Federal contracts may cost more because workers are paid more

People in the construction world in California may be interested in exploring their options with lucrative state and federal construction projects. These projects can provide a small or mid-size construction firm with a tremendous source of jobs, income and exposure in the professional world and the public eye, but there may also be substantial barriers of entry for those construction firms which have never explored this uncharted territory.

Perhaps the biggest barrier to entry is not having the knowledge of the interesting nuances of dealing with state and federal contracts. One interesting example is the federal Davis-Bacon act, which only applies to federal contracts and has substantial ramifications for a construction firm and any subcontractors they work with.

Davis-Bacon is federal labor law standard which requires contractors and subcontractors who are working on federally funded projects to pay their workers no less than the local prevailing wage, and benefits, as those working on other similar projects in that geographic area. Of course, this raises some interesting questions, such as how does one determine what the prevailing wage for a skilled or unskilled construction work in Southern California would be. The Department of Labor is responsible for determining what this prevailing wage figure will be, but their methodologies have historically led them to a wage determination that is substantially higher than what most construction firms would probably be used to paying for similar labor on a non-federally funded project. Davis-Bacon also means that contractors on federal projects will need to keep meticulous records, including hours worked, deductions made, wages paid, and each worker’s classification.

With so many different wrinkles, it can be very easy for a construction operator to overlook or fail to follow federal regulations and guidelines. Nevertheless, failure to fully comply could subject an operator to serious financial penalties and could disqualify them from consideration on future government works projects. Seeking the assistance of an experienced attorney can help those in such situations navigate the complexities of different contracts.

Source: US DOL “Davis-Bacon and Related Acts” accessed Sept. 28, 2015