Labor’s Wage Determination Process Based on Voluntary Survey Participation

In setting prevailing wages, Labor’s task is to determine and issue prevailing wage rates in a wide range of job classifications in each of four types of construction (building, residential, heavy, and highway) in more than 3,000 counties or groups of counties. Labor’s process for determining the wage rates is based primarily on a survey of the wages and fringe benefits paid to workers in similar job classifications on comparable construction projects in the particular area. This information is submitted voluntarily by employers and third parties. These weaknesses include limitations in the degree to which Labor verifies the accuracy of the survey data it receives, limited computer capability to review wage data before calculating prevailing wage rates, and an appeals process that may not be well publicized to make it accessible to all interested parties. Lack of Awareness of the Appeals Process May Limit Its Effectiveness

Labor’s appeals process could provide an important safeguard against reliance on inaccurate data in that it allows any interested party to question the validity of the determinations. Consequences of Wage Determinations Based on Erroneous Data

Wage determinations based on erroneous data could result in workers being paid higher or lower wages and fringe benefits than those prevailing on federal construction projects. One recent change improves the verification process for data submitted by third parties. Labor has also proposed a long-term strategy to review the entire Davis-Bacon wage determination process. Specifically, Labor needs to move ahead immediately to improve its verification of wage data submitted by employers.
Why GAO Did This Study

GAO discussed the vulnerabilities in the Department of Labor's prevailing wage determination process under the Davis-Bacon Act.

What GAO Found

GAO noted that: (1) Labor sets prevailing wage rates for numerous job classifications in about 3,000 geographic areas; (2) Labor's wage determination process depends on employers' and third parties' voluntary participation in a survey that reports wage and fringe benefits paid for similar jobs on comparable construction projects in a given area; (3) due to limited resources, Labor concentrates on those geographical areas most in need of wage rate revisions; (4) Labor wage determinations can be appealed by any interested party; (5) process weaknesses include limited data verification, limited computer capabilities to detect erroneous data, and the lack of awareness of the appeals process; (6) erroneous data could result in setting the wage rate too low so that construction workers are underpaid or setting the wage rate too high so that the government incurs excessive construction costs; (7) Labor initiatives to improve its rate-setting process include having employers verify certain third-party data, informing survey respondents of the serious consequences of willfully falsifying wage data, and proposing a long-term strategy to review the entire wage determination process; and (8) Labor should immediately improve its verification of employer wage data and make the appeals process more effective.