Davis-Bacon and Prevailing Wage Requirements for Construction Grants
Learn about Davis-Bacon Act prevailing wage requirements for federally funded construction projects, including applicability, wage determinations, and compliance procedures.
What Is the Davis-Bacon Act?
The Davis-Bacon Act is a federal law enacted in 1931 that requires contractors and subcontractors performing work on federally funded or assisted construction contracts exceeding $2,000 to pay their laborers and mechanics no less than the prevailing wages for the geographic area where the work is performed. These prevailing wage rates are determined by the U.S. Department of Labor and vary by locality and trade classification. For organizations that receive federal grant funds for construction or renovation projects, understanding and complying with Davis-Bacon requirements is a critical compliance obligation.
Davis-Bacon applies not only to direct federal construction contracts but also to many federally assisted construction projects funded through grants, loans, or guarantees. More than 60 federal statutes, known as Davis-Bacon Related Acts, extend prevailing wage requirements to construction projects that receive federal financial assistance. If your grant includes any construction component, you need to determine whether Davis-Bacon applies before any work begins. For a comprehensive overview of post-award obligations, see our post-award grant management compliance guide.
When Does Davis-Bacon Apply to Grant-Funded Projects?
Not every construction project funded by a federal grant triggers Davis-Bacon requirements. Applicability depends on the specific federal program under which the grant was awarded and the terms of the grant agreement. Key factors to evaluate include:
- The authorizing statute: Check whether the federal program that funded your grant is subject to a Davis-Bacon Related Act. Common programs with Davis-Bacon requirements include those administered by HUD, EPA, USDA Rural Development, and the Economic Development Administration.
- The grant agreement: Review your award terms and conditions for language requiring compliance with Davis-Bacon. Federal agencies typically include specific Davis-Bacon provisions when the requirement applies.
- The $2,000 threshold: Davis-Bacon applies to construction contracts exceeding $2,000. This threshold applies to each individual contract, not to the total project cost.
- The definition of construction: Davis-Bacon covers construction, alteration, and repair of public buildings and public works. This includes new construction, renovation, rehabilitation, painting, decorating, and mechanical installations on buildings or infrastructure.
Understanding Wage Determinations
The Department of Labor issues wage determinations that specify the minimum hourly wages and fringe benefits that must be paid to each classification of laborer and mechanic working on a covered project. Wage determinations are specific to the geographic area and the type of construction being performed.
Types of Wage Determinations
There are two types of Davis-Bacon wage determinations:
- General wage determinations reflect prevailing wage rates for a given area based on data collected through surveys and are published on SAM.gov (formerly the Wage Determinations Online website).
- Project wage determinations are issued for specific projects when a general determination does not adequately represent the prevailing wages for the type of construction involved.
The correct wage determination must be incorporated into the construction contract before any work begins. Using an outdated or incorrect wage determination is a compliance violation. Grantees should verify that the wage determination is current and appropriate for the specific type of construction and geographic location of the project.
Compliance Requirements for Grantees
As a grant recipient funding a Davis-Bacon covered construction project, your organization has specific compliance obligations even if you are not the direct employer of the construction workers.
Contract Provisions
All covered construction contracts must include the Davis-Bacon contract clauses, the applicable wage determination, and the Department of Labor's standard labor standards provisions. These provisions establish the contractor's obligations regarding wages, payroll records, and compliance with labor standards.
Certified Payroll Review
Contractors and subcontractors on Davis-Bacon covered projects must submit weekly certified payroll reports (Form WH-347) to the grantee. These reports list each worker, their classification, hours worked, wage rate, and deductions. The grantee is responsible for reviewing these reports to verify that workers are being paid the required prevailing wage rates. This review is not merely a filing exercise; you must actually examine the data for accuracy and compliance.
Worker Interviews
Grantees or their designated representatives should conduct periodic on-site interviews with construction workers to verify that the information on the certified payrolls is accurate. Interviews help identify situations where workers are being misclassified at lower wage rates or where payroll records do not reflect actual hours worked.
Enforcement and Remedies
When violations are discovered, the grantee must take corrective action. Contractors who fail to pay prevailing wages may be required to make back-pay restitutions to affected workers. In serious cases, contractors can be debarred from future federal contracts. The grantee may also withhold payments to the contractor sufficient to cover wage underpayments until the violations are resolved.
Common Davis-Bacon Compliance Challenges
Organizations managing their first Davis-Bacon covered project frequently encounter several challenges:
- Worker classification errors: Contractors sometimes classify workers at lower-paid trades to reduce labor costs. Grantees must verify that classifications match the work actually performed.
- Apprentice ratio violations: Apprentices may be paid less than journeyman rates only if they are registered in an approved apprenticeship program and the required apprentice-to-journeyman ratios are maintained.
- Fringe benefit miscalculations: Prevailing wage rates include both cash wages and fringe benefits. Contractors can pay fringe benefits in cash, provide bona fide benefit plans, or use a combination, but the total compensation must meet or exceed the wage determination.
- Late or missing payroll submissions: Contractors must submit certified payrolls weekly. Delays in submission make it difficult for grantees to monitor compliance in real time.
Building Davis-Bacon compliance costs into your project budget from the beginning is essential. Grant budgets that underestimate labor costs due to failure to account for prevailing wages often face funding shortfalls. Our guide on federal cost principles and budget fundamentals covers how to develop accurate construction budgets for federal awards. Additionally, understanding the federal grant application process helps you address Davis-Bacon requirements during the proposal stage rather than after award.
Learn more about grant writing strategies at Subthesis.
Get Expert Guidance on Construction Grant Compliance
Davis-Bacon compliance adds complexity to any construction grant, but with proper preparation and monitoring systems, your organization can manage these requirements effectively. Enroll in The Complete Grant Architect course to build comprehensive grant management skills, including the specialized knowledge needed for construction-related federal awards.
Learn more about grant writing strategies at Subthesis.