In addition to paying no less than locally prevailing wages, contractors for  construction projects that are subject to the Davis-Bacon Act must pay  their workers on a weekly basis and submit weekly certified payroll  records. The prevailing wage provision in section 1606 of the Recovery Act broadly  applies Davis-Bacon requirements to all construction projects funded  directly or assisted by the federal government under Division A of the  act. Federal Agency Officials Reported That 40 Programs Are Newly Subject to Davis-Bacon Requirements because of the Recovery Act’s Prevailing Wage Provision

According to federal agency officials, 40 programs are newly subject to  Davis-Bacon requirements as a result of the Recovery Act’s prevailing  wage provision, as shown in table 1. These programs are spread across  12 of 27 federal agencies that received funding under Division A of the ac Most of the programs existed prior to the Recovery Act and are subject to  Davis-Bacon requirements for the first time under the act, while some are  newly created programs. Program Officials Differed on Whether Davis-Bacon Requirements Would Increase Programs’ Costs

Federal officials responsible for programs that are newly subject to Davis- Bacon requirements—the prevailing wage rate requirement and the  administrative requirements associated with weekly payroll processes— had mixed views on the extent to which they expected these requirements  to affect program costs, as table 2 shows. According to other program  officials, the impact would be small because a relatively small amount of  program funds are to be spent on construction activities that are subject to  Davis-Bacon requirements. Officials from the Department of Energy’s  Weatherization Assistance Program explained that the prevailing wage  rate requirement will have at least a moderate impact on program costs. They explained that weatherization projects in buildings taller than four  stories will require that workers be paid commercial prevailing wage rates  that are higher than the wage rates that would otherwise be used for  weatherization projects. Department of Energy  officials responsible for the Energy Efficiency and Conservation Block  Grants program anticipated a potentially large impact as a result of the  large number of grantees and significant proportion of funds that would be  spent on construction labor wages. Federal officials responsible for the Weatherization  Assistance Program and the Lead Hazard Reduction Program said Davis- Bacon administrative requirements would require a more detailed payroll  tracking system, which would be particularly burdensome for small  companies. To accommodate this increase, the agency is in the process of  increasing the cap on how much recipients can spend on administrative  costs from 10 to 15 percent of their award. State and local officials we interviewed and collected data from also  reported that the Davis-Bacon requirements would generally have little  impact on their ability to achieve program and Recovery Act goals. Conversely, Michigan state weatherization officials said the  requirements might affect their ability to support the Recovery Act goal of  job creation, especially for smaller businesses and contractors. For example, officials with the Department of Energy’s  Weatherization Assistance Program stated that Davis-Bacon requirements  had significantly affected their program’s timing because the program is  newly subject to the requirements so prevailing wage rates for  weatherization workers were not immediately available. Officials with the Department of Energy’s Energy Efficiency and  Conservation Block Grants and State Energy Program also expected  Davis-Bacon requirements to affect the timing of their Recovery Act  efforts, while officials with the Department of Housing and Urban  Development’s Lead Hazard Reduction Program reported that grantees  were provided additional time to complete their work plans to ensure  contractors understood the requirements.
Why GAO Did This Study

The American Recovery and Reinvestment Act of 2009 (Recovery Act) has the broad purpose of stimulating the economy. It includes substantial appropriations for construction projects that, under the act's prevailing wage provision, are subject to Davis-Bacon Act requirements. That is, contractors must pay laborers and mechanics who work on those projects at least the prevailing wage rates set for their local area by the Secretary of Labor. In addition, contractors must submit certified payrolls and pay their workers weekly. Prior to the Recovery Act, some federal programs with construction projects were already subject to Davis-Bacon Act requirements. Others, however, are subject to the requirements for the first time because the Recovery Act extended the requirements to all construction projects supported by the act. GAO was asked to (1) identify the programs that are newly affected by the Recovery Act's prevailing wage provision and (2) examine the extent to which that provision is expected to affect each of those newly affected programs. GAO obtained data from 27 agencies and spoke with federal, state, and local officials as well as contractors involved with the newly affected programs. Although GAO is not making recommendations in this report, these findings may be helpful in considering and designing legislation with similar objectives.

What GAO Found

Fortyprograms are newly subject to Davis-Bacon requirements as a result of the Recovery Act's prevailing wage provision, according to federal agency officials. Of these, 33 programs existed prior to the Recovery Act and are subject to Davis-Bacon requirements for the first time under the act, while 7 are newly created programs. Together, the 40 programs account for about $102 billion of the $309 billion that was appropriated by the Recovery Act for projects and activities. However, a smaller amount of these funds will be subject to Davis-Bacon requirements because not all of the funds will be used for construction activities and only a portion of those funds will be used to pay labor wages. For those programs that are newly subject to Davis-Bacon requirements, officials had mixed views on the impact of these requirements on program costs and goal achievement. In some cases, officials said Davis-Bacon requirements would have little or no impact on program costs for a few reasons, such as (1) the program having a small amount of construction activities, (2) prevailing wage rates that were in line with expectations, and (3) companies' previous experience with weekly payrolls. In other cases, officials said the requirements would have a moderate to large impact on program costs and/or goals. For example, officials from the Department of Energy's (DOE) Energy Efficiency and Conservation Block Grants program anticipated a potentially large cost impact as a result of the significant amount of funds to be spent on construction labor wages. Officials from DOE's Weatherization Assistance Program reported that weatherization projects in buildings taller than four stories will require workers to be paid a commercial prevailing wage rate under the Davis-Bacon Act that is higher than what would otherwise be used and could potentially reduce the number of homes weatherized. Additionally, weatherization officials said that Davis-Bacon requirements affected the program's timing because prevailing wage rates for weatherization workers were not fully available until September 2009. Further, officials from the Department of Housing and Urban Development's Lead Hazard Reduction Program noted that Davis-Bacon requirements would require a more detailed payroll tracking system that could be particularly burdensome for small companies. Those officials also explained that because administrative costs are likely to increase, the department is in the process of increasing the cap on how much recipients can spend on administrative costs.