This report reflects the findings of the Office of Inspector General at the time that the audit report was issued. More current information may be available as a result of the resolution of this audit by the Department of Labor program agency and the auditee. For further information concerning the resolution of this report's findings, please contact the program agency.
Report Number: 04-97-013-04-420
Issue Date: March 10, 1997
The Davis-Bacon Act requires each contractor and subcontractor involved in the construction, alteration, or repair of Federal works to pay its employees no less than "locally prevailing" wages and fringe benefits. The Congressional Budget Office estimates that $42 billion was spent in Federal construction during Fiscal Year 1996; therefore, the economic effect of the Davis-Bacon program is substantial. Under the Act, DOL is responsible for determining the wages and fringe benefit rates prevailing in local geographic areas. The WHD establishes prevailing rates through data voluntarily provided by employers and third parties, which include union and trade associations.
In response to a congressional request, the OIG conducted an audit to assess the accuracy of wage and fringe benefit data used by the Department in prevailing wage surveys. The OIG audited a sample of data affecting Calendar Year 1995 wage decisions.
The audit found that WHD staff generally did a creditable job in operating the program. OIG did not find evidence of fraud or deliberate misreporting of wage data. However, we determined that inaccurate data were frequently used in Davis-Bacon wage determinations.
Specifically, the OIG identified 211 significant errors in 123 (15 percent) of the 837 survey instruments (WD-10 forms) examined. Inaccuracies in data reported by employers and third parties accounted for 84 percent (177 of 211) of the total exceptions. The remaining 16 percent (34 exceptions) were attributed to errors in WHD's compilation of the data. Material errors resulted in wage decisions needing revision in five states. Among these decisions, wages or fringe benefits for certain crafts were overstated by as much as $1.08 per hour and understated by as much as $1.29 per hour. However, the errors discovered did not materially change wage decisions in the majority of the cases because the data sampled often represented a small portion of the responses for an individual WHD survey.
The audit report also identified other issues involving WHD's survey methodology, provisions of the Davis-Bacon legislation, and Labor's regulations that either contributed to the exceptions found or bring representativeness of the wage decisions into question.
To achieve validity and representativeness in the data used to determine locally prevailing wages, OIG recommends the Assistant Secretary for Employment Standards reform the survey process to:
1. Select contractors for participation using statistical or other independent means. This helps to prevent outcomes from being skewed by employers and third parties, who frequently respond to WH surveys, from exerting greater influence over the wage levels that are established.
2. Obtain necessary data directly from contractors' records through onsite collection, thus eliminating the need for third party reporting. If mail surveys are used for statistically selected employers, onsite reviews to verify submissions on at least a sample basis should be built into the process.
OIG believes that having the WHD independently select employers provides
many benefits, including eliminating errors and undue influence in the
establishment of wage levels. The time and costs of onsite payroll reviews
may be offset by broadening the geographical coverage of the surveys and
by combining efforts with other of BLS' survey efforts. Any resistance
from employers could be lessened by the reduced frequency of wage requests
due to combined surveys.
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