Davis-Bacon Act:

Labor Now Verifies Wage Data, but Verification Process Needs Improvement

HEHS-99-21: Published: Jan 11, 1999. Publicly Released: Jan 11, 1999.

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Pursuant to a legislative requirement, GAO reviewed the: (1) Department of Labor's response to the House Appropriations Committee's directive that it verify a random sample of employers' wage data submissions and select a sample of submissions for on-site data verification; and (2) likely effect of these efforts on the accuracy and timeliness of Davis-Bacon Act wage determinations.

GAO noted that: (1) in response to a Committee directive and GAO's recommendation, Labor has implemented a program to verify wage survey data submitted on standardized wage data forms by construction contractors and interested third parties, such as contractor associations and trade unions; (2) to verify these data, Labor has developed procedures to select samples of these forms for telephone verification that differ depending on whether the forms are submitted by contractors or third parties; (3) in addition, Labor has hired a private accounting firm to conduct on-site verification reviews; (4) as of September 30, 1998, the accounting firm had issued final reports for 9 of the 85 geographic area surveys scheduled for audit from April 1997 to June 1998 and had identified errors in wages reported in about 70 percent of the wage data forms reviewed; (5) in both the telephone and on-site verification processes, all data--regardless of the entity that submitted them--are verified only with the contractors; (6) even though Labor has identified and corrected numerous errors in the wage data submitted, its verification efforts will have limited impact on the accuracy of the wage determinations and will increase the time required to issue them; (7) specifically, errors the accounting firm identified and corrected in all nine area surveys averaged 76 cents per hour; (8) but, because Labor was only able to correct the limited number of wage data forms verified, which contain a small portion of the wage rates submitted, on average, changes to these wage determinations will be less than 10 cents per hour, according to Labor officials' estimates; (9) the extent to which correcting the errors found through verification will improve the accuracy of wage determinations is limited by: (a) the Committee directive to use a random sample of wage data forms for verification, given the characteristics of the wage data with respect to the universe being sampled; and (b) the procedures Labor uses to implement this directive; (10) for example, in its procedures, Labor assumes that data from contractors that refuse access to supporting documentation are correct and includes the wages in calculating wage determinations; and (11) while the time needed for verification reduced timeliness of wage determinations, telephone verification added less time to the process than did on-site verification--an estimated average of 2 weeks as compared with an average of 211 days for the 30 area surveys for which the auditor completed preliminary reports.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: WHD completed efforts to implement this recommendation. It adopted new procedures that increased the number of data collection forms randomly selected for contractor telephone verification from 2 percent to 5 percent beginning with surveys completed after May 30, 1999. In addition, the procedures require Labor staff to request payroll documentation in all telephone and on-site verification and for all contractors judged as having the biggest impact on wage data.

    Recommendation: To reduce the cost of verification and increase the benefits, the Secretary of Labor should direct the Administrator, Wage and Hour Division (WHD), to revise verification procedures to maximize the expected value to be gained from verification. Specifically, Labor should increase the use of telephone verification--while decreasing on-site verification audits--and increase efforts to obtain payroll documentation from all selected submitters.

    Agency Affected: Department of Labor

  2. Status: Closed - Implemented

    Comments: WHD completed action to respond to this recommendation. In 1999, it adopted new verification procedures that detail the steps staff should follow in selecting a judgmental sample. These procedures detail how WHD make a judgmental sample to identify contractors with the greatest impact on the wage data.

    Recommendation: To reduce the cost of verification and increase the benefits, the Secretary of Labor should direct the Administrator, WHD, to revise verification procedures to maximize the expected value to be gained from verification. Specifically, Labor should change the procedures used to select wage data for verification, using a judgmental sample of wage data forms based on the potential impact of the data on prevailing wage rate determinations rather than using a random sample.

    Agency Affected: Department of Labor

  3. Status: Closed - Implemented

    Comments: WHD has completed action on this recommendation. Under a new policy adopted in May 1999, revised verification procedures require that if a contractor declines to provide data three times, WHD staff will input these contractors' names into a nationwide list and their submitted data will not be used. The revised policy also requires staff to ask third parties to submit supporting payroll documentation.

    Recommendation: To reduce the cost of verification and increase the benefits, the Secretary of Labor should direct the Administrator, WHD, to revise verification procedures to maximize the expected value to be gained from verification. Specifically, Labor should revise verification procedures to take more appropriate action when documentation cannot readily be obtained from a contractor, such as not using data when supporting documentation is requested but not provided, requiring documentation where possible, and giving third parties an opportunity to provide supporting documentation for data they submitted.

    Agency Affected: Department of Labor

 

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