Davis-Bacon Act: Process Improvements Could Increase Confidence in
Labor's Prevailing Wage Rates (Letter Report, 05/31/96, GAO/HEHS-96-130).

Pursuant to a congressional request, GAO reviewed the Department of
Labor's efforts to prevent the use of inaccurate wage data for
Davis-Bacon Act wage rate determinations, focusing on: (1) the steps
Labor follows in collecting and reporting wage data; and (2) weaknesses
in Labor's wage determination process.

GAO found that: (1) Labor's wage determinations are based on voluntary
submissions of wage and benefit data from employers and third parties;
(2) such internal control weaknesses as inaccurate wage and fringe
benefit data, limited computer capability, and an inaccessible appeals
process often lead to increased government construction costs or lower
wages and fringe benefits for construction workers; (3) Labor began
requiring its regional staff to verify third-party wage survey data in
August 1995, but the verification does not address erroneous
employer-reported data; (4) Labor does not have sufficient computer
resources to automate data collection and verification; and (5) Labor
requested $4 million in its fiscal year 1997 budget to develop,
evaluate, and implement alternative reliable methodologies that will
provide accurate and timely wage determinations at a reasonable cost.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  HEHS-96-130
     TITLE:  Davis-Bacon Act: Process Improvements Could Increase 
             Confidence in Labor's Prevailing Wage Rates
      DATE:  05/31/96
   SUBJECT:  Wage surveys
             Labor costs
             Minimum wage rates
             Job classification
             Data collection operations
             Fringe benefits
             Data integrity
             Construction contracts
             Internal controls
             Labor law
IDENTIFIER:  Oklahoma City (OK)
             Tulsa (OK)
             
******************************************************************
** This file contains an ASCII representation of the text of a  **
** GAO report.  Delineations within the text indicating chapter **
** titles, headings, and bullets are preserved.  Major          **
** divisions and subdivisions of the text, such as Chapters,    **
** Sections, and Appendixes, are identified by double and       **
** single lines.  The numbers on the right end of these lines   **
** indicate the position of each of the subsections in the      **
** document outline.  These numbers do NOT correspond with the  **
** page numbers of the printed product.                         **
**                                                              **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced.  Tables are included, but    **
** may not resemble those in the printed version.               **
**                                                              **
** Please see the PDF (Portable Document Format) file, when     **
** available, for a complete electronic file of the printed     **
** document's contents.                                         **
**                                                              **
** A printed copy of this report may be obtained from the GAO   **
** Document Distribution Center.  For further details, please   **
** send an e-mail message to:                                   **
**                                                              **
**                                            **
**                                                              **
** with the message 'info' in the body.                         **
******************************************************************


Cover
================================================================ COVER


Report to Congressional Requesters

May 1996

DAVIS-BACON ACT - PROCESS CHANGES
COULD RAISE CONFIDENCE THAT WAGE
RATES ARE BASED ON ACCURATE DATA

GAO/HEHS-96-130

Davis-Bacon Prevailing Wages

(205300)


Abbreviations
=============================================================== ABBREV

  CBA - collective bargaining agreement
  CRA - Construction Resource Analysis
  ESA - Employment Standards Administration
  RSPR - Regional Survey Planning Report
  WHD - Wage and Hour Division

Letter
=============================================================== LETTER


B-271489

May 31, 1996

The Honorable Pete Hoekstra
Chairman, Subcommittee on Oversight
 and Investigations
Committee on Economic and Educational
 Opportunities
House of Representatives

The Honorable Cass Ballenger
Chairman, Subcommittee on Workforce
 Protections
Committee on Economic and Educational
 Opportunities
House of Representatives

The Davis-Bacon Act requires employers on federal construction
projects to pay workers wages at or above the level determined by the
Department of Labor to be prevailing in a geographic area.\1 In
recent years, the act has drawn controversy, with critics charging
that it artificially inflates federal construction costs.  The
Congressional Budget Office estimates that for fiscal year 1996, the
federal government will contract about $42 billion in construction
projects throughout the nation.  Given the magnitude of these
expenditures, inaccurate wage determinations could lead either to
excessive government construction costs or to large numbers of
workers receiving wages and fringe benefits that are lower than
required by the law. 

In early 1995, allegations of the use of inaccurate and fraudulent
wage data to determine the prevailing wages paid on federally funded
construction projects in one geographic area precipitated a criminal
investigation by the Department of Justice that is still ongoing.  On
the basis of its own review, Labor concluded that data weaknesses
warranted a redetermination of the area's prevailing wage rates,
which it issued in April 1996. 

Because of your concern about whether Labor's procedures under the
Davis-Bacon Act allow the use of data that could result in inaccurate
wage determinations throughout the nation, you asked us to

  -- identify the steps used by Labor to collect data and determine
     and report the prevailing wages to be paid on federally funded
     construction projects,

  -- determine whether specific weaknesses exist in the wage
     determination process that could have resulted in the use of
     inaccurate or fraudulent data, and

  -- assess the extent to which Labor is addressing any identified
     process weaknesses. 

To respond to your request, we collected information from Labor's
Wage and Hour Division (WHD); interviewed Labor officials and staff
in Washington, D.C., Atlanta, and Philadelphia; surveyed staff in
Labor's six regions; and obtained the views of representatives of
individual employers, construction unions, and industry associations. 
We focused on the policies and procedures that Labor had in place to
prevent the use of inaccurate or fraudulent wage data.  We did not
verify the accuracy of the wage determination data Labor used or
explore the adequacy of Labor's survey response rates or its
calculation of prevailing wages.  We conducted our review from
October 1995 to April 1996 in accordance with generally accepted
government auditing standards.  Appendix I provides more information
on our study objectives, scope, and methodology. 


--------------------
\1 Labor's regulations define a prevailing wage as the wage paid to
the majority (more than 50 percent) of the workers in the job
classification on similar projects in the area during the period in
question.  If the same wage is not paid to a majority of those
employed in the classification, the prevailing wage will be the
average of the wages paid, weighted by the total employed in the
classification.  (See app.  II.)


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

Labor sets prevailing wage rates for construction job classifications
in some 3,000 individual counties or groups of counties and for four
different types of construction.  Labor's decisions are based on
voluntarily submitted wage and benefit data from employers and third
parties,\2 such as unions or trade groups, on construction projects. 
Any interested party can appeal Labor's final wage determination. 
Although Labor has a process in place to determine prevailing wage
rates, we found that it contains internal control weaknesses that
contribute to the lack of confidence in the resulting wage
determinations.  These weaknesses include limitations in Labor's
verification of wage and fringe benefit data, limited computer
capabilities, and an appeals process that may be difficult for
interested parties to access.  Such weaknesses can lead to increased
government construction costs or result in lower wages and fringe
benefits being paid to construction workers than required by the law. 

In August 1995, Labor began requiring all regional staff to conduct
additional verification of some third-party wage survey data.  While
this change may improve the accuracy of the wage survey data received
from third parties, it does not address the problem of erroneous data
being submitted by employers.  For the long term, Labor has requested
about $4 million in its fiscal year 1997 budget to develop, evaluate,
and implement alternative reliable methodologies that would provide
accurate and timely wage determinations at reasonable cost.  Although
Labor's long-term initiative is a positive step, in the interim,
verification weaknesses in Labor's process and limited public
awareness of its appeals process remain. 


--------------------
\2 Labor defines third-party data as project wage and fringe benefits
data for a specified construction project that are submitted for use
in a wage survey by any party other than an employer or other payroll
holder. 


   BACKGROUND
------------------------------------------------------------ Letter :2

The Davis-Bacon Act (40 U.S.C.  276a) requires workers on federal
construction projects valued in excess of $2,000 to be paid, at a
minimum, wages and fringe benefits\3 that the Secretary of Labor
determines to be prevailing for corresponding classes of workers in
the locality where the contract is to be performed.  The act covers
every contract to which the United States or the District of Columbia
is a party, for construction, alteration, or repair of public
buildings or public works.  The $2,000 threshold for projects covered
by the Davis-Bacon Act has not changed since 1935. 

WHD, within Labor's Employment Standards Administration (ESA), has
responsibility for administering the Davis-Bacon Act through
approximately 50 staff in the Washington, D.C., headquarters and in
its six regional offices.  Its duties include the collection of wage
and fringe benefits data on construction projects for the calculation
of local prevailing wage rates.  For fiscal year 1996, the
Congressional Budget Office estimates that $42 billion will be spent
on the construction of federal projects. 

Labor's Administrative Review Board hears appeals of prevailing wage
determinations issued under the Davis-Bacon Act and upheld by the WHD
Administrator.  The Office of the Solicitor provides legal advice and
assistance to Labor personnel relative to the administration and
enforcement of the Davis-Bacon Act and represents WHD in Davis-Bacon
wage determination cases before the Administrative Review Board. 

Labor collects wage and fringe benefit data through voluntary
participation in a wage survey.  Although the survey form does not
explicitly so inform participants, failure to supply truthful answers
can have serious consequences.  It is a crime under federal law (18
U.S.C.  1001) to knowingly submit false data to the government, and
it is a crime under federal law (18 U.S.C.  1341) to use the U.S. 
mail for fraudulent purposes. 

In previous reviews of the Davis-Bacon Act,\4 we raised concerns
about the accuracy of Labor's wage determinations.  In 1979, we
pointed out that the act appeared to be impractical to administer due
to the magnitude of the task of producing an estimated 12,400
accurate and timely prevailing wage determinations.  Since then,
Labor has implemented regulatory changes that have addressed some of
our specific concerns about the process used to determine prevailing
wages.  For example, rules were changed to generally prohibit (1)
including federal contracts in the area wage surveys and (2) mixing
prevailing wage data from surveys of urban and rural areas.  An
additional change has likely resulted in more wage determinations
being based on the average wage of an area rather than on the wage
specified in area collective bargaining agreements.  Technological
improvements have also improved Labor's ability to administer the
Davis-Bacon wage determination process.\5 Despite these changes, in
1994, we found continuing verification problems with the data that
Labor uses to make prevailing wage determinations. 

The Congress is currently considering separate bills that would
either repeal or reform the Davis-Bacon Act.  Two bills (S.  141 and
H.R.  500) would repeal the Davis-Bacon Act.  Two other bills (H.R. 
2472 and S.  1183) would reform the act.  The two latter bills would
change the way that Labor determines and enforces wage decisions in
the construction industry.  These reform bills include provisions
that would (l) increase the $2,000 threshold for construction
projects covered by Labor's wage surveys and (2) expand Labor's
enforcement authority.\6

Thirty-two states have "little Davis-Bacon" laws requiring the
payment of prevailing wages on certain state-funded construction
projects.  Of these, 15 states conduct their own wage surveys as part
of their prevailing wage rate determination process.  Three of the
remaining 17 states--
Connecticut, Kentucky, and Oklahoma--have recently used the federal
wage determinations as the basis for the prevailing rates on state
construction projects, while the others generally base their wage
rates on the union rate.\7


--------------------
\3 Fringe benefits considered in computing the prevailing wage rate
include holiday and vacation pay, health insurance, and pension
benefits.  (See fig.  II.3.)

\4 The Davis-Bacon Act Should Be Repealed (GAO/HRD-79-18, Apr.  27,
1979) and Davis-Bacon Act (GAO/HEHS-94-95R, Feb.  7, 1994). 

\5 In a 1994 report, both employers and employee representatives we
interviewed also noted that additional staffing and training could
improve the accuracy of Davis-Bacon prevailing wage determinations. 
See Workplace Regulation:  Information on Selected Employer and Union
Experiences (GAO/HEHS-94-138, Vol.  I, June 30, 1994). 

\6 We also discussed changes to the Davis-Bacon Act in our report,
Addressing the Deficit:  Budgetary Implications of Selected GAO Work
for Fiscal Year 1996 (GAO/OCG-95-2, Mar.  15, 1995).  In this report,
we identified reforming or repealing the Davis-Bacon Act as an option
that the Congress might wish to consider. 

\7 A 1995 state Supreme Court decision ruled the Oklahoma prevailing
wage law to be unconstitutional because the law's piggyback provision
for setting prevailing wages delegated too much authority to the
federal government. 


      RECENT EVENTS RESURFACE
      CONCERNS WITH LABOR'S
      PROCESS
---------------------------------------------------------- Letter :2.1

In January 1995, federal Labor and Oklahoma state labor officials
received reports about possible inaccuracies in the results of a
recent survey conducted by Labor that set prevailing wages for work
on certain types of construction projects in the Oklahoma City and
Tulsa areas.  Based on this information, Labor directed an audit of
the wage data used in the Oklahoma City survey.  Labor's review found
that inaccuracies did exist in the wage determinations issued for
some heavy construction and building construction job classifications
in the Oklahoma City area.  In March 1995, Labor issued a revised
determination for certain heavy construction job classifications for
the Oklahoma City area.  Labor also reviewed the wage survey data of
the remaining heavy construction job classifications for the Oklahoma
City and Tulsa areas and issued revised wage rates in May 1995. 

During this period, believing the initial survey rates to be
incorrect, Oklahoma state labor officials independently directed a
review of the third-party data used in the contested survey.\8 This
investigation detected several occurrences of potentially inaccurate
and fraudulent wage and fringe benefit information reported by third
parties, which served to increase the federal prevailing wage rate
for certain construction job classifications.  In July 1995, Labor
received the Oklahoma state Labor Commissioner's report alleging that
fraudulent data were submitted and used in the original wage
determinations.\9

This report however, did not challenge the revised wage
determinations for heavy construction that Labor had issued in March
and May 1995. 

In July 1995, Labor then initiated a review of the building
construction wage surveys for Oklahoma that had been collected at the
same time as the initial heavy construction wage survey data.  Based
on a determination that potential data verification problems existed
in the building construction survey, Labor withdrew its wage
determinations for all Oklahoma City building construction job
classifications in August 1995. 

In April 1996, Labor issued new wage determinations for heavy
construction based on completely new survey data and for building
construction based on complete verification and analysis of
previously conducted building construction survey data.  The new
determinations established prevailing rates that were higher in some
instances and lower in others than the wage determinations in place
in January 1995.  As of mid-May 1996, these new determinations had
not been contested. 

Labor's Office of the Inspector General is currently surveying the
extent to which fraudulent or inaccurate wage data were used by Labor
in 1995 to determine prevailing wages under the Davis-Bacon Act in
several of Labor's regions.  The study is expected to be completed in
the fall of 1996. 


--------------------
\8 At the time, the Oklahoma state little Davis-Bacon law based
prevailing wages for state projects, such as schools or prisons, on
federal wage determinations. 

\9 The Department of Justice is currently investigating charges of
fraudulent and inaccurate reporting of wage data on Labor's initial
Oklahoma City wage survey. 


   LABOR'S WAGE DETERMINATION
   PROCESS BASED ON VOLUNTARY
   SURVEY PARTICIPATION
------------------------------------------------------------ Letter :3

Labor's procedures for determining prevailing wages for individual
counties or groups of counties are based 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 collected through the voluntary submission of data
from employers and third parties on construction projects surveyed
for each wage determination.  Labor's wage determination process
consists of four basic stages:  planning and scheduling surveys,
conducting the surveys, clarifying and analyzing respondents' wage
data, and issuing the wage determinations.  In addition, any employer
or interested party\10 who wishes to contest or appeal Labor's final
wage determination can do so. 

Labor encourages the submission of wage information from all
employers and third parties, including employee unions and industry
associations that are not directly involved with the surveyed
projects.  In fiscal year 1995, Labor completed about 100 prevailing
wage surveys, gathering wage and fringe benefit data from over 37,000
employers and third parties. 

Labor surveys wages and fringe benefits paid to workers in different
job classifications for four basic types of construction (building,
residential, heavy, and highway) covering more than 3,000 counties or
groups of counties within the United States.  Given the large number
of prevailing wage determinations and Labor's limited resources,
Labor develops an annual plan to identify those geographic areas or
counties for which wage determinations are most in need of revision. 
(See app.  II for a detailed description of Labor's prevailing wage
determination and appeal procedures.) For each area designated for
survey, Labor identifies the counties for which the wage
determination should be conducted and determines what construction
projects will be surveyed. 

Labor places primary responsibility for the collection and
compilation of the relevant wage data on about 30 staff distributed
among six Labor regional offices.  The survey is distributed to the
participant population, which includes the general contractor for
each construction project identified as comparable and within the
survey's geographic area.  In surveying the general contractors,
Labor requests information on subcontractors to solicit their
participation.  Labor also surveys interested third parties, such as
local unions and construction industry associations that are located
or active in the survey area. 

Once the data submissions are returned, the analysts review and
analyze the returned wage survey forms--WD-10 wage reporting
forms.\11 They follow up with the employer or third parties to
clarify any information that seems discrepant, inaccurate, or
confusing.\12 The analysts then use this information to create
computer-generated recommended prevailing wages for key construction
job classifications.\13

These recommended prevailing wages are reviewed and approved by
Labor's National Office in Washington, D.C.  Labor publishes the
Davis-Bacon final wage determinations in printed reports and on its
electronic bulletin board, allowing updates to be rapidly
communicated to contracting and assisting agencies.  Modifications to
wage determinations are published in the Federal Register.  Any
interested party has the opportunity to review or contest, through a
written or telephone request, a final wage determination issued by
Labor in Washington, D.C.  (See app.  II for details on Labor's
appeals process.)


--------------------
\10 Interested parties may include the employers or contractors;
contractor associations; construction workers; labor unions; and
federal, state, and local agencies. 

\11 See app.  II for a sample WD-10 wage reporting form and other
forms used in the Davis-Bacon prevailing wage determination process. 

\12 Before August 1995, when Labor received information on the same
project from both the employer and a third party, wage analysts were
not required to contact the employer to resolve any discrepancies
between them. 

\13 In accordance with its regulations, Labor determines an area's
prevailing wage rate based on a 50-percent rule, which states that if
the same wage is not paid to a majority of workers employed in the
classification, the prevailing wage shall be the average of the wages
paid, weighted by the total employed in the classification. 


   WEAKNESSES IN LABOR'S
   PROCEDURES COULD LEAD TO
   INACCURATE PREVAILING WAGE
   RATES
------------------------------------------------------------ Letter :4

Labor's wage determination procedures contain weaknesses that could
permit the use of fraudulent or inaccurate data for setting
prevailing wage rates.  These weaknesses include limitations in the
degree to which Labor verifies the accuracy of the survey wage and
fringe benefit data it receives, limited computer capabilities and
safeguards to review wage data before calculating prevailing wage
rates, and an appeals process that may not be well publicized. 
Labor's failure to prevent the use of fraudulent or inaccurate data
may result in wages and fringe benefits being paid to construction
workers that are lower than those prevailing.  Erroneous prevailing
wage rates could also lead to excessive government construction costs
and undermine confidence in the system among survey respondents,
reducing their future participation. 


      VERIFICATION OF WAGE DATA
      LARGELY LIMITED TO TELEPHONE
      CONTACTS
---------------------------------------------------------- Letter :4.1

Labor's regional staff rely primarily on telephone responses from
employers or third parties to verify the information received on the
WD-10 wage reporting forms.  Staff in Labor's regional offices that
have Davis-Bacon operations reported that most of their verifications
of data submissions--clarifications concerning accuracy,
appropriateness, or inclusion--were conducted by telephone.  Labor's
procedures also do not require and Labor staff rarely request
supporting documentation--for example, payroll records--that
supplement the WD-10 wage reporting forms submitted by employers.\14
Labor officials and staff told us that if an employer insists that
the wages reported are accurate, Labor's wage analysts generally
accepted what was communicated verbally by telephone. 

Analysts conduct telephone verification with the employer on all
third-party data that appear to be inaccurate.  For example, when
employers and third parties submit wage information on the same
project, verification is conducted by contacting the employer in the
event of a discrepancy between data received from the employer and a
third party.\15 However, Labor officials and staff told us that,
before August 1995, there was no requirement to contact the employer
regarding the verification of third-party data.  Typically, if there
was some question regarding third-party data, staff generally
resolved the matter by contacting the third party only, rather than
verifying the information with the employer. 

Labor headquarters officials also said that because of resource
constraints, regional staff do not conduct on-site inspections or
reviews of employer payroll records to verify wage survey data.\16 In
recent years, Labor has reduced the number of staff allocated to
Davis-Bacon wage-setting activities.  For example, the number of
staff in Labor's regional offices assigned to the Davis-Bacon wage
determination process--who have primary responsibility for the wage
survey process--decreased from a total of 36 staff in fiscal year
1992 to 27 staff in fiscal year 1995, and Labor officials in one
region also told us that staff had only received two training courses
in the last 6 years.  Labor's regional staff told us that this staff
decline has challenged their ability to collect and review wage
survey data for accuracy and consistency. 


--------------------
\14 The only additional documentation typically requested is a list
from a project's employers--general contractors--of the
subcontractors who also work on a project. 

\15 Third-party data submissions generally account for about
one-third of all wage survey submissions.  However, in some
metropolitan areas, third parties may account for over one-half of
all data submissions received. 

\16 Labor officials also noted that the agency does not have the
authority under the Davis-Bacon Act to inspect wage records for
private projects without an employer's permission; however, at least
one of the reform bills would provide such authority. 


      LIMITED COMPUTER
      CAPABILITIES HINDER ABILITY
      TO DETECT ERRONEOUS DATA
---------------------------------------------------------- Letter :4.2

Labor officials reported a lack of both computer software and
hardware that could assist wage analysts in their reviews.  They said
that Labor staff depend on past experience and eyeballing the wage
data for accuracy and consistency.  For example, Labor offices do not
have computer software that could detect grossly inaccurate data
reported in Labor's surveys.  Regional staff reported only one
computer edit feature in the current system that could eliminate
duplicate entry of data received in the wage surveys.  As a result,
several review functions that could be performed by computers are
conducted by visual reviews by one or more wage analysts or
supervisory wage analysts in Labor's regional offices. 

Labor's ability to review wage survey data is also hindered by a lack
of up-to-date computer hardware.  For example, in the Atlanta and
Philadelphia regional offices, most of the computer hardware is old
and outdated.  In these offices, because of the computers' limited
memory capabilities, Labor staff told us that they are unable to
store historical data on prior wage determinations that would allow
wage analysts to compare current with prior recommendations for wage
determinations in a given locality. 

These limitations could be significant given the large number of
survey forms received and the frequency of errors on the WD-10
reporting forms.  In 1995, Labor received wage data from over 37,000
employers and third parties, and Labor staff reported that
submissions with some form of data error were quite common.  The
frequency of errors could be caused in part by employer confusion in
completing the wage reporting forms.  Depending on the employer's
size and level of automation, completing the WD-10 reporting forms
could be somewhat difficult and time consuming.  For example, the
employer must not only compute the hourly wages paid to each worker
who was employed on the particular project in a certain job
classification but must also determine the time period when the most
workers were employed in each particular job classification.\17

Representatives of an employer association, a union, and state labor
officials also told us that many smaller, nonunion employers do not
have the capability to easily report information on the WD-10 wage
reporting forms.\18

Although Labor staff reported that wage surveys with data errors are
fairly common, agency officials believe that it is very unlikely that
erroneous wage data went undetected and were used in the prevailing
wage determination.  They said that a key responsibility of Labor's
wage analysts is to closely scrutinize the WD-10 wage reporting forms
and contact employers as necessary for clarification.  Labor
officials contended that, over time, this interaction with employers
and third parties permitted Labor staff to develop considerable
knowledge of and expertise in the construction industry in their
geographic areas and to easily detect wage survey data that are
inaccurate, incomplete, or inconsistent. 

Although Labor officials also acknowledged that additional staff,
enhanced computer capabilities, and the provision of more training
and outreach to employers and third parties on how to participate in
the surveys could improve their review of wage survey data and reduce
errors, they said that all these options require additional resources
that are currently unavailable. 


--------------------
\17 This is the so-called peak week calculation required for
completion by the WD-10 wage reporting form.  The employer must
identify the names, addresses, and telephone numbers of all
subcontractors that worked on the particular project included in the
survey.  (See app.  II.)

\18 They also believed that more education and training programs
offered by Labor could improve survey participants' understanding of
information required on the survey forms. 


      LACK OF AWARENESS OF THE
      APPEALS PROCESS MAY LIMIT
      ITS EFFECTIVENESS
---------------------------------------------------------- Letter :4.3

Labor's regulations provide any interested party, such as an
employee, employer or contractor, or representatives of associations
or unions, the opportunity to request a reconsideration of Labor's
prevailing wage determinations.  A formal request for reconsideration
must be in writing and accompanied by a full statement of the
interested party's views and any supporting wage data or other
pertinent information.  Instead of formally requesting a
reconsideration, an interested party may make informal inquiries by
telephone or in writing for quick resolution of questions about wage
determinations.  Labor's regional officials handle informal inquiries
about wage determinations, with WHD's National Office staff getting
involved only in the formal reconsiderations.  Labor reported that
most inquiries on its wage determinations are informal and are
generally resolved quickly over the telephone at the regional
offices. 

If an informal inquiry is not resolved to the satisfaction of the
interested party, he or she may submit a formal request for
reconsideration to either the regional or National Office.  On formal
requests for reconsideration, regional offices may or may not make
recommendations before referring them to the National Office for a
decision.  A successful request for reconsideration typically results
in Labor modifying an existing determination or conducting a new wage
survey.  An interested party may appeal an unsuccessful request to
Labor's Administrative Review Board for adjudication.  Labor
officials said it is extremely rare for anyone to make formal
requests for reconsideration of a determination, reporting that there
had been only one such case in the last 5 years.  Labor officials
interpreted this record as a vindication of complaints about the
accuracy and fairness of the prevailing wage determinations issued. 

The small number of formal appeals could also be evidence of
interested parties' lack of awareness of their rights and the
difficulty they faced in collecting the evidence necessary to sustain
a case.  Representatives of construction unions and industry trade
associations told us that employers were generally unaware of their
rights to appeal Labor's final wage determinations.  In addition,
officials with the Oklahoma Department of Labor told us that even if
an interested party wanted to appeal a wage determination to the
National Office and the Administrative Review Board, the length of
time it takes to independently verify wage data submissions could
discourage such an action.  For example, for their 1995 study of wage
rates in Oklahoma City, an intra-agency team took 1 month to fully
investigate and verify the information for only three construction
projects.  A private employer or organization wishing to appeal a
determination on the basis that the wage information used was
inaccurate might experience similar difficulties. 

Labor officials reported that for an interested party to contest a
new wage determination successfully, it must present evidence
demonstrating that the survey wage rates do not reflect the pattern
of wages paid in a particular area.  The amount of evidence to
warrant a new survey will vary according to a variety of factors,
including the quality of the evidence and the amount of construction
activity in an area.  Labor officials contended that collecting
information to contest a wage survey is not difficult for most
interested parties who inquire.  They said that most inquiries
originate either from contractors who have access to wage rates on
their own projects; unions who have access to collective bargaining
rates; or project grantees, such as local governments, who have
access to the wage rates paid on their other projects.  However,
Labor officials acknowledged that it could be difficult for an
interested party to challenge a wage determination on the basis that
the wage data submitted by employers were inaccurate. 


      CONSEQUENCES OF WAGE
      DETERMINATIONS BASED ON
      ERRONEOUS DATA
---------------------------------------------------------- Letter :4.4

Wage determinations based on erroneous data could result in wages and
fringe benefits paid to workers that are higher or lower than would
otherwise be prevailing on federal construction projects.  For
example, although they considered it unlikely, Labor officials
acknowledged that there could be an incentive for third parties,
particularly union contractors, to report higher wages than those
being paid on a particular construction project.  The reporting of
higher wages could influence the prevailing wages in a local area
toward the typically higher union rate or at least minimize any wage
differential between the unionized wage rate and the prevailing wage
to be paid on Davis-Bacon construction projects. 

The use of inaccurate data could also lead to lower wages for
construction workers on federal projects than would otherwise be
prevailing.  Industry association members and officials told us that
in several parts of the country, employers, especially nonunion
contractors, paid wages on their private projects below the
prevailing wage levels specified by the Davis-Bacon Act in their
areas.\19 These officials told us that this differential sometimes
proved problematic for contractors in retaining their skilled labor
force.  For example, an official of an employer association told us
that an employer who successfully bid on a Davis-Bacon contract but
who typically paid wages below the prevailing rate would be required
to pay the workers employed on the new project at the higher
Davis-Bacon wage rates.  Depending on the local labor market
conditions, when the project was completed, these workers typically
received their pre-Davis-Bacon, lower wages and fringe benefits on
any future work.  In such cases, some employees became disgruntled,
believing that they were being cheated, or suffered lower morale that
sometimes led to increased staff turnover.\20 Given these conditions,
Labor officials acknowledged that an employer in a largely nonunion
area who had been paying lower than average wages would have an
incentive to "chisel" or report wages and fringe benefits levels
somewhat lower than what he or she was actually paying, in an attempt
to lower the Davis-Bacon rate.\21

To the extent that the submission of fraudulent or inaccurate data is
perceived by the construction industry to be a widespread problem, it
could also erode survey participation support among the interested
parties.  Officials from one industry association reported that
despite training classes and other assistance it provides, it was
difficult for the association to foster employer survey
participation, especially among the nonunion contractors.  To the
extent that participants' beliefs about erroneous data being used as
the basis for Labor's wage determinations became widespread, the
number of survey respondents would likely decrease. 


--------------------
\19 In at least some parts of the country, nonunion wages determine
the vast majority of prevailing wage determinations.  For example, in
Labor's Atlanta region, nonunion wage rates dominated 72 percent of
all existing wage determinations.  In these determinations,
prevailing wages were determined by a weighted average of the
submitted wage data. 

\20 Depending on local labor market conditions, if the employer did
not bid on the Davis-Bacon project, he or she could still be affected
if skilled workers quit to search for work on the new, higher wage
federally funded project. 

\21 Labor officials said that it is much more likely for some
employers to report data selectively in an effort to lower the
prevailing wage rate.  For example, a contractor may only submit data
on those projects where the wages paid were relatively low, ignoring
projects where they have paid a somewhat higher wage. 


   LABOR'S SHORT- AND LONG-TERM
   INITIATIVES TO IMPROVE WAGE
   DETERMINATION PROCESS
------------------------------------------------------------ Letter :5

At least partially in response to the problems detected in the
Oklahoma wage surveys, Labor has proposed both short- and long-term
initiatives to improve the accuracy of the data used in prevailing
wage determinations.  In August 1995, Labor implemented a procedural
change requiring its regional wage analysts to conduct telephone
verifications with the employer on all third-party data that appear
to be inaccurate or discrepant.  In addition, the new policy requires
analysts to verify with the employers at least a 10-percent sample of
third-party data that appear to be accurate. 

Under this requirement, Labor staff first attempt to verify this
information by telephone with the employer.  If Labor staff are
unable to contact the employer, they will then contact the third
party to request supporting documentation verifying the submitted
wage information on the specific construction project.  This new
requirement was linked with training for all regional office staff
that reemphasized agency procedures for analyzing and verifying
employer and third-party data received in its wage surveys.  Although
the new procedures may improve the accuracy of data received from
third parties, Labor's change does not include enhanced verification
of the majority of the data used in most wage determinations; that
is, data directly received from employers.  In addition, the new
procedures do not move toward encouraging the use of Labor's appeals
process. 

Labor has proposed placing a statement on the WD-10 survey reporting
form that would inform respondents that they could be prosecuted if
they willfully falsify data in the Davis-Bacon wage surveys.  Labor
officials solicited comments on this proposal in the Federal Register
in February 1996, with the comment period ending in May 1996. 

Labor has also proposed a long-term strategy to review the entire
Davis-Bacon wage determination process.  In late 1995, Labor
established an ongoing task group to identify various strategies for
improving the process it uses to determine prevailing wages.  Labor
officials held meetings with contractors knowledgeable about the
Davis-Bacon prevailing wage determination process.  These continuing
discussions have led to the identification of various weaknesses in
the wage determination process and steps Labor might take to address
them. 

Labor has acknowledged the weaknesses identified by the task group;
for example, the system's vulnerability to manipulation through the
submission of false data that can erode the accuracy of some of its
wage determinations.  In response, in its fiscal year 1997 budget
request, Labor asked for about $4 million to develop, evaluate, and
implement alternative reliable methodologies or procedures that will
yield accurate and timely wage determinations at reasonable cost. 
These alternatives would include

  -- exploring the feasibility of replacing the current
     labor-intensive wage survey process with the development of
     econometric models from which occupational wage rates could be
     extrapolated from existing sources of wage data and

  -- privatizing the wage survey process using alternative
     technologies that would derive prevailing wage rates from a
     sample design rather than from a universe survey as is currently
     used. 

If such alternatives are not feasible for all localities and
occupational job classifications, Labor would focus on enhancing the
existing survey process, including the improvement of data
verification procedures, the fostering of employer participation, and
the expansion of the geographic scope of the Davis-Bacon surveys. 
Labor anticipates completing its evaluation of the wage determination
process in late 1996 and it expects to consider any recommendations
that may result from the Office of the Inspector General study, which
should be completed about the same time.  In the interim, absent any
additional action, Labor's procedures will still contain many of the
weaknesses that we have identified.  These could result in the use of
erroneous data in its determination of prevailing wages. 


   CONCLUSIONS
------------------------------------------------------------ Letter :6

Labor's responsibilities to establish prevailing wage rates have a
significant impact on the $42 billion to be spent in fiscal year 1996
in federal construction contract business and the wages paid to
construction workers.  Although Labor has worked to improve the
accuracy of its wage determinations, a lack of confidence still
exists with Labor's process. 

Labor has begun to address process weaknesses, including the
exploration of alternative reliable methodologies for collecting the
information it needs to make the wage determinations.  In addition,
if it discovers that such alternatives are not feasible for all
localities, Labor plans to take other action to improve its existing
survey process.  Labor's actions are clearly positive steps; however,
what is missing from Labor's plans is a short-term solution to the
existing system's vulnerability to the use of fraudulent or
inaccurate data. 

Even if Labor obtains the additional funds that it requested to
improve its process, it would take some time to identify and
implement improvements.  In the meanwhile, Labor would continue to
issue new wage determinations and enforce compliance with existing
ones that may be based on fraudulent or inaccurate data.  Such data
can lead to the payment of wages that are either lower than what
workers should receive by law or else higher than the actual
prevailing wages, which would inflate federal construction costs at
the taxpayer's expense.  Although we have not established the extent
to which such data have been used, the system's long-standing
vulnerabilities and a lack of confidence by some critics in the
accuracy of the wage determinations suggest that immediate changes
are in order. 

We believe that Labor needs to improve its verification of wage data
submitted by employers--similar to the change it made in verification
of third-party submissions.  More specifically, Labor should apply to
employer submissions a comparable approach of selecting a sample for
more intensive review.  When a submission is selected for review,
Labor should ask the employer to provide additional documentation
supporting the wage data.  Although Labor has indicated that it is
unable to do more intensive verification because of limited staff
resources, Labor does not appear to have explored proposals to target
its scarce resources more effectively toward verification efforts. 

Labor also needs to revisit its procedures to appeal wage
determinations to improve their accessibility.  At a minimum, it
needs to publicize the availability of the appeals process to all
interested parties and the rights of those parties to obtain
information on the data used to develop the wage determinations
believed to be questionable.  For example, Labor could place a
statement either with its issuance of each wage determination, on its
wage survey forms, or in some other manner, informing interested
parties of their rights to request summary information on a wage
determination (that is, the WD-22a construction project wage summary
report) and of the procedures for initiating an appeal. 


   RECOMMENDATIONS
------------------------------------------------------------ Letter :7

While Labor continues in the long term to evaluate the Davis-Bacon
wage determination process, we recommend that the Secretary of Labor
require the Assistant Secretary for Employment Standards to request a
sample of participating employers to submit appropriate documentation
on their data submissions or to conduct a limited number of on-site
inspection reviews of employer wage data. 

Because Labor's appeals process can serve as an additional internal
control to guard against the use of fraudulent or inaccurate data in
the wage determination process, we recommend that the Secretary of
Labor require the Assistant Secretary for Employment Standards to
inform employers, unions, and other interested parties of their
rights to request summary information on a wage determination and of
the agency's procedures for initiating an appeal of a wage
determination. 


   AGENCY COMMENTS
------------------------------------------------------------ Letter :8

The Department of Labor concurs with our recommendations and stated
that it is developing an action plan, consistent with available
resources, to implement the recommendations while it continues to
evaluate longer-term revisions to the Davis-Bacon wage determination
process.  However, Labor disagreed with our chacterization of a
"pervasive" lack of confidence in the wage determinations on the part
of employers and other affected parties.  We agree with Labor's
comment and deleted that characterization from our conclusions. 
Labor also provided information to clarify the report's chronology
regarding action to correct wage determinations in Oklahoma, and we
have revised our description as necessary.  Finally, Labor provided
some technical corrections, which we incorporated as appropriate in
the report.  Labor's comments are included in appendix III. 


---------------------------------------------------------- Letter :8.1

As agreed with your office, we are sending copies of this report to
the appropriate congressional committees, the Secretary of Labor, the
Assistant Secretary of the Employment Standards Administration, WHD
officials in Atlanta and Philadelphia, and the respective regional
offices that participated in our telephone survey.  We will also make
copies available to others on request.  Major contributors to this
report are listed in appendix IV. 

Carlotta C.  Joyner
Director, Education and
 Employment Issues


OBJECTIVES, SCOPE, AND METHODOLOGY
=========================================================== Appendix I

We were asked by the Chairmen of the Subcommittee on Oversight and
Investigations and the Subcommittee on Workforce Protections of the
House Committee on Economic and Educational Opportunities to study
potential weaknesses in the process that the Department of Labor uses
to make prevailing wage determinations under the Davis-Bacon Act of
1931.  More specifically, the objectives of our review were to (1)
identify the steps used by Labor to collect data and determine and
report the prevailing wages to be paid on federally funded
construction projects, (2) determine whether specific weaknesses in
the process could have resulted in the use of inaccurate or
fraudulent data in its prevailing wage determinations, and (3) assess
the extent to which Labor is addressing any identified process
weaknesses. 


   METHODOLOGY
--------------------------------------------------------- Appendix I:1

To respond to this request, we collected information from Labor's WHD
on the Davis-Bacon prevailing wage determination process, including
Labor's survey procedures and its implementing regulations.  To
understand the procedures for collecting, determining, and reporting
survey wage data, we interviewed Labor officials and staff in
Washington, D.C.; Atlanta; and Philadelphia.  We also surveyed staff
in Labor's six regions with Davis-Bacon operations to ascertain the
procedures used to review and verify wage and fringe benefits survey
data.  We also collected information from these regions on the
procedures available to appeal Labor's wage determinations and the
frequency of those appeals. 

We also obtained the views of representatives of individual
employers, construction unions, and industry associations regarding
potential weaknesses in Labor's wage determination process and on
possible options to address those weaknesses.  For example, we spoke
with representatives from the Associated Builders and Contractors,
Incorporated; the International Union of Operating Engineers; and the
National Alliance for Fair Contracting to obtain the views of groups
most directly affected by the administration of the Davis-Bacon Act. 
In addition, we spoke with representatives from the State of Oklahoma
Department of Labor and the F.W.  Dodge Division of McGraw-Hill
Information Systems.  We also reviewed the social science literature
on the Davis-Bacon Act, focusing on those articles that addressed
issues on the wage determination process. 


   ANALYSIS OF THE WAGE
   DETERMINATION PROCESS
--------------------------------------------------------- Appendix I:2

To identify the steps in the survey and wage determination process,
we reviewed Labor's documents, including the Davis-Bacon Construction
Wage Determinations Manual of Operations, and Davis-Bacon training
materials for wage analysts.  We interviewed Labor officials at the
National Office in Washington, D.C., to clarify our understanding of
the policies and procedures used in the wage determination process
and to obtain information on changes to the process implemented in
1995. 

We visited Labor's regional offices in Atlanta and Philadelphia,
where we interviewed the regional administrators and wage specialists
and analysts about how the process works and obtained their
perspectives on weaknesses in the process.  We chose to conduct
on-site visits in the Atlanta and Philadelphia regional offices on
the basis of regional personnel experiences in the prevailing wage
process, the dollar value of federal construction, and the degree of
unionization.  The remaining four regional offices were contacted by
telephone and questioned about specific aspects of the survey process
dealing with data integrity and the appeals process. 


   ANALYSIS OF RECENT CHANGES TO
   THE PROCESS
--------------------------------------------------------- Appendix I:3

We reviewed Labor's recent procedural changes to improve the
Davis-Bacon wage determination process.  We also spoke with federal
Labor officials in the Washington, D.C., office about efforts
recently instituted as well as actions being considered.  We also
reviewed Labor's 1996 draft report of proposals to evaluate ways to
improve the full Davis-Bacon prevailing wage determinations process,
including Labor's fiscal year 1997 budget request for additional
funds to contract for the development, evaluation, and implementation
of alternative reliable methodologies. 

Labor's recent changes to the wage determination process were
assessed on the basis of their potential to strengthen those areas we
found potentially vulnerable to the inclusion of inaccurate or
fraudulent data.  We did not evaluate the actual impact of these
changes. 


   LIMITATIONS OF OUR REVIEW
--------------------------------------------------------- Appendix I:4

Because we limited our analysis of the wage survey and determination
process to issues directly related to the detection of inaccurate or
fraudulent data, we did not attempt to determine the extent to which
any identified weaknesses in Labor's process were actually
contributing to inaccurate prevailing wage determinations.  We also
did not verify the accuracy of the wage determination data Labor used
or explore the adequacy of Labor's survey response rates or its
calculation of prevailing wages. 


LABOR'S WAGE DETERMINATION AND
APPEALS PROCESS UNDER THE
DAVIS-BACON ACT
========================================================== Appendix II

The Davis-Bacon Act requires that workers employed on federal
construction contracts valued in excess of $2,000 be paid, at a
minimum, wages and fringe benefits that the Secretary of Labor
determines to be prevailing\22 for corresponding classes of workers
employed on projects that are similar in character to the contract
work in the area where the construction takes place. 

To determine the prevailing wages and fringe benefits in various
areas throughout the United States, Labor's WHD periodically surveys
wages and fringe benefits paid to workers in four basic types of
construction (building, residential, highway, and heavy).\23 Labor
has designated the county as the basic geographic unit for data
collection, although Labor also conducts some surveys setting
prevailing wage rates for groups of counties.  Wage rates are issued
for a series of job classifications in the four basic types of
construction, so each wage determination requires the calculation of
prevailing wages for many different trades, such as electrician,
plumber, carpenter, and drywall installer.  For example, the
prevailing wage rates for the Washington, D.C., metropolitan area
include wage rates for 143 different construction trade occupations. 
Because there are over 3,000 counties, more than 12,000 surveys could
be conducted each year if every county in the United States was
surveyed.  In fiscal year 1995, Labor completed about 100 prevailing
wage surveys, gathering wage and fringe benefit data from over 37,000
employers and interested parties.  As shown in figure II.1, Labor's
wage determination process consists of four basic stages: 

  -- planning and scheduling surveys of employers' wages and fringe
     benefits in similar job classifications on comparable
     construction projects;

  -- conducting surveys of employers and third parties,\24

such as representatives of unions or industry associations, on
construction projects;

  -- clarifying and analyzing respondents' data; and

  -- issuing the wage determinations.\25

In addition, an interested party, such as a contractor; labor union;
or federal, state, or local agency, may seek review and
reconsideration of Labor's final wage determinations through an
appeals process. 

   Figure II.1:  Labor's
   Davis-Bacon Wage Determination
   Process

   (See figure in printed
   edition.)


--------------------
\22 Labor regulations define the prevailing wage as the wage paid to
the majority (more than 50 percent) of the workers in the job
classification on similar projects in the area during the period in
question.  If the same wage is not paid to a majority of those
employed in the classification, the prevailing wage will be the
average of the wages paid, weighted by the total employed in the
classification. 

\23 Heavy construction is a catch-all grouping that includes projects
not properly classified under the other three types of construction;
for example, dredging and sewer projects. 

\24 Labor defines third-party data as project wage and fringe benefit
data that are submitted for use in a wage survey by any party other
than an employer or other payroll holder. 

\25 A wage determination is the listing of wage and fringe benefits
rates for each classification of workers that the WHD Administrator
has determined to be prevailing in a given area for a type of
construction.  Each wage determination involves establishing
prevailing wage rates for many occupations. 


   STAGE 1:  PLANNING AND
   SCHEDULING SURVEY ACTIVITY
-------------------------------------------------------- Appendix II:1

Labor annually identifies the geographic areas that it plans to
survey.  Because it has limited resources, a key task of Labor's
staff is to identify those counties and types of construction most in
need of a new survey.\26 In selecting areas for inclusion in planned
surveys, the regional offices establish priorities based on criteria
that include

  -- the need for a new survey based on the volume of federal
     construction in the area;

  -- the age of the most recent survey; and

  -- requests or complaints from interested parties, such as state
     and county agencies, unions, and contractors' associations. 

If a type of construction in a particular county is covered by a wage
determination based on collective bargaining agreements (CBA) and
Labor has no indication that the situation has changed such that a
wage determination should now reflect nonunion rates, an updated wage
determination may be based on updated CBAs.  The unions submit their
updated CBAs directly to the National Office. 


--------------------
\26 In 1996, the average age of a wage survey is more than 7 years. 


      THE REGIONAL SURVEY PLANNING
      REPORT SHOWS WHERE FEDERALLY
      FINANCED CONSTRUCTION IS
      CONCENTRATED
------------------------------------------------------ Appendix II:1.1

Planning begins in the third quarter of each fiscal year when the
National Office provides regional offices with the Regional Survey
Planning Report (RSPR).  The RSPR provides data obtained under
contract with the F.W.  Dodge Division of McGraw-Hill Information
Systems.  The data show the number and value of active construction
projects by region, state, county, and type of construction and give
the percentage of total construction that is federally financed.\27
Labor uses the F.W.  Dodge data because they comprise the only
continuous nationwide database on construction projects.  Labor
supplements the F.W.  Dodge data with additional information provided
to the National Office by federal agencies regarding their planned
construction projects.  The RSPR also includes the date of the most
recent survey for each county and whether the existing wage
determinations for each county are union, nonunion, or a combination
of both. 

Using this information, the regional offices, in consultation with
the National Office, designate the counties and type of construction
to be included in the upcoming regional surveys.  Although Labor
usually designates the county as the geographic unit for data
collection, in some cases more than one county is included in a
specific data gathering effort. 

The regional offices determine the resources required to conduct each
of the priority surveys.  When all available resources have been
allocated, the regional offices transmit to the National Office for
review their schedules of the surveys they plan to do:  the types of
construction, geographic areas, and time periods that define each
survey. 

When Labor's National Office approves all regional offices'
preliminary survey schedules, it assembles them in a national survey
schedule that it transmits to interested parties, such as major
national contractor and labor organizations, for their review and
comment.  The National Office transmits any comments or suggestions
received from interested parties to its affected regional offices. 
Organizations proposing modifications of the schedule are requested
to support their perceived need for alternative survey locations by
providing sufficient evidence of the wages paid to workers in the
type of construction in question in the area where they want a survey
conducted. 


--------------------
\27 The F.W.  Dodge data consider a project to be active from the
time on-site work begins (ground breaking) until it is released to
and accepted by the owner. 


      EACH REGIONAL OFFICE OBTAINS
      A FILE OF ACTIVE PROJECTS
      THAT MATCH ITS SURVEY
      OBJECTIVES
------------------------------------------------------ Appendix II:1.2

The target date for establishing the final fiscal year survey
schedule is September 15.  Once the National Office has established
the final schedule, each regional office starts to obtain information
it can use to generate lists of survey participants for each of the
surveys it plans to conduct.  Each regional office contacts
Construction Resources Analysis (CRA) at the University of Tennessee. 
CRA applies a model to the F.W.  Dodge data that identifies all
construction projects in the start-up phase\28 within the parameters
specified in the regional office's request and produces a file of
projects that were active during a given time period.  The time
period may be 3 months or longer, depending on whether the number of
projects active during the period is adequate for a particular
survey.  F.W.  Dodge provides information on each project directly to
the regional offices.  The F.W.  Dodge reports for each project
include the location, type of construction, and cost of the project;
the name and address of the contractor or other key firm\29
associated with each project; and if available, the
subcontractors.\30


--------------------
\28 F.W.  Dodge defines the start stage as one in which the
construction will commence within 60 days. 

\29 Other examples of key firms would be the owner or architect of
the project. 

\30 A subcontractor is an employer that has a contractual agreement
with the project's prime employer.  On a typical construction
project, most employees working on the job will be employees of
subcontractors. 


      ANALYSTS SCREEN PROJECTS TO
      DETERMINE THOSE TO BE
      SURVEYED
------------------------------------------------------ Appendix II:1.3

When the F.W.  Dodge reports are received by the regional offices,
Labor analysts screen them to make sure the projects meet four basic
criteria for each survey.  The project must

  -- be of the correct construction type,

  -- be in the correct geographic area,

  -- fall within the survey time frame, and

  -- have a value of at least $2,000. 

In addition to obtaining files of active projects, Labor analysts are
encouraged to research files of unsolicited information that may
contain payment evidence submitted in the past that is within the
scope of a current survey. 


   STAGE 2:  CONDUCTING SURVEYS OF
   PARTICIPANTS
-------------------------------------------------------- Appendix II:2


      REGIONAL OFFICES CONDUCT THE
      SURVEYS
------------------------------------------------------ Appendix II:2.1

When the regional offices are ready to conduct the new surveys, they
send the WD-10 wage reporting form to each contractor (or employer)
identified by the F.W.  Dodge reports as being in charge of one of
the projects to be surveyed, together with a transmittal letter that
requests information on any additional applicable projects the
contractor may have.  (See figs.  II.2, II.4, and II.5.) Every WD-10
that goes out for a particular project has on it a unique project
code, the location of the project, and a description of it.  Data
requested on the WD-10 include a description of the project and its
location, in order to assure the regional office that each project
for which it receives data is the same as the one it intended to have
in the survey.  The WD-10 also requests the contractor's name and
address; the value of the project; the starting and completion dates;
the wage rate, including fringe benefits, paid to each worker; and
the number of workers employed in each classification during the week
of peak activity for that classification.  The week of peak or
highest activity for each job classification is the week when the
most workers were employed in that particular classification.  The
survey respondent is also asked to indicate which of four categories
of construction the project belongs in.  Detailed instructions appear
on the back of the WD-10.  (See fig.  II.5.)


      SURVEY IS ANNOUNCED TO THIRD
      PARTIES
------------------------------------------------------ Appendix II:2.2

In addition, about 2 weeks before a survey is scheduled to begin,
regional offices send WD-10s and transmittal letters to a list of
third parties, such as national and local unions and industry
associations, to encourage participation.  (See fig.  II.3.) Labor
encourages the submission of wage information from third parties,
including unions and contractors' associations that are not the
direct employers of the workers in question, in an effort to collect
as much data as possible.\31 Third parties that obtain wage data for
their own purposes may share it with Labor without identifying
specific workers.  For example, union officials need wage information
to correctly assess workers' contributions toward fringe benefits. 
Third-party data generally serve as a check on data submitted by
contractors if both submit data on the same project.  Regional
offices also organize local meetings with members of interested
organizations to explain the purpose of the surveys and how to fill
out the WD-10.\32

Because the F.W.  Dodge reports do not identify all the
subcontractors, both the WD-10 and the transmittal letter ask for a
list of subcontractors on each project.  Subcontractors generally
employ the largest portion of on-site workers, so their
identification is considered critical to the success of the wage
survey.  Analysts send WD-10s and transmittal letters to
subcontractors as subcontractor lists are received. 


--------------------
\31 Labor officials said that third-party data submissions generally
account for about one-third of all wage survey submissions.  The
percentage of survey respondents who are third parties can be
substantial for surveys of metropolitan areas.  Staff estimated that
third-party participation may have been as high as one-half for a
recent survey of metropolitan building construction.  There is little
or no third-party participation in surveys of rural areas, staff
said. 

\32 Regional staff in Atlanta and Philadelphia said that they
generally have not held this type of meeting because of limited
resources. 


      PARTICIPANTS WHO SUBMIT DATA
      RECEIVE A WRITTEN
      ACKNOWLEDGMENT
------------------------------------------------------ Appendix II:2.3

Transmittal letters also state that survey respondents will receive
an acknowledgment of data submitted, and that they should contact the
regional office if one is not received.  Providing an acknowledgment
is intended to reduce the number of complaints that data furnished
were not considered in the survey.  Labor analysts send contractors
who do not respond to the survey a second WD-10 and a follow-up
letter.  If they still do not respond, analysts attempt to contact
them by telephone to encourage them to participate. 


   STAGE 3:  CLARIFYING AND
   ANALYZING RESPONDENTS' DATA
-------------------------------------------------------- Appendix II:3


      ANALYSTS REVIEW THE DATA
      SUBMITTED AS THEY RECEIVE
      THEM
------------------------------------------------------ Appendix II:3.1

As the Labor wage analysts receive the completed WD-10s in the
regional offices, they review and analyze the data.  Labor's training
manual guides the analyst through each block of the WD-10, pointing
out problems to look for in data received for each one.  Analysts are
instructed to write the information they receive by telephone
directly on the WD-10 in a contrasting color of ink, indicating the
source and the date received.  They are instructed to draw one line
through the old information so it is still legible. 

Labor's wage analysts review the WD-10s to identify missing
information, ambiguities, and inconsistencies that they then attempt
to clarify or verify by telephone.  For example, an analyst may call
a contractor for a description of the work done on a project in order
to verify that a particular project has been classified according to
the correct construction type.  An analyst may also call a contractor
to ask about the specific type of work that was performed by an
employee in a classification that is reported in generic terms, such
as a mechanic.  In that situation, the analyst would specify on the
WD-10 whether it is a plumber mechanic or some other type of mechanic
to make sure that the wages that are reported are appropriately
matched to the occupations that are paid those rates. 

Similarly, due to variations in area practice, analysts may routinely
call to find out what type of work the employees in certain
classifications are doing.  This is because in some areas of the
country some contractors have established particular duties of
traditional general crafts, for example carpenters, as specialty
crafts that are usually paid at lower rates than the general craft. 


      NEW POLICY IMPLEMENTED FOR
      VERIFYING THIRD-PARTY DATA
------------------------------------------------------ Appendix II:3.2

In August 1995, Labor implemented a new policy for verifying third-
party data.  Where data submitted by third parties present problems,
Labor now requires wage analysts to conduct a verification review by
telephone of all data from the third party with the employer.  In
cases where the employer cannot be reached, Labor will accept
third-party data only with supporting payroll documentation. 
Furthermore, the new policy requires analysts to verify with
employers a sample of at least 10 percent of the third-party data
that appear to present no problems. 


      DATA ARE RECORDED AND
      TABULATED
------------------------------------------------------ Appendix II:3.3

When an analyst is satisfied that any remaining issues with respect
to the data on the WD-10s for a particular project have been
resolved, the data are recorded and tabulated.  The analyst enters
them into a computer, which uses the data to generate a Project Wage
Summary, Form WD-22a, for reporting survey information on a
project-by-project basis.  The WD-22a has a section for reporting the
name, location, and value of each project; the number of employees
who were in each classification; and their hourly wage and fringe
benefits.  It also has a section for reporting the date of completion
or percentage of the project completed, whichever is applicable. 
(See fig.  II.6.)


      ANALYSTS DETERMINE IF DATA
      ARE ADEQUATE
------------------------------------------------------ Appendix II:3.4

At least 2 weeks before the survey cut-off date, the response rate
for the survey is calculated to allow time to take follow-up action
if the response rate is determined to be inadequate.  For example,
WHD operational procedures specify that if data gathered for building
or residential surveys provide less than a 25-percent usable response
rate or less than one-half of the required key classes of workers,\33
the analyst will need to obtain data from comparable federally
financed projects in the same locality.\34

If an analyst has no data on occupations identified by Labor as key
classifications of workers for the type of construction being
surveyed, he or she is required by Labor's procedures to call all the
subcontractors included in the survey who do that type of work and
from whom data are missing, to try to get data.  If the analyst still
cannot get sufficient data on at least one-half of the required key
classes, consideration must be given to expanding the scope of the
survey geographically to get more crafts represented.  If the overall
survey usable response rate is 25 percent or more, data on three
workers from two contractors are sufficient to establish a wage rate
for a key occupation. 

After the survey cut-off date, when all valid data have been recorded
and tabulated, a final survey response rate is computer-generated. 
Typically, it takes a WHD analyst 4 months to conduct a survey. 


--------------------
\33 Labor defines key classes of workers as those determined
necessary for each of the four types of construction surveys. 

\34 Since 1985, regulation has prohibited, to the extent practicable,
the use of wages for federal construction in determining prevailing
wages. 


      PREVAILING WAGE RATES ARE
      COMPUTER-GENERATED
------------------------------------------------------ Appendix II:3.5

Once all the valid project data have been entered, the prevailing
wage rate for each classification of worker can be
computer-generated.  If there is a majority of workers paid at a
single rate in a job classification, that rate prevails for the
classification.  The wage rate needs to be the same to the penny to
constitute a single rate.  If there is no majority paid at the same
rate for a particular classification, a weighted average wage rate
for that occupation is calculated. 

The prevailing wage rate for each occupation is compiled in a
computer-generated comprehensive report for each survey, the Wage
Compilation Report, Form WD-22.  The WD-22 lists each occupation and
the wage rate recommended for that occupation by the regional office. 
A rule column indicates whether the rate is based on a majority (M)
or a weighted average (A), and a column to the left of the rule
column provides the number of workers for which data were used to
compute each wage rate.  (See fig.  II.7.) The regional offices
transmit survey results to the National Office, which reviews the
results and recommends further action if needed. 


   STAGE 4:  ISSUING THE WAGE
   DETERMINATIONS
-------------------------------------------------------- Appendix II:4

When all its recommendations have been acted upon, the National
Office issues the wage determination.  These determinations are
final.  There is no review or comment period provided to interested
parties before they go into effect.  Access to wage determinations is
provided both in printed reports available from the U.S. 
Superintendent of Documents and on an electronic bulletin board. 
Modifications to general wage determinations are published in the
Federal Register. 


   LABOR'S APPEALS PROCESS
-------------------------------------------------------- Appendix II:5

An interested party may seek review and reconsideration of Labor's
final wage determinations.  The National Office and the regional
offices accept protests and inquiries relating to wage determinations
at any time after a wage determination has been issued.  The National
Office refers all the complaints it receives to the relevant regional
offices for resolution.  Most inquiries are received informally by
telephone, although some are written complaints.  Regional office
staff said that a majority of those with concerns appear to have
their problems resolved after examining the information (collected on
a Form WD-22a) for the survey at issue, because they do not pursue
the matter further.  If an examination of the forms does not satisfy
them, they are required to provide information to support their claim
that a wage determination needs to be revised.  The National Office
modifies published wage determinations in cases where regional
offices, based on evidence provided, recommend that it do so; for
example, when it has been shown that a wage determination was the
result of an error by the regional office.  However, some of those
who seek to have wage rates revised are told that a new survey will
be necessary to resolve the particular issue that they are concerned
about.  For example, if the wage rates of one segment of the
construction industry are not adequately reflected in survey results
due to a low rate of participation in the survey by that segment of
the industry, a new survey would be necessary to resolve this issue. 


      AN INTERESTED PARTY MAY
      APPEAL A DECISION OF LABOR'S
      WHD ADMINISTRATOR
------------------------------------------------------ Appendix II:5.1

Those who are not satisfied with the decision of the regional office
may write to the National Office to request a ruling by Labor's WHD
Administrator.  If the revision of a wage rate has been sought and
denied by a ruling of Labor's WHD Administrator, an interested party
has 30 days to appeal to the Administrative Review Board for review
of the wage determination.  The board consists of three members
appointed by the Secretary of Labor.  The Solicitor of Labor
represents WHD in cases involving wage determinations before the
Administrative Review Board.  A petition to the board for review of a
wage determination must be in writing and accompanied by supporting
data, views, or arguments.  Labor reports that it has had only one
appeal with respect to wage determinations in the past 5 years.  The
result of the appeal was that a contested rate was changed. 


   TRANSMITTAL LETTERS AND FORMS
   USED IN LABOR'S DAVIS-BACON
   PREVAILING WAGE DETERMINATION
   PROCESS
-------------------------------------------------------- Appendix II:6

Presented below are examples of transmittal letters and forms used in
Labor's Davis-Bacon prevailing wage determination process.  Included
are examples of (1) the transmittal letter to accompany the Form
WD-10 sent to contractors; (2) the transmittal letter to accompany
the Form WD-10 sent to interested parties; (3) the front of the Form
WD-10 used to collect data on which wage determinations are based and
(4) the back of the Form WD-10 with instructions for filling out the
front of the form; (5) the Form WD-22a, which provides a summary of
data received on a particular project; and (6) the Form WD-22, which
is a comprehensive report of the prevailing wage rate for each
occupation in a survey. 

   Figure II.2:  Labor's
   Transmittal Letter to Accompany
   the Form WD-10 Sent to
   Contractors

   (See figure in printed
   edition.)

   Figure II.3:  Labor's
   Transmittal Letter to Accompany
   the Form WD-10 Sent to
   Interested Parties

   (See figure in printed
   edition.)

   Figure II.4:  Front of Labor's
   Form WD-10

   (See figure in printed
   edition.)

   Figure II.5:  Back of Labor's
   Form WD-10

   (See figure in printed
   edition.)

   Figure II.6:  Labor's Form
   WD-22a

   (See figure in printed
   edition.)

   Figure II.7:  Labor's Form
   WD-22

   (See figure in printed
   edition.)




(See figure in printed edition.)Appendix III
COMMENTS FROM THE DEPARTMENT OF
LABOR
========================================================== Appendix II



(See figure in printed edition.)


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix IV

Charles A.  Jeszeck, Assistant Director, (202) 512-7036
Linda W.  Stokes, Evaluator-in-Charge, (202) 512-7040
Sheila R.  Nicholson, Evaluator
Deborah McCormick, Methodologist
Robert Crystal, Assistant General Counsel
Ann McDermott, Publishing Advisor



RELATED GAO PRODUCTS
=========================================================== Appendix 0

Addressing the Deficit:  Budgetary Implications of Selected GAO Work
for Fiscal Year 1996 (GAO/OCG-95-2, Mar.  15, 1995). 

Workplace Regulation:  Information on Selected Employer and Union
Experiences (GAO/HEHS-94-138, Vol.  I, June 30, 1994). 

Davis-Bacon Act (GAO/HEHS-94-95R, Feb.  7, 1994). 

The Davis-Bacon Act Should Be Repealed (GAO/HRD-79-18, Apr.  27,
1979). 


*** End of document. ***