The Infrastructure Investment and Jobs Act delivers $550 billion of funding to improve our nation’s infrastructure, and the construction industry stands ready to deliver on the law’s promised revitalization of America’s roads, schools, bridges, utilities, and transportation systems.
Unfortunately, this investment could not happen at a worse time for taxpayers. The construction industry currently faces supply chain disruptions, unprecedented materials cost inflation, declining investment in structures and a skilled labor shortage of 650,000 people in 2022. To make matters worse, the Biden administration proposed controversial new regulations in March that will needlessly increase construction costs and discourage small businesses from bidding on taxpayer-funded projects.
A Department of Labor proposed rule released on March 18 purports to “update and modernize” existing Davis-Bacon Act regulations requiring contractors performing work on most federal and federally assisted projects to pay construction workers a government-determined hourly wage and benefit rate reflecting local “prevailing” rates of compensation.
Since its passage in 1931, construction trade unions and their allies in the federal government have fiercely defended the DBA—and expanded its reach to federally assisted construction projects procured by state and local government via 71 Related Acts. That’s despite complaints by government watchdogs, taxpayers and small-business advocates that DBA regulations and prevailing wage requirements needlessly raise taxpayer-funded construction costs, stifle job creation, undermine productivity, unfairly steer contracts to unionized firms and discourage competition from small businesses.
At the heart of the DBA policy debate are two key arguments. The first is that the DOL has failed to provide clarity to contractors about the various bureaucratic interpretations of DBA regulations. This exposes contractors to added compliance costs, fines, and litigation and ultimately undermines government programs seeking to award more contracts to small, minority, and disadvantaged businesses.
The second is the perception that lawmakers and regulators—collaborating with the construction trade-union lobby—have rigged the government’s regulatory and enforcement bureaucracy to ensure that, as much as possible, the DOL requires that contractors pay inflated, nonmarket union rates to construction workers. Since less than 13 percent of the construction industry is unionized, it is improbable for union rates to be adopted as “prevailing” as much as they actually are.
Likewise, for decades, the Government Accountability Office and the DOL Office of Inspector General have called for reforms to the DOL’s flawed wage determination process, yet the DOL has done little to improve it.
Together, these two regulatory deficiencies help unionized contractors win more government contracts. This is a key reason why the DBA is supported by Secretary of Labor Marty Walsh, who was previously head of the Boston Building Trades Council, and President Biden, who has said, “I intend to be the most pro-union president leading the most pro-union administration in American history.”
So, it’s no surprise that the DOL’s proposal turned out to be more pork for unions rather than meaningful reforms. It rescinds modest reforms enacted by the Reagan administration in the early 1980s, overturns decades of legal decisions unfavorable to unions, expands the scope of the DBA to new types of construction-related activity and new industries such as manufacturing, trucking, and surveying, and fails to fix the DOL’s broken and convoluted wage determination process, which a new study released by the Beacon Hill Institute found increases the price tag of DBA construction projects by at least 7.2% and costs taxpayers an extra $21 billion a year.
In total, there are more than 50 significant changes to DBA regulations in the proposed rule’s 432 pages of text, which the DOL claims will take just 90 minutes “of a human resources staff member’s time” to review and implement, at a cost of $79 in its first year for each of the 192,000 contractors it estimates will be affected by this rule. The regulations will likely cost regulated businesses hundreds of millions of dollars to implement, and the DOL does not account for additional costs to taxpayers as a result of the adoption of inflated nonmarket rates and reduced competition from small businesses.
The DOL has given just 60 days for taxpayers and industry stakeholders to provide thoughtful and comprehensive comments on these sweeping changes that apply to an estimated $217 billion in federal and federally assisted construction spending per year and provide government-determined wage rates for an estimated 1.2 million U.S. construction workers.
Meaningful Davis-Bacon Act regulatory reform will foster robust competition from all members of the construction industry on federally funded contracts and deliver communities the high-quality infrastructure they deserve while providing the best possible value for taxpayers.
Ben Brubeck is vice president of regulatory, labor and state affairs for Associated Builders and Contractors.
The op-ed was published by National Review on May 17.