Prevailing-Wage Law Faces Changes

THE time was 1931. Fly-by-night contractors trucked gangs of itinerant workers around the country undercutting the wage rates of local firms working on government projects. Congress's solution was the Davis-Bacon Act, requiring federal contractors to pay the local ``prevailing'' wage as determined by the Department of Labor. Today, the House plans to vote on legislation, attached to the fiscal 1990 Defense Authorization Act, that would make the first significant changes in Davis-Bacon since the legislation was signed into law by President Herbert Hoover. If the changes become law, they could potentially affect thousands of government contracts, and save billions of dollars.

The House faces two amendments to Davis-Bacon: one introduced by Rep. Charles Stenholm (D) of Texas and one by Rep. Austin Murphy (D) of Pennsylvania. The Stenholm amendment, which was endorsed by the administration on Monday, would raise the Davis-Bacon threshold, that is the level below which contracts are exempted, to $250,000 from $2,000. This would affect 7 percent of the total dollar volume in government contracts. Mr. Stenholm's amendment also allows the expanded use of semi-skilled helpers and cuts required paperwork.

The Murphy amendment would increase the threshold to $50,000 on new construction and $15,000 on repairs. It would also expand the act to include leases, off-site suppliers, independent contractors, fabricators, and privately financed projects where federal grants were involved. It is supported by organized labor, but the White House claims the plan would discourage competition.

If the House votes for the Murphy amendment, which comes up first, it will not get a chance to vote on the Stenholm amendment. Either amendment could be modifed in final legislation adopted by House and Senate conferees.

Last year, the Stenholm amendment was defeated by six votes. This year, the vote is likely to be even closer since Congress is scrambling to find ways to save money in future federal budgets.

The Congressional Budget office (CBO) estimates Davis-Bacon increases total government-wide construction costs by 3.1 percent, or about $1.3 billion a year. Total repeal of Davis-Bacon would save $6.6 billion in budget authority, and $4.6 billion in actual outlays, over five years.

Since the Stenholm amendment would not affect all contracts, it would only result in a 55 percent savings. Thus, CBO estimates the Stenholm plan would save the government $3.55 billion in budget authority ($2.4 billion in outlays) over five years. There is no estimate of the savings, if any, of the Murphy plan.

Mr. Stenholm says it's the right time to make changes in the act. ``Look at the way construction contracts are handled today compared to 40 years ago,'' he says. Stenholm maintains the Davis-Bacon act discourages small and minority-owned firms from bidding on contracts, since they would have to pay higher wages than they normally would. His amendment is supported by the National Association of Minority Contractors, school boards, and other government entities that model their construction contracts after federal regulations.

Alvin Silverman, a public relations consultant to the AFL-CIO, the nation's largest union organization, says labor realizes the minimum threshold needs to be raised ``to some reasonable figure.'' But Mr. Silverman maintains ``The reason for Davis-Bacon has not changed. Contractors still move around the country, knocking out the prevailing wage and then packing up and leaving when their contract is over.''

Labor is also opposed to changes in the helper category. Under current law, a contractor working on a federal contract must hire either an apprentice or a journeyman worker to do semi-skilled work. Stenholm would allow contractors to hire less skilled and less well-paid workers.

Stenholm originally wanted to repeal the Davis-Bacon Act. ``That is politically impossible,'' he now admits. ``I'm willing to keep the provisions in line so we don't go back to 1931,'' he says.