Reform Labor Laws and Transform the Labor Department into an Efficient Partner for Meeting Public Policy Goals Background Five labor laws are implemented through the federal procurement system. They are: -- The DavisBacon Act of 1931, which requires each contract for the construction, alteration, or repair of public buildings or works in excess of $2,000 to specify the minimum wages to be paid to various classes of laborers and mechanics.1 The minimum wages, including fringe benefits, are those the Secretary of Labor determines to be "prevailing" for the laborers and mechanics employed on projects of a similar character in the area in which the work is to be performed. The requirements of the act are incorporated in more than 70 other statutes that authorize federally assisted construction. -- The Copeland AntiKickback Act of 1934, which regulates payroll deductions on federal or federally assisted construction.2 This law prohibits anyone, under penalty of fine and/or imprisonment, from inducing an employee to give up any part of the compensation to which he or she is entitled under his contract of employment and requires contractors to submit a weekly statement of compliance to the agency contracting officer. Further, the act's implementing regulations require contractors on federal projects to submit and certify weekly payroll reports detailing daily hours worked, wage rates, total earnings, and any deductions. -- The Service Contract Act of 1965, which requires contractors on covered contracts in excess of $2,500 to pay service employees the minimum wage prevailing in the locality and provide specified minimum fringe benefits. The act applies to federal contracts if the principal purpose of the contract is to furnish services in the United States through the use of service employees.3 It also prohibits employment under hazardous or unsanitary conditions. -- The WalshHealey Public Contracts Act, which requires contractors manufacturing or furnishing materials, supplies, articles, and equipment to the federal government under contracts that exceed $10,000 to qualify as a manufacturer or regular dealer, pay all employees working under the contract at least the minimum wage as determined by the Secretary of Labor, agree that no employee will be required to work in excess of 40 hours a week unless paid overtime, avoid use of convict labor or persons under 16 years of age, and agree that no part of the contract will be performed in unsanitary, hazardous, or dangerous work places.4 -- The Contract Work Hours and Safety Standards Act, which requires that certain contracts contain a clause specifying that no laborer or mechanic doing any part of the work required by the contract be permitted or required to work more than 40 hours in any workweek unless paid for all such overtime hours at not less than 11_2 times the basic rate of pay.5 These prevailing wage laws were enacted because the federal procurement system generally required that contracts be awarded to the lowest responsible and responsive bidder through a sealed bid process. Unfortunately, in laborintensive industries, like construction and service, the most expedient way to lower a bid may be to lower labor costs. In recognition of the influence that the government's buying power had on the economies of local areas, Congress enacted laws to protect minimum wages and benefits. The objective was to require contractors to compete by becoming more efficient, applying new technologies, or using a more productive workforce instead of simply lowering wages. With the enactment of the Competition in Contracting Act in 1984, Congress shifted the focus away from the sealed bidding process to the concept of providing full and open competition using the most appropriate method of procurement. This change, however, did not diminish the underlying purpose and need for prevailing wage laws. Even though procuring agencies may have greater flexibility to consider other factors in addition to price in selecting contractors, price remains a principal selection criterion for almost all covered contracts, whereas employee labor standards are not considered in the selection process. In addition, Executive Order 11246, "Equal Employment Opportunity," requires federal contractors with contracts in excess of $10,000 to not discriminate in employment because of race, creed, color, sex, or national origin and to take affirmative steps to promote the employment opportunities of these protected groups.6 Need for Change The government and industry bear significant costs in implementing these laws. These administrative costs need to be balanced against the intended social benefits. Alternative methods should be explored for achieving these benefits at lower cost. For example, savings from amending the Copeland Act to modify the requirement for submission of certified weekly payrolls alone would require 600 fewer federal employees per year to fulfill the administrative requirements, thereby saving the government $20 million per year. In addition, the construction industry would benefit significantly. During fiscal year 1992, federal construction contracts over $100,000 totaled $11.1 billion. Modification of the weekly payroll requirement would eliminate a great deal of paperwork burden for construction businesses and should result in a 1 percent savings to these businessesor up to $111 million in savings per yearthat could be passed onto the government and taxpayer. Significant savings can also be expected from amending the DavisBacon Act and the Service Contract Act.7 The following statutory and regulatory authorities must be reexamined. DavisBacon Act and Copeland AntiKickback Act. The DavisBacon Act has been a recurring public policy issue, as well as the subject of a number of government and private studies. These studies have produced recommendations ranging from repeal of the Act to amendments to supplemental regulations. Some procurement experts contend that the requirements of the DavisBacon and Copeland Acts for submission of payrolls and statements of compliance are burdensome. Others argue that both acts are impediments to small and minority business participation in federal construction contracting. For example, the more than 1,600 delegates to the 1986 White House Conference on Small Business ranked repealing the DavisBacon Act as their seventh most important recommendation out of 60 reported to the President and Congress. The 1992 Budget Resolution passed by the House of Representatives urged the House Committee with jurisdiction over the DavisBacon Act to study the potential for possible savings to the federal government from the reform of the Act and report committee findings to the full House of Representatives.8 Service Contract Act. The Service Contract Act places a fiveyear limitation on the term of service contracts subject to the Act and requires a new wage determination to be incorporated in multiyear contracts at least every two years. The fiveyear limitation is inconsistent with the government's need to enter into longterm contracts.9 It is contrary to the objectives of the Act to limit the term of contracts. As long as the Act requires the incorporation of a new wage determination every two years, service employees' interests are protected. Longerterm contracts provide more stable employment for service employees. WalshHealey Public Contracts Act. Over time, the protections provided by the WalshHealey Public Contracts Act have been superseded or duplicated by subsequent legislation and congressional action. The overtime pay provisions are the same as those in the Fair Labor Standards Act (FLSA). WalshHealey's minimum wage provisions are also essentially the same as the FLSA because the Secretary of Labor has not issued a wage determination since 1963. The act's prohibition against purchasing goods made with child labor is duplicated by the FLSA, which prohibits oppressive child labor in any facility that ships goods in interstate commerce. The convict labor provisions are the only provisions that have not been overtaken by events; these provisions could easily be incorporated into the provisions of the existing executive order on convict labor. The Acquisition Law Advisory Panel to the United States Congress on Streamlining Defense Acquisition Law (Section 800 Panel) recommended the thresholds for application of the DavisBacon and Service Contract Acts be increased to $100,000, the requirement for submission of weekly payrolls be modified, the DavisBacon Act wage schedules be issued annually per locality, and the WalshHealey Public Contracts Act be repealed except for the provisions of the act dealing with convict labor.10 Debarment Provisions. In addition to changes in labor laws, the statutory provisions related to debarment need to be simplified. Currently, the DavisBacon Act authorizes the Comptroller General to debar contractors for violations and to disburse back wages to employees. The Service Contract Act, the WalshHealey Act, and the Contract Work Hours and Safety Standards Act require the Department of Labor (DOL) to notify the Comptroller General when it debars a contractor for violating the law. Under each statute, the Comptroller General is required to prepare and distribute a list of the parties debarred. Currently the Comptroller General distributes a list to various government entities, including the General Services Administration (GSA), so the information may be included on the List of Parties Excluded from Federal Procurement or Nonprocurement Programs that GSA maintains and distributes through the Superintendent of Documents. The requirement to process recommendations for debarment and/or notices of debarment to the Comptroller General for distribution has become an unnecessary duplication of effort. The information should be sent directly to GSA for inclusion on the List of Parties Excluded from Federal Procurement or Nonprocurement Programs. Use of Information Technology. Further, due to budget limitations, DOL has not been able to maximize the use of information technology in implementing the various labor laws. For example, most wage determinations under the DavisBacon Act are published, and contracting officers select the one that applies to a particular construction project if the cost is estimated to exceed $2,000. Improvements are also needed in DOL regulations, especially those allowing interested parties to challenge a wage determination issued under the Service Contract Act as being at substantial variance with the wages prevailing in the locality or regulations that do not provide time frames for resolving cases. Wage determinations that are based on collective bargaining agreements may also be challenged when there is a question of whether the collective bargaining agreement was a product of arm'slength negotiations. DOL's track record in terms of providing a timely hearing and resolution of substantial variance cases is not good. For example, some cases are dismissed as moot because the government contract involved has already expired.11 Equal Employment Opportunity. Finally, regulations implementing the executive order on equal employment opportunity (EEO) provide for a paperintensive process that adds little or no value but delays contract award. The regulations issued by DOL implementing the executive order require contracting officers to request a preaward EEO compliance review or clearance before awarding a contract in excess of $1 million.12 Contracting officers submit requests for preaward clearances to the Office of Federal Contract Compliance Programs at DOL. DOL processes the request and notifies the contracting officer in writing that the clearance is granted or that a full review is scheduled. In either case, the contract is awarded. During fiscal year 1992, approximately 23,000 requests were submitted but only 185 full reviews were conducted.13 (Due to reduced staff and budget, most requests were automatically approved because an onsite review could not be conducted within 30 days.) The small number of full reviews conducted by DOL does not justify the cost associated with processing every action over $1 million through DOL. DOL can enhance enforcement of the executive order by using its resources more effectively to conduct more onsite reviews. Cross References to Other NPR Accompanying Reports Reinventing Support Services, SUP03: Improve Distribution Systems to Reduce Costly Inventories. Department of Labor, DOL14: Apply Information Technology to Expedite Wage Determinations for Federal Contracts. Endnotes 1. DavisBacon Act, 40 U.S Code 276ab (March 3, 1931). 2. Copeland Act, as amended, 40 U.S.C. 276c (June 13, 1934). 3. Service Contract Act of 1965, 41 U.S.C., 351358. 4. WalshHealey Act, 41 U.S.C., 3445. 5. Contract Work Hours and Safety Standards Act, 40 U.S.C. 327333. 6. Executive Order 11246, "Equal Employment Opportunity," September 24, 1965. 7. See "PROC04: Establish New Simplified Acquisition Threshold and Procedures" in this report. 8. See Reducing the Deficit: Spending and Revenue Options (Washington, D.C., February 1992), p. 179. 9. See "PROC18: Authorize Multiyear Contracts" in this report. 10. Acquisition Law Advisory Panel to the United States Congress, Streamlining Defense Acquisition Law (January 1993), pp. 425 463. 11. See Board of Service Contract Appeals, Case Number 9220, August 26, 1992, in the matter of Porshia Alexander of America, Inc. 12. 41 CFR 601 and 604. 13. Data as of July 1993 provided by the U.S. Department of Labor, Office of Federal Contract Compliance Program.
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