improper determinations of minimum wage rates. for titles of issued reports.) (See app. I Of the wage determinations made by the Department for the 29 projects, 28 were for federally financed and insured housing projects constructed at a total cost of about $72.8 million. Of these 28 projects, 16 were for low-rent public housing, eight were for military family housing, and four were for federally insured housing. For the 28 projects, we estimated that extra construction costs of approximately $7.4 million would be incurred. These extra costs were largely attributable to the Department's prescribing as minimum wage rates for construction of residential-type housing projects the higher wage rates paid by contractors for construction of commercial-type buildings rather than the lower rates paid by contractors for construction of private residential housing. The Department has recently recognized the need for an appropriate distinction between wage rates for commercial construction and those for residential construction, for purposes of determining minimum wage rates. The supporting data for the Department's budget request for fiscal year 1971 included estimates showing that potential savings of $60 million annually could be realized by the Federal Government if wage rates prevailing for residential housing construction were prescribed for such type of construction. In addition to questioning the improper determination of minimum wage rates for housing construction projects, we questioned in our reviews certain wage determinations for heavy construction and highway construction work. In our report to the Congress on wage rate determinations governing the construction of Carters Dam, Georgia, by the Corps of Engineers, we pointed out that the contract price of $15.4 million for the main dam work included about $1.7 million of extra labor costs which contractors had considered in their bids and which therefore had resulted in increased costs to the Government. These extra costs were attributable principally to the payment of high wage rates which were applicable to more hazardous and more specialized work than that actually required for the main dam work and to the use of higher wage rates which were negotiated and paid by another contractor for work on the project during an unrepresentative brief period. POSSIBLE EFFECT ON COMPETITION Information obtained by us indicated that the determination of wage rates higher than those prevailing in the industry had discouraged some contractors from bidding on Federal construction contracts and had resulted in reduced competition. Some of the private contractors interviewed by us during our reviews of wage rates paid on housing construction projects told us that they would not bid on federally financed construction projects because of the high wage rates they would be forced to pay. These contractors stated that the payment of the rates prescribed by the Department would cause a disruption in their labor forces, because the workers on federally financed construction projects would be paid hourly wage rates higher than the rates paid to workers on privately financed construction projects. They also pointed out hardship and morale problems among their workers, created by the reduction of wage rates after the federally financed projects were completed and the workers returned to lower paid work on private construction. INFLATIONARY IMPACT Prescribing minimum wage rates higher than those prevailing for similar construction in an area not only increases the cost of federally financed construction but also, because of the large volume of such construction, tends to have an inflationary impact on the construction industry and the national economy as a whole. Concern has been expressed by Government officials and economists over the inflationary trend of construction costs and the need to control such costs in the fight against inflation. From February 23 to March 29, 1971, the President of the United States suspended the provisions of the DavisBacon Act because, in his judgment, they had encouraged the severe inflationary pressures experienced in the construction industry. When he reinstated the act, the President provided for labor-management boards to review collective bargaining agreements for each of the construction crafts and established the Construction Industry Stabilization Committee--composed of four representatives each from labor, management, and the public--to review the boards' findings on future collective-bargaining negotiations and agreements. As highlighted by recent events which have focused attention on the economic impact of the Davis-Bacon Act and related laws, special efforts are needed to ensure that the legislation serves its intended purpose of protecting prevailing wage levels but does not become a vehicle for inflating construction costs. The following chapters discuss measures which, we believe, should be taken to improve the administration of the Davis-Bacon Act. CHAPTER 3 NEED FOR IMPROVED PROCEDURES IN WAGE DETERMINATIONS Our review of the wage determination activities of the Department of Labor showed that improvements were needed to ensure that minimum wage rates were prescribed for federally financed construction on the basis of actual prevailing rates determined in accordance with the requirements of the Davis-Bacon Act. These improvements include the issuance of explicit guidelines and criteria covering the principal elements of an adequate determination of minimum wage rates and fringe benefits and the establishment of adequate, upto-date, and accurate information based on prevailing wages. ELEMENTS OF A WAGE DETERMINATION The Davis-Bacon Act, as amended, provides that the minimum wage to be paid construction workers: "'*** shall be based upon the wages that will be Therefore the Department must determine prevailing wages on the basis of four principal elements: (1) identify the classes of workers for whom the determination should be made, (2) fix the boundaries of the area for which the determination is to be made, (3) decide what projects are of similar character to the proposed project, and (4) determine what wages actually prevail. Our review of the wage determination files and our inquiries regarding specific wage determinations showed that, in many instances, these principal elements were not adequately determined. Our findings and suggestions for needed improvements are discussed in the following sections of this chapter. Corresponding classes of laborers and mechanics In some cases minimum wage rates determined for a particular worker classification were applied as the minimum wage rates for another worker classification, without determining the work practices in the area. In other cases union-negotiated rates were prescribed for a number of different worker classifications on the basis that the wage rates found to be prevailing for one or more classifications were union rates, without determining the prevailing wage rates for the other worker classifications. The rates for the other classifications were based on prior determinations. For example, in one case the Department prescribed that the wage rate paid to workers classified as "ornamental ironworkers" be paid to workers erecting chain link fences; yet, in private residential construction work in the area, chain link fences were installed by workers who were classified as laborers and foremen and who received much lower hourly wage rates ($1.25 to $2.75) than ironworkers ($3.65). In another case, wage rates for carpenters were applied to the installers of insulation material, although in private construction work in the area persons doing such work were normally classified as insulation applicators and received a much lower hourly wage rate ($1.25 to $1.50) than carpenters ($3.55). Further, we noted a determination of wage rates covering 38 building worker classifications and a number of power equipment operator classifications based on wage data collected for 11 of these classifications. The Department had determined that union wage scales were applicable to all classifications and had disregarded lower wages being paid to some of the crafts in the area because (1) such wages were not considered equitable for that worker classification, (2) the wage data obtained was not sufficient to change the union-negotiated rates previously prescribed, and (3) the wage rates being paid the craft were lower than rates recognized as prevailing for related crafts. We questioned the propriety of this determination, because the Department did not collect wage data for the other worker |