What is prevailing wage?

Prevailing wage requirements are a major cost driver on federally funded construction and service contracts. The premise: the federal government should not depress local labor markets by paying below-market wages on its contracts.

Two federal laws drive prevailing-wage requirements: - Davis-Bacon Act (40 U.S.C. §3141 et seq.) — covers federal construction over $2,000 - Service Contract Act (41 U.S.C. §6701 et seq.) — covers federal service contracts over $2,500

For each law, the US Department of Labor publishes Wage Determinations (WDs) on SAM.gov that list the required hourly wage and fringe rate for each: - Job classification (laborer, carpenter, electrician, accountant, security guard, etc.) - Geography (typically county-level for Davis-Bacon, broader for SCA) - Project type (building, residential, highway, heavy for Davis-Bacon)

Most states also have "Little Davis-Bacon" laws applying to state-funded construction. Some states (California, New York, Washington, Massachusetts) have substantially broader prevailing-wage requirements than federal.

Compliance burden: - Maintain certified payroll records (Form WH-347 for federal) - Post wage determinations on the job site - Pay any prevailing-wage labor at the listed rate from day one (no waiting until the next pay period) - Allow DOL audits and worker interviews - Self-correct any underpayments with back-pay restitution

Penalties for noncompliance: - Back wages owed to workers - Liquidated damages - Suspension or debarment from federal contracts - False Claims Act exposure if certified payrolls are inaccurate

For contractors, prevailing wage often increases labor cost 30-100% versus prevailing private-sector rates depending on the trade and region. Bid pricing must reflect this. Many contractors find their commercial-sector wage structure does not support federal prevailing-wage work without changes.