Davis-Bacon Act:

Methodological Changes Needed to Improve Wage Survey

GAO-11-152: Published: Mar 22, 2011. Publicly Released: Apr 6, 2011.

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Procedures for determining Davis-Bacon prevailing wage rates, which must be paid to workers on certain federally funded construction projects, and their vulnerability to the use of inaccurate data have long been an issue for Congress, employers, and workers. In this report, GAO examined (1) the extent to which the Department of Labor (Labor) has addressed concerns regarding the quality of the Davis-Bacon wage determination process, and (2) additional issues identified by stakeholders regarding the wage determination process. GAO interviewed Labor officials, representatives from contractor associations and unions, contractors, and researchers; conducted site visits to three Labor regional offices; and analyzed data from Labor's wage survey database.

Recent efforts to improve the Davis-Bacon wage survey have not addressed key issues with timeliness, representativeness, and the utility of using the county as the basis for the wage calculation. Labor has made some data collection and processing changes; however, we found some surveys initiated under the new processes were behind Labor's processing schedule. Labor did not consult survey design experts, and some criticisms of the survey and wage determination process have not been addressed, including the representativeness and sufficiency of the data collected. For example, Labor cannot determine whether its wage determinations accurately reflect prevailing wages because it does not currently calculate response rates or analyze survey nonrespondents. And, while Labor is required by law to issue wage rates by the "civil subdivision of the state," the goal to issue them at the county level is often not met because of insufficient survey response. In the published results for the four surveys in our review, Labor issued about 11 percent of wage rates for key job classifications (types of workers needed for one or more of Labor's construction types) using data from a single county. The rest were issued at the multi-county or state level. Over one-quarter of the wage rates were based on six or fewer workers. Little incentive to participate in Labor's Davis-Bacon wage surveys and a lack of transparency in the survey process remain key issues for stakeholders. Stakeholders said contractors may not participate because they lack resources, may not understand the purpose of the survey, or may not see the point in responding because they believe the prevailing wages issued by Labor are inaccurate. While most stakeholders said the survey form was generally easy to understand, some identified challenges with completing specific sections. Our review of reports by Labor's contracted auditor for four published surveys found most survey forms verified against payroll data had errors in areas such as number of employees and hourly and fringe benefit rates. Both contractor association and union officials said addressing a lack of transparency in how the published wage rates are set could result in a better understanding of the process and greater participation in the survey. GAO suggests Congress consider amending its requirement that Labor issue wage rates by civil subdivision to allow more flexibility. To improve the quality and timeliness of the Davis-Bacon wage surveys, GAO recommends Labor obtain objective expert advice on its survey design and methodology. GAO also recommends Labor take steps to improve the transparency of its wage determinations. Labor agreed with the second recommendation, but said obtaining expert survey advice may be premature given ongoing changes. We believe obtaining expert advice is critical for improving the quality of wage determinations.

Matter for Congressional Consideration

  1. Status: Open

    Comments: H.R. 448 was introduced on February 1, 2013 and would require that Davis-Bacon wage rates be set based on surveys carried out by the Department of Labor's Bureau of Labor Statistics (BLS). BLS wage surveys use Metropolitan Statistical Areas rather than civil subdivisions of states. However, this legislation has not yet been enacted.

    Matter: To improve the quality of Labor's Davis-Bacon wage survey data, Congress may wish to consider amending the language of the Davis-Bacon Act to allow Labor to use wage data from geographic groupings other than civil subdivisions of states, such as metropolitan statistical areas or Bureau of Economic Analysis' economic areas.

Recommendations for Executive Action

  1. Status: Open

    Comments: According to the Department's update for 2014, the Division of Wage Determinations was merged with the Branch of Government Contracts Enforcement into the Office of Government Contracts, headed by a newly-created SES position, as part of its commitment to the government contracts program. This will centralize all aspects of the government contracts program that will streamline changes to the wage determination methodology. Officials noted that this restructuring is part of a larger effort by the Wage and Hour Division (WHD) to reevaluate its survey processes. As part of that effort, WHD is also planning to engage with statistical agencies, including BLS and the U.S. Census Bureau, to determine what methods WHD can use to increase survey participation, which remains the primary challenge in administering construction surveys. WHD is exploring working with independent statistical organizations. They also noted that since GAO's report, numerous meetings and discussions have been held with BLS to explore use of the Occupational Employment Survey (OES) or alternative survey methodology. BLS and WHD have discussed barriers to using the OES, including: the Davis Bacon Act and implementing regulations require WHD to use the smallest civil subdivision, whereas OES data is primarily derived using statewide data; regulations requiring the use of a prevailing rate requirement at more than 50 percent as opposed to the OES' automatic calculation of an average rate; and the inclusion of data collected by BLS in its surveys that are not permitted to be included in prevailing wage calculations (for example, the OES includes data on "helpers"). WHD reported continuing regular engagement with BLS and Census to identify best practices to improve its surveys. These efforts to collaborate represent a positive step; however, concrete progress on survey quality is still lacking.

    Recommendation: To improve the quality and timeliness of Labor's Davis-Bacon wage surveys, the Secretary of Labor should direct the Wage and Hour Division to enlist the National Academies, or another independent statistical organization, to evaluate and provide objective advice on the survey, including its methods and design; the potential for conducting a sample survey instead of a census survey; the collection, processing, tracking, and analysis of data; and promotion of survey awareness.

    Agency Affected: Department of Labor

  2. Status: Open

    Comments: In April 2013, the department indicated it had issued All Agency Memorandum No. 213 describing the policies and processes related to requests for additional classifications and wage rates, and continued to conduct prevailing wage events to explain the survey process to interested parties. It had also added language to its Web site about the survey appeals process. In terms of publicly providing additional information on how the wage rates are calculated, including the number and wages of workers used in each wage calculation, the department was working to update its IT systems. Once completed it expected to be able to provide this information more expeditiously; however, the update was not expected to be completed for about two years. The department did not provide an update on the status of this effort in fiscal year 2014.

    Recommendation: To improve the transparency of wage determinations while maintaining the confidentiality of specific survey respondents, the Secretary of Labor should direct the Wage and Hour Division to publicly provide additional information on the data used to calculate its Davis-Bacon wage rates, such as the number and wages of workers included in each wage rate calculation, and to clearly communicate the meaning of various dates and codes used in wage determinations in the same place the prevailing wage rates are posted.

    Agency Affected: Department of Labor


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