national survey schedule that it

transmits to interested parties, such as major national contractor and

labor organizations, for their review and comment. The National Office

transmits any comments or suggestions received from interested parties to

its affected regional offices. Organizations proposing modifications of the

schedule are requested to support their perceived need for alternative

survey locations by providing sufficient evidence of the wages paid to

workers in the type of construction in question in the area where they

want a survey conducted.

Each Regional Office

Obtains a File of Active

Projects That Match Its

Survey Objectives

The target date for establishing the final fiscal year survey schedule is

September 15. Once the National Office has established the final schedule,

each regional office starts to obtain information it can use to generate lists

of survey participants for each of the surveys it plans to conduct. Each

regional office contacts Construction Resources Analysis (CRA) at the

University of Tennessee. CRA applies a model to the F.W. Dodge data that

identifies all construction projects in the start-up phase28 within the

parameters specified in the regional office’s request and produces a file of

projects that were active during a given time period. The time period may

be 3 months or longer, depending on whether the number of projects

active during the period is adequate for a particular survey. F.W. Dodge

provides information on each project directly to the regional offices. The

F.W. Dodge reports for each project include the location, type of

construction, and cost of the project; the name and address of the

contractor or other key firm29 associated with each project; and if

available, the subcontractors.30

28F.W. Dodge defines the start stage as one in which the construction will commence within 60 days.

29Other examples of key firms would be the owner or architect of the project.

30A subcontractor is an employer that has a contractual agreement with the project’s prime employer.

On a typical construction project, most employees working on the job will be employees of

subcontractors.

Page 27 GAO/HEHS-96-130 Davis-Bacon Prevailing Wages
Appendix II 

Labor’s Wage Determination and Appeals

Process Under the Davis-Bacon Act

Analysts Screen Projects to

Determine Those to Be

Surveyed

When the F.W. Dodge reports are received by the regional offices, Labor

analysts screen them to make sure the projects meet four basic criteria for

each survey. The project must

• be of the correct construction type,

• be in the correct geographic area,

• fall within the survey time frame, and

• have a value of at least $2,000.

In addition to obtaining files of active projects, Labor analysts are

encouraged to research files of unsolicited information that may contain

payment evidence submitted in the past that is within the scope of a

current survey.

Stage 2: Conducting

Surveys of

Participants

Regional Offices Conduct

the Surveys

When the regional offices are ready to conduct the new surveys, they send

the WD-10 wage reporting form to each contractor (or employer)

identified by the F.W. Dodge reports as being in charge of one of the

projects to be surveyed, together with a transmittal letter that requests

information on any additional applicable projects the contractor may have.

(See figs. II.2, II.4, and II.5.) Every WD-10 that goes out for a particular

project has on it a unique project code, the location of the project, and a

description of it. Data requested on the WD-10 include a description of the

project and its location, in order to assure the regional office that each

project for which it receives data is the same as the one it intended to have

in the survey. The WD-10 also requests the contractor’s name and address;

the value of the project; the starting and completion dates; the wage rate,

including fringe benefits, paid to each worker; and the number of workers

employed in each classification during the week of peak activity for that

classification. The week of peak or highest activity for each job

classification is the week when the most workers were employed in that

particular classification. The survey respondent is also asked to indicate

which of four categories of construction the project belongs in. Detailed

instructions appear on the back of the WD-10. (See fig. II.5.)

Page 28 GAO/HEHS-96-130 Davis-Bacon Prevailing Wages
Appendix II 

Labor’s Wage Determination and Appeals

Process Under the Davis-Bacon Act

Survey Is Announced to

Third Parties

In addition, about 2 weeks before a survey is scheduled to begin, regional

offices send WD-10s and transmittal letters to a list of third parties, such as

national and local unions and industry associations, to encourage

participation. (See fig. II.3.) Labor encourages the submission of wage

information from third parties, including unions and contractors’

associations that are not the direct employers of the workers in question,

in an effort to collect as much data as possible.31 Third parties that obtain

wage data for their own purposes may share it with Labor without

identifying specific workers. For example, union officials need wage

information to correctly assess workers’ contributions toward fringe

benefits. Third-party data generally serve as a check on data submitted by

contractors if both submit data on the same project. Regional offices also

organize local meetings with members of interested organizations to

explain the purpose of the surveys and how to fill out the WD-10.32

Because the F.W. Dodge reports do not identify all the subcontractors,

both the WD-10 and the transmittal letter ask for a list of subcontractors

on each project. Subcontractors generally employ the largest portion of

on-site workers, so their identification is considered critical to the success

of the wage survey. Analysts send WD-10s and transmittal letters to

subcontractors as subcontractor lists are received.

Participants Who Submit

Data Receive a Written

Acknowledgment

Transmittal letters also state that survey respondents will receive an

acknowledgment of data submitted, and that they should contact the

regional office if one is not received. Providing an acknowledgment is

intended to reduce the number of complaints that data furnished were not

considered in the survey. Labor analysts send contractors who do not

respond to the survey a second WD-10 and a follow-up letter. If they still

do not respond, analysts attempt to contact them by telephone to

encourage them to participate.

31Labor officials said that third-party data submissions generally account for about one-third of all

wage survey submissions. The percentage of survey respondents who are third parties can be

substantial for surveys of metropolitan areas. Staff estimated that third-party participation may have

been as high as one-half for a recent survey of metropolitan building construction. There is little or no

third-party participation in surveys of rural areas, staff said.

32Regional staff in Atlanta and Philadelphia said that they generally have not held this type of meeting

because of limited resources.

Page 29 GAO/HEHS-96-130 Davis-Bacon Prevailing Wages
Appendix II 

Labor’s Wage Determination and Appeals

Process Under the Davis-Bacon Act

Stage 3: Clarifying and

Analyzing

Respondents’ Data

Analysts Review the Data

Submitted as They Receive

Them

As the Labor wage analysts receive the completed WD-10s in the regional

offices, they review and analyze the data. Labor’s training manual guides

the analyst through each block of the WD-10, pointing out problems to

look for in data received for each one. Analysts are instructed to write the

information they receive by telephone directly on the WD-10 in a

contrasting color of ink, indicating the source and the date received. They

are instructed to draw one line through the old information so it is still

legible.

Labor’s wage analysts review the WD-10s to identify missing information,

ambiguities, and inconsistencies that they then attempt to clarify or verify

by telephone. For example, an analyst may call a contractor for a

description of the work done on a project in order to verify that a

particular project has been classified according to the correct construction

type. An analyst may also call a contractor to ask about the specific type of

work that was performed by an employee in a classification that is

reported in generic terms, such as a mechanic. In that situation, the

analyst would specify on the WD-10 whether it is a plumber mechanic or

some other type of mechanic to make sure that the wages that are

reported are appropriately matched to the occupations that are paid those

rates.

Similarly, due to variations in area practice, analysts may routinely call to

find out what type of work the employees in certain classifications are

doing. This is because in some areas of the country some contractors have

established particular duties of traditional general crafts, for example

carpenters, as specialty crafts that are usually paid at lower rates than the

general craft.

New Policy Implemented

for Verifying Third-Party

Data

In August 1995, Labor implemented a new policy for verifying third- party

data. Where data submitted by third parties present problems, Labor now

requires wage analysts to conduct a verification review by telephone of all

data from the third party with the employer. In cases where the employer

cannot be reached, Labor will accept third-party data only with supporting

payroll documentation. Furthermore, the new policy requires analysts to

Page 30 GAO/HEHS-96-130 Davis-Bacon Prevailing Wages
Appendix II 

Labor’s Wage Determination and Appeals

Process Under the Davis-Bacon Act

verify with employers a sample of at least 10 percent of the third-party

data that appear to present no problems.

Data Are Recorded and

Tabulated

When an analyst is satisfied that any remaining issues with respect to the

data on the WD-10s for a particular project have been resolved, the data

are recorded and tabulated. The analyst enters them into a computer,

which uses the data to generate a Project Wage Summary, Form WD-22a,

for reporting survey information on a project-by-project basis. The WD-22a

has a section for reporting the name, location, and value of each project;

the number of employees who were in each classification; and their hourly

wage and fringe benefits. It also has a section for reporting the date of

completion or percentage of the project completed, whichever is

applicable. (See fig. II.6.)

Analysts Determine If Data

Are Adequate

At least 2 weeks before the survey cut-off date, the response rate for the

survey is calculated to allow time to take follow-up action if the response

rate is determined to be inadequate. For example, WHD operational

procedures specify that if data gathered for building or residential surveys

provide less than a 25-percent usable response rate or less than one-half of

the required key classes of workers,33 the analyst will need to obtain data

from comparable federally financed projects in the same locality.34

If an analyst has no data on occupations identified by Labor as key

classifications of workers for the type of construction being surveyed, he

or she is required by Labor’s procedures to call all the subcontractors

included in the survey who do that type of work and from whom data are

missing, to try to get data. If the analyst still cannot get sufficient data on

at least one-half of the required key classes, consideration must be given

to expanding the scope of the survey geographically to get more crafts

represented. If the overall survey usable response rate is 25 percent or

more, data on three workers from two contractors are sufficient to

establish a wage rate for a key occupation.

After the survey cut-off date, when all valid data have been recorded and

tabulated, a final survey response rate is computer-generated. Typically, it

takes a WHD analyst 4 months to conduct a survey.

33Labor defines key classes of workers as those determined necessary for each of the four types of

construction surveys.

34Since 1985, regulation has prohibited, to the extent practicable, the use of wages for federal

construction in determining prevailing wages.

Page 31 GAO/HEHS-96-130 Davis-Bacon Prevailing Wages
Appendix II 

Labor’s Wage Determination and Appeals

Process Under the Davis-Bacon Act

Prevailing Wage Rates Are

Computer-Generated

Once all the valid project data have been entered, the prevailing wage rate

for each classification of worker can be computer-generated. If there is a

majority of workers paid at a single rate in a job classification, that rate

prevails for the classification. The wage rate needs to be the same to the

penny to constitute a single rate. If there is no majority paid at the same

rate for a particular classification, a weighted average wage rate for that

occupation is calculated.

The prevailing wage rate for each occupation is compiled in a

computer-generated comprehensive report for each survey, the Wage

Compilation Report, Form WD-22. The WD-22 lists each occupation and

the wage rate recommended for that occupation by the regional office. A

rule column indicates whether the rate is based on a majority (M) or a

weighted average (A), and a column to the left of the rule column provides

the number of workers for which data were used to compute each wage

rate. (See fig. II.7.) The regional offices transmit survey results to the

National Office, which reviews the results and recommends further action

if needed.

Stage 4: Issuing the

Wage Determinations

When all its recommendations have been acted upon, the National Office

issues the wage determination. These determinations are final. There is no

review or comment period provided to interested parties before they go

into effect. Access to wage determinations is provided both in printed

reports available from the U.S. Superintendent of Documents and on an

electronic bulletin board. Modifications to general wage determinations

are published in the Federal Register.

Labor’s Appeals

Process

An interested party may seek review and reconsideration of Labor’s final

wage determinations. The National Office and the regional offices accept

protests and inquiries relating to wage determinations at any time after a

wage determination has been issued. The National Office refers all the

complaints it receives to the relevant regional offices for resolution. Most

inquiries are received informally by telephone, although some are written

complaints. Regional office staff said that a majority of those with

concerns appear to have their problems resolved after examining the

information (collected on a Form WD-22a) for the survey at issue, because

they do not pursue the matter further. If an examination of the forms does

not satisfy them, they are required to provide information to support their

claim that a wage determination needs to be revised. The National Office

modifies published wage determinations in cases where regional offices,

Page 32 GAO/HEHS-96-130 Davis-Bacon Prevailing Wages
Appendix II 

Labor’s Wage Determination and Appeals

Process Under the Davis-Bacon Act

based on evidence provided, recommend that it do so; for example, when

it has been shown that a wage determination was the result of an error by

the regional office. However, some of those who seek to have wage rates

revised are told that a new survey will be necessary to resolve the

particular issue that they are concerned about. For example, if the wage

rates of one segment of the construction industry are not adequately

reflected in survey results due to a low rate of participation in the survey

by that segment of the industry, a new survey would be necessary to

resolve this issue.

An Interested Party May

Appeal a Decision of

Labor’s WHD

Administrator

Those who are not satisfied with the decision of the regional office may

write to the National Office to request a ruling by Labor’s WHD

Administrator. If the revision of a wage rate has been sought and denied

by a ruling of Labor’s WHD Administrator, an interested party has 30 days to

appeal to the Administrative Review Board for review of the wage

determination. The board consists of three members appointed by the

Secretary of Labor. The Solicitor of Labor represents WHD in cases

involving wage determinations before the Administrative Review Board. A

petition to the board for review of a wage determination must be in writing

and accompanied by supporting data, views, or arguments. Labor reports

that it has had only one appeal with respect to wage determinations in the

past 5 years. The result of the appeal was that a contested rate was

changed.

Transmittal Letters

and Forms Used in

Labor’s Davis-Bacon

Prevailing Wage

Determination

Process

Presented below are examples of transmittal letters and forms used in

Labor’s Davis-Bacon prevailing wage determination process. Included are

examples of (1) the transmittal letter to accompany the Form WD-10 sent

to contractors; (2) the transmittal letter to accompany the Form WD-10

sent to interested parties; (3) the front of the Form WD-10 used to collect

data on which wage determinations are based and (4) the back of the

Form WD-10 with instructions for filling out the front of the form; (5) the

Form WD-22a, which provides a summary of data received on a particular

project; and (6) the Form WD-22, which is a comprehensive report of the

prevailing wage rate for each occupation in a survey.

Page 33 GAO/HEHS-96-130 Davis-Bacon Prevailing Wages
Appendix II 

Labor’s Wage Determination and Appeals

Process Under the Davis-Bacon Act

Figure II.2: Labor’s Transmittal Letter to Accompany the Form WD-10 Sent to Contractors

Page 34 GAO/HEHS-96-130 Davis-Bacon Prevailing Wages
Appendix II 

Labor’s Wage Determination and Appeals

Process Under the Davis-Bacon Act

Figure II.3: Labor’s Transmittal Letter to Accompany the Form WD-10 Sent to Interested Parties

Page 35 GAO/HEHS-96-130 Davis-Bacon Prevailing Wages
Appendix II 

Labor’s Wage Determination and Appeals

Process Under the Davis-Bacon Act

Figure II.4: Front of Labor’s Form WD-10

Page 36 GAO/HEHS-96-130 Davis-Bacon Prevailing Wages
Appendix II 

Labor’s Wage Determination and Appeals

Process Under the Davis-Bacon Act

Figure II.5: Back of Labor’s Form WD-10

Page 37 GAO/HEHS-96-130 Davis-Bacon Prevailing Wages
Appendix II 

Labor’s Wage Determination and Appeals

Process Under the Davis-Bacon Act

Figure II.6: Labor’s Form WD-22a

Page 38 GAO/HEHS-96-130 Davis-Bacon Prevailing Wages
Appendix II 

Labor’s Wage Determination and Appeals

Process Under the Davis-Bacon Act

Figure II.7: Labor’s Form WD-22

Page 39 GAO/HEHS-96-130 Davis-Bacon Prevailing Wages
Appendix III 

Comments From the Department of Labor

Page 40 GAO/HEHS-96-130 Davis-Bacon Prevailing Wages
Appendix III 

Comments From the Department of Labor

Page 41 GAO/HEHS-96-130 Davis-Bacon Prevailing Wages
Appendix IV 

Major Contributors to This Report

Charles A. Jeszeck, Assistant Director, (202) 512-7036

Linda W. Stokes, Evaluator-in-Charge, (202) 512-7040

Sheila R. Nicholson, Evaluator

Deborah McCormick, Methodologist

Robert Crystal, Assistant General Counsel

Ann McDermott, Publishing Advisor

Page 42 GAO/HEHS-96-130 Davis-Bacon Prevailing Wages
Appendix IV 

Major Contributors to This Report

Page 43 GAO/HEHS-96-130 Davis-Bacon Prevailing Wages
Related GAO Products

Addressing the Deficit: Budgetary Implications of Selected GAO Work for

Fiscal Year 1996 (GAO/OCG-95-2, Mar. 15, 1995).

Workplace Regulation: Information on Selected Employer and Union

Experiences (GAO/HEHS-94-138, Vol. I, June 30, 1994).

Davis-Bacon Act (GAO/HEHS-94-95R, Feb. 7, 1994).

The Davis-Bacon Act Should Be Repealed (GAO/HRD-79-18, Apr. 27, 1979).

(205300) Page 44 GAO/HEHS-96-130 Davis-Bacon Prevailing Wages
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