PREVAILING

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					PREVA I L ING




  Wage
Hassle
BY GILBERT DAVIS AND EDWARD RILEY
                                                                                               NEW PREVAILING WAGE SOFTWARE
                                                                                     MAKES CONTRACTORS
                                                                                                MORE COMPETITIVE




            he Davis-Bacon Act and related regulations



T           require both union and open shop contractors
            performing federal construction contracts to pay
            workers the same specified wage, usually the pre-
vailing union wage in the geographic area. The wage con-
sists of two components: the hourly pay rate and an amount
to cover fringe benefits, which the contractor may pay either
to a qualified benefits plan or to the employees in cash. The
federal government reimburses a contractor for wages, fringe
benefits and the cost of providing fringe benefits.
   Union contractors generally take advantage of this pro-
vision by paying fringe benefit contributions to union-
administered benefits programs. Sometimes open shop
contractors pay these benefits in cash, which means that
both the contractor and the employees must pay taxes on
them. And there’s no way around it. Contractors that fail
to comply with Davis-Bacon requirements face severe penal-
                                                                JOE BARABAN/CORBIS




ties, including cancellation of the contract, payment of back
wages and interest, debarment from federal projects for
three years and government withholding of payments due.

26   |   Construction EXECUTIVE August 2003                                                                     August 2003 Construction EXECUTIVE   | 27
PR E VA I L I N G WA GE H A S S L E

NEW TECHNOLOGY HELPS                            Sample Job                                                                                  Carpenter|Total When Fringe Applied to Plan                                                    • generate the reports the contractor needs
Recognizing the problems these contrac-                                                                                                                                                                                                      for compliance with federal and state
                                                                                 Projected Cost       Projected Cost         Job                                                      Rate Per                           Projected
tors face in meeting the demands of pre-                                                                                                                                                                                                     requirements.These reports serve as doc-
                                                Trade                   Hours         Cash              with Fringe        Savings          Trade                                      Hour               Hours            Cost
vailing wage requirements, benefits plan                                                                                                                                                                                                     umentation of contributions to benefits
custodians and financial consultants have                                                                                                                                                                                                    plans and provide the paper trail required
come up with new technology that estab-         Laborer                  8,078        242,792             227,888          14,904           Base Wage                                      22.44                                             under the Davis-Bacon Act and for fed-
lishes low-cost benefits programs or makes      Carpenter                4,304        171,773             161,107          10,666           Burden on Base Wage (30%)                       6.73                                             eral or state department of labor audits.
better use of existing benefits programs—       Finisher                 1,432         57,672              53,600            4,072          Wage Cost                                      29.17                                               With these low-cost tools, open shop
affording open shop contractors the same                                                                                                                                                                                                   contractors can compete with unionized
                                                                        13,814       $472,237            $442,237         $29,642           Fringe Rate                                     8.26
benefits unions receive.                                                                                                                                                                                                                   contractors while meeting prevailing wage
    New prevailing wage accounting soft-       Savings per hour $2.15                                                                       Total Labor Cost                           $37.43              4,304        $161,098.72        requirements and providing employees
ware tracks hours and accrued benefits to                                                                                                                                                                                                  with a competitive benefits package.
help reduce payroll expenses, make com-         Carpenter|Total Contractors Pay in Cash                                                    risk of costly, time-consuming government        ing the additional payroll burden on pre-          A contractor should seek the services
panies more competitive on federal con-                                                 Rate Per                         Projected         compliance audits and fines.                     vailing wage jobs, increases profitability     of a custodian and financial consultant
tracts and enable them to recruit and retain    Trade                                    Hour              Hours           Cost                With proper planning and a compre-           and complies with federal and state pre-       knowledgeable about accounting in the
qualified employees. A contractor can                                                                                                      hensive prevailing wage software, howev-         vailing wage laws.                             construction industry and the Davis-
choose the benefits to include in these pro-    Base Wage                                   22.44                                          er, a contractor can offer a better bid and                                                     Bacon Act before establishing a program.
grams—for example, health, disability and                                                                                                  take credit for the full fringe rate for each    SOFTWARE FEATURES TO CONSIDER
                                                Fringe                                       8.26
accident insurance; vacation and holiday                                                                                                   trade classification on each job—with no         Whichever administrator or financial           Davis, CPA, is a principal in McCrory &
pay; and retirement—and decide the min-         Total Wage                                  30.70                                          out-of-pocket cash being dispersed.              services firm a contractor uses to manage      McDowell LLC, a full-service accounting and
imum number of hours an employee must           Burden on Total Wage (30%)                   9.21                                              Once the contractor has established          its payroll distribution, contractors should   consulting firm headquartered in Pittsburgh.
work each month to be eligible for the plan.    Total Labor                             $39.91               4,304      $171,772.64        the hourly cost it is going to contribute        insist that the prevailing wage software       Riley is president and chief executive officer of
    For a contractor with even one or two                                                                                                  for company-provided benefits, it can use        used have the ability to:                      PrevWage Administrators, LLC, Cleveland,
prevailing wage jobs, this software can be                                                                                                 an existing 401(k) plan or a separate            • track every hour for every job by trade      Ohio, which specializes in helping contractors
an enormous help. It can be used to track      or work in more than one trade at differ-     to their payroll costs,which makes the com-   money purchase plan to accept the dif-             and properly allocate fringe benefits;       working in the prevailing wage market admin-
employees by trade, hour and job, always       ent hourly rates.                             pany uncompetitive or cuts into its profit    ference between the employer contribu-           • accept payroll information electronically    ister their employee benefit programs. For more
a challenging feat because open shop              Contractors that pay fringe benefits in    margin. Cash payments make for a less         tion and the actual fringe benefits rate           from any payroll system the contractor       information, contact Davis via email, davis@
employees routinely move from job to job       cash add as much as 30 percent per hour       competitive wage package and increase the     on each job. The contractor avoids pay-            might use; and                               mccmcd.com or Riley, eriley@prevwage.com.




28   |   Construction EXECUTIVE August 2003                                                                                                                                                                                                      August 2003 Construction EXECUTIVE   | 29

				
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