GAO Report Finds Flaws in Davis-Bacon Act Prevailing Wage Determinations

By: Lawrence M. Prosen & Andrew R. McFall, K&L Gates, Washington DC

Over the past several years, the current business conditions have had an impact on all areas and aspects of the economy.  Recent reports indicate that no industry has been harder hit than that of construction, an industry possessing one of the highest national levels of unemployment.  Unemployment in the construction industry has spiked from 7.1 percent in 2000 to around 20 percent in early 2011.  Tied to this issue is the fact that the commercial and private construction and real estate markets substantially dried up as a result of the economy and underlying bank crises.  This, in effect, resulted in government construction and real estate projects being the predominant area in which work was available; forcing contractors to enter the federal market, often for the first time, and ‘‘learn on the fly.’’

The current economic problems have also resulted in Congress increasing or maintaining spending levels for a number of years on construction and related projects to try and bolster the economy.  These expenditures and stimulus efforts have led to an increased curiosity and concern for how government monies are being spent.  Coupled with the inauguration of President Obama in 2009, there has been a significant uptick in the amount of government regulation and oversight regarding government contracting and the construction industry.  As part of that effort, the United States Government Accountability Office and other governmental organizations have conducted investigations and released reports dealing with government expenditures and budgeting.  This article discusses one such report.

On March 22, 2011, GAO released a report (the ‘‘Report’’) raising several issues and concerns with the U.S. Department of Labor’s (‘‘DOL’’) methodology for making Davis-Bacon Act wage determinations.  The Report is noteworthy, in that the Davis-Bacon Act plays a significant role in federal and federally funded construction projects throughout the United States.  This article provides a brief background on the Davis-Bacon Act, a description of the Report and its recommendations, a discussion of the potential implications of the Report on the Service Contract Act, and a list of practical tips that construction contractors should consider in light of the Report.

To read more and to view footnotes, click here.