The Davis-Bacon Act, enacted in 1931 and administered by the Department of Labor’s Wage and Hour Division, requires that workers on federally funded construction projects be paid at least the locally prevailing wage for their trade as determined by the DOL’s wage surveys. The law applies to construction contracts with the federal government valued above $2,000 and to contracts for construction, alteration, or repair of public buildings or public works financed in whole or in part with federal funds.
For developers and construction teams working with federal financing programs, HUD construction loans, USDA rural development loans, Community Development Block Grants, HOME Investment Partnership funds, New Markets Tax Credit transactions, and others, Davis-Bacon compliance is not optional and its requirements are more extensive than most teams anticipate when they first encounter them.
What Triggers Davis-Bacon
The triggers for Davis-Bacon applicability are broader than many developers initially recognize:
Direct federal construction contracts. The baseline trigger, construction performed under a direct contract with the federal government, is well-understood. Federal agencies that contract for construction include those that own or manage federal buildings, military installations, and other federal property.
Federally assisted construction. This is the trigger most relevant to private developers. When a private construction project receives assistance from the federal government, grants, loans, loan guarantees, or other federal financial assistance, the project is typically required to pay Davis-Bacon wages as a condition of the federal assistance. The key word is “typically”: each federal assistance program has its own Davis-Bacon clause language, and the specific assistance agreement governs whether and how Davis-Bacon applies.
HUD programs that carry Davis-Bacon requirements: FHA-insured multifamily loans (Section 221(d)(4), Section 223(f) for substantial rehabilitation, and others); CDBG grants used for construction; HOME grants used for construction; and the Choice Neighborhoods and Choice Neighborhoods planning programs.
USDA rural development programs that carry Davis-Bacon requirements include the Section 515 rural rental housing program and certain rural utilities and infrastructure programs.
New Markets Tax Credit transactions sometimes carry Davis-Bacon requirements depending on whether federal loan programs are used as part of the financing stack, the NMTC equity alone does not trigger Davis-Bacon, but combining NMTC with an SBA 504 loan or another federal program may.
What Davis-Bacon Requires
When Davis-Bacon applies, every worker employed on the project, including workers employed by subcontractors at every tier, must be paid at least the applicable prevailing wage rate for their trade and locality. The DOL publishes wage determinations for each county (or sometimes smaller geographic areas) and each trade classification. The wage determination applicable to a specific project is incorporated into the project’s construction contract and governs for the life of the project.
Fringe benefits, health insurance, retirement plan contributions, paid leave, can be credited against the prevailing wage obligation. An employer who provides fringe benefits with a value equal to or greater than the fringe benefit component of the prevailing wage determination can pay the base wage component alone. Employers who provide no fringe benefits must pay the full hourly prevailing wage (base plus fringe) in cash.
Certified Payroll and Compliance Documentation
Davis-Bacon compliance requires certified payroll records, weekly payroll records, certified by the contractor, showing each worker’s name, classification, hours worked, hourly rates paid, and fringe benefit contributions. Certified payrolls must be submitted to the project’s contracting agency (or in the case of federally assisted construction, to the assistance recipient) weekly.
The certified payroll obligation extends to every subcontractor on the project at every tier, the GC is responsible for ensuring that its subcontractors comply and submit certified payrolls, and the GC faces liability for a subcontractor’s Davis-Bacon violation just as it does for the subcontractor’s own workers.
Electronic certified payroll submission systems, LCPtracker, Elation Systems, and agency-specific portals, are increasingly required by federal agencies as the primary submission mechanism. Construction teams that are not familiar with these systems will need to implement them early in the project setup phase.
Davis-Bacon and State Prevailing Wage Interaction
In states that have their own prevailing wage laws, Washington’s Prevailing Wage Act under RCW 39.12 applies to public works, both the federal Davis-Bacon requirement and the state prevailing wage requirement may apply simultaneously. In that case, the worker must be paid the higher of the two applicable rates for each trade classification.
In practice, the interaction most commonly matters for projects in Washington State that receive both state prevailing wage-triggering assistance (state grants or loans) and federal Davis-Bacon-triggering assistance (HUD or USDA programs). The compliance program must satisfy both requirements, which usually means applying the higher rate and documenting compliance with both regulatory frameworks simultaneously.
Texas and Arizona do not have state prevailing wage laws for private construction (Texas’s state prevailing wage law applies only to state public works), so Davis-Bacon applies without a competing state requirement in most private Texas and Arizona construction with federal involvement.
Inflation Reduction Act and Expanded Prevailing Wage
The Inflation Reduction Act of 2022 established prevailing wage requirements as a condition for certain clean energy tax credits, solar, wind, and other qualified energy facilities, regardless of whether federal funding is directly involved. These expanded prevailing wage requirements, if applicable to a project, must be tracked and documented in the same manner as traditional Davis-Bacon requirements.
Developers considering projects that may qualify for clean energy tax credits should assess whether the IRA’s prevailing wage requirements apply before finalizing the project’s construction contract and labor compliance program.
Federal construction projects subject to Davis-Bacon require systematic certified payroll compliance from the GC and every subcontractor tier, and the lender or owner monitoring a publicly funded project has an obligation to verify that compliance is being maintained throughout the construction period.
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Related: Prevailing Wage Washington State Construction · Construction Loan Monitoring · Owner’s Representative Services · Construction Loan Monitoring Guide
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