Prevailing Wage Requirements: What Every Government Contractor Must Know

If you're bidding on government construction contracts, you need to understand prevailing wage laws. Getting this wrong can result in severe penalties, including debarment from future government work.

What is Prevailing Wage?

Prevailing wage is the minimum hourly wage (plus benefits) that must be paid to workers on government-funded construction projects. It's based on the wages and benefits paid to workers in similar trades in the same geographic area.

Federal: Davis-Bacon Act

The Davis-Bacon Act applies to all federal construction contracts over $2,000. Key points:

• Wage determinations — The Department of Labor publishes prevailing wage rates by trade and location
• Fringe benefits — Includes health insurance, pension, vacation, and training fund contributions
• Certified payroll — You must submit weekly certified payroll reports
• Applies to subs — Subcontractors must also pay prevailing wages

State Prevailing Wage Laws

Most states have their own prevailing wage laws that apply to state and local projects. Thresholds and rates vary significantly:

• California — Applies to all public works over $1,000. Highest rates in the country.
• New York — Applies to all public works. Strong enforcement.
• Texas — No state prevailing wage law (only Davis-Bacon applies to federal projects)
• Florida — No state prevailing wage law

How Prevailing Wage Affects Your Bid

Cost Impact Prevailing wages can be 20-50% higher than market wages in some areas. You MUST factor this into your bid.

Fringe Benefits You can pay fringe benefits as cash, actual benefits, or a combination. Calculate carefully — this significantly affects your labor cost.

Overtime Prevailing wage overtime is typically 1.5x the base rate plus straight-time fringe benefits.

Compliance Requirements

1. Post wage rates — Display the applicable wage determination at the job site
2. Pay correctly — Each trade classification has its own rate
3. Certified payroll — Submit Form WH-347 weekly
4. Record retention — Keep payroll records for 3 years
5. Apprentice ratios — Follow approved apprenticeship ratios

Penalties for Non-Compliance

• Back pay — Must pay the difference plus interest
• Contract termination — Government can terminate your contract
• Debarment — Can be barred from government work for up to 3 years
• Criminal penalties — Willful violations can result in fines and imprisonment

Pro Tips

• Always check the specific wage determination for your project before pricing
• Use a prevailing wage payroll service if you're not experienced
• Factor in the administrative burden when pricing your bid
• Include a contingency for wage rate increases on multi-year projects