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Federal Construction: Bidding on Prevailing Wage Jobs
By John G. Allen
Ever lost a bid on a government job by just a few dollars? Competition for government jobs and maintaining compliance with government regulations are tougher than ever. Masonry companies that work on government jobs may be missing an opportunity to reduce payroll costs on those projects, while providing valuable benefits such as retirement plans and health insurance for their workers.
Even companies that do a small percentage of projects covered by prevailing wage laws can realize significant savings by using fringe dollars in the way the law intended. With the deadline for ACA (healthcare reform) compliance approaching, there’s never been a better time to consider a prevailing wage benefit plan if you work on government contracts.
Federal construction contracts in excess of $2,000 are subject to the Davis-Bacon Act, which requires payment of locally “prevailing wages,” including the “anticipated cost of prevailing benefits.” Generally, this is expressed as a per-hour wage and per-hour cash equivalent value of benefits, and often is based on a union scale. Prevailing wages are set by the DOL and are included in the bid specifications of covered contracts. Many states and the District of Columbia have their own prevailing wage laws, often referred to as “little Davis-Bacon Acts.”
The reason contractors save money by offering a bona fide benefit plan is that, when the fringe portion of the prevailing wage is used to provide benefits for hourly workers, this amount is not subject to payroll costs such as FICA, FUTA and SUTA, general liability and, in most states, workers compensation insurance.
Here’s an example of how much can be saved by removing these dollars from payroll:
Say the company has 15 employees doing prevailing wage work. These employees work about 1,000 hours each per year. The fringe amount above the base rate is $10/hour, and the average approximate additional payroll cost, when paying fringe dollars as cash wages, is 25 percent.
15 employees X 1,000 hours = 15,000 total hours
Contractors searching for ways to cut costs and improve their chances of winning bids on government jobs should consider implementing a bona fide benefits plan. It provides valuable benefits for hourly workers by providing them with a way to save for retirement, as well as the protection offered by medical, vision, dental and life insurance. And, regardless of economic conditions, it makes good business sense to reduce costs and sharpen your competitive edge when bidding on public works projects.
With ACA deadlines quickly approaching, it makes more sense than ever for companies working on government contracts to use the fringe to provide major medical coverage for their employees. For prevailing wage contractors, the funds to purchase coverage for employees are right there, included in the fringe. Starting in 2015, employers with more than 50 full-time employees will be required to provide health insurance for their workers. Companies that fail to comply will face penalties.
|Last Updated on Friday, 02 August 2013 10:30|