By Eric Byrd, Kentucky APEX Accelerator Procurement Consultant
This article was originally published in our monthly Kentucky APEX Accelerator Newsletter. If you have any questions about this topic, your regional procurement consultant is here to help! Not a client? Sign up here.
When you pursue opportunities for construction projects with the federal government, wage rates may be your largest portion of cost. Also, if the U.S. Department of Labor (DOL) were to determine that your wage rates were incorrect, this could become even more costly. Both prime contractors and subcontractors should make certain that they are familiar with the Davis-Bacon Act (FAR 22.403-1) and what rates apply. This article will provide you with an overview concerning the Davis-Bacon Act 2024 Update.
The Davis-Bacon Act is a federal law requiring prevailing wage rates and fringe benefits to be paid on construction projects over $2,000. The projects are specific to construction, alteration or repair to public buildings or public works. The current wages are determined by locality and apply to both union and non-union employees. This applies to all businesses, both large and small.
So, how do you make certain you are paying the correct wages? Proper classification.
DOL classifies employees very differently than most employers. However, even if you disagree with the classification, the wage rates must still follow DOL standards. Experience is not a factor in determining prevailing wage rates. As an example, if a newly hired individual is using a hammer, then they are still considered to be classified as a carpenter. Another unique factor in classification by DOL is that there are no “helpers” as a classification for federal projects.
On federal construction projects, DOL may request certified payroll and perform other types of audits. The certified payroll must list employees on the project and how they are classified, along with wages and fringe benefits that were paid. The employer must sign the certified payroll under penalty of perjury. If the payroll is found to contain errors, you are committing false claims to the government.
As with many federal requirements, DOL revised the Davis-Bacon Act in 2024. One of the biggest changes is that now DOL states the contractor (prime, sub or possibly both) is responsible for using correct wages. If a contract is issued with incorrect information, contact the contracting officer for a correction as soon as possible. Contractors can receive price adjustment for corrected wages and fringe benefits from the contracting office.
There are also several updated definitions in the 2024 Davis-Bacon Act update.
Site work no longer includes only the primary construction site. Any secondary site where a significant portion of work is constructed, and where the site is dedicated to the project for a specific amount of time, is also subject to the Davis-Bacon Act wages.
The prime contractor is now considered the general contractor, in addition to controlling shareholders or members, Joint Venture members or any other individual responsible for overseeing construction for the prime contractor.
Building works have been updated to include any improvements related to modern activity. This includes any improvements to electrical or power systems such as solar panels.
Material suppliers have been included as not subject to the Davis-Bacon Act if they meet specific criteria. Material suppliers include anyone that delivers or picks up items from the project site, a facility that is not dedicated to the project, or a manufacturing facility that is not located on the primary or secondary site of the project.
Other updates to the Davis-Bacon Act include DOL processes. Moving forward, DOL will intend to use Bureau of Labor Statistics to automate the wage determination process. DOL will also include wage determination rates from both rural and metropolitan areas to create a more accurate average. DOL can list commonly conformed rates even if insufficient data is collected.
If debarment occurs, there is a three-year violation, and you will be unable to attempt any type of early removal. Keep records for three years as DOL can now review closed contracts.
There are many clarifications and determinations that can be made with the Davis-Bacon Act and how wages are determined on federal construction projects. Do not let these details become overwhelming to your business. Contact your regional procurement consultant at the Kentucky APEX Accelerator to better understand the requirements of government contracting.
To learn more about how the Kentucky APEX Accelerator can provide free services to assist your business, email us at kyapex@kstc.com or visit our website at www.kyapex.com.