The Washington State Department of Labor
and Industries has issued a draft policy statement to address prevailing wage
filing requirements for on-call public works contracts. Comments are due
to L&I by April 2, 2012.
Note: This is a long blog posting, but it is a very important issue for public agencies who use on-call public works contracts.
The draft policy identifies different
requirements for what L&I characterizes as two different types of on-call
public works projects: “Hybrid" on-call maintenance/repair contracts, and all
other on-call maintenance/repair contracts.
1. "Hybrid" on-call maintenance/repair
contracts:
According to L&I, these contracts are for a specific type of work and are
performed on a recurring basis at a specific and identifiable location.
L&I's proposed requirements for these contracts include the following:
- Effective date of prevailing wages: The prevailing wages in effect on the bid submission deadline would be the wages in effect for the first year of such contracts. If the contract is a multi-year contract, the draft policy would require that the prevailing wages be changed to reflect the current prevailing wages when the contract was renewed or extended for an additional year.
- Filing Intent and Affidavit: The prime contractor on these contracts would be required to file a "Statement of Intent to Pay Prevailing Wages" and an "Affidavit of Wages Paid" form annually. But subcontractors performing work on these contracts would be required to file an Intent and Affidavit for each work authorization under the contract.
Analysis of proposed hybrid requirements: The following are my comments on
the proposed hybrid requirements:
- Effective date of prevailing wages: Under L&I's current regulations, the effective date of prevailing wages for a public works project is the required bid submission date, regardless of the length of the contract. Hybrid on-call contracts are public works also. L&I is arguing that RCW 39.12.040 requires Intents for each "contract" but Affidavits for each "project," and that each work authorization under a hybrid on-call contract is a "project." Personally, I think it's a stretch to make such an argument. “Contract” is defined in state law (RCW 39.04.010), but "project" is not defined. In my opinion, the two terms are meant to be used interchangeably. When RCW 39.12 was adopted, I don't think there was ever any intent to distinguish between "contract" and "project" as it might relate to on-call public works projects - which aren't even addressed. L&I's proposal to require higher wages in subsequent years of a public works contract is at variance with their own regulations in WAC 296-127-011. Unless the WAC is formally changed, it is questionable whether L&I can modify that practice by a policy statement:
"For all public works contracts, except janitorial or building service maintenance contracts, the applicable prevailing wage rates shall be the rates that are in effect on the date when bids by prime contractors are due for submission to contract awarding agencies. These rates shall remain in effect for the duration of the contract." [emphasis added]
Contractors
should be required to submit bids based on the current prevailing wages (and any wage increases necessary to retain a qualified work force or comply with the terms of a collective bargaining agreement), and not transfer that risk and cost to public agencies that would be
required to pay for the increased wages in subsequent years of a multi-year
hybrid on-call contract. In addition, if
the hybrid on-call contract is bid and the award evaluation is based on anything
other than hourly rates (and it is problematic, in my opinion, to bid these
contracts based on hourly rates), it will be very difficult for public agencies
to determine the increased amount in prevailing wages that must be reimbursed
to the contractor to pay their workers.
- Filing Intent and Affidavit: It is unclear to me why L&I is distinguishing between prime contractors and subcontractors when both may end up performing work on an individual work order under the hybrid on-call contract. To require an Intent and Affidavit for each subcontractor performing work on an individual work authorization is unreasonable, inefficient, and costly to the public. Many work orders are very small. For example, on a $150 work order, if the work was performed by a subcontractor, an additional $80 would need to be paid by the public agency as part of the work order to cover the cost of the Intent and Affidavit. It seems to me that L&I should establish a minimum dollar threshold below which the Intents and Affidavits would not be required. This may require a change in the law, and the law should address the lower risk and higher administrative cost associated with small public works projects. Short of a legislative change, L&I can resolve this issue by eliminating the artificial distinction between a “contract” and “project” and simply require an Intent and Affidavit for each public works contract, regardless of the length of the contract (to be consistent with current regulations in WAC 296-127-011).
2. Other on-call maintenance/repair contracts:
L&I’s draft policy states that these contracts do not meet the
criteria for being a “hybrid” contract (for a specific type of work and are
performed on a recurring basis at a specific and identifiable location). The proposed requirements for these contracts
are as follows:
- Effective date of prevailing wages: The prevailing wages in effect on “the award date for each ‘call-out' must be used.” In other words, even though there is no “award” for each work order, I think L&I is intending to require that the wages in effect on the date when a work order is executed will be the prevailing wages in effect for that work order.
- Intents and Affidavits: L&I’s draft policy states that “An Intent must be filed at the beginning of the contract period and [an] Affidavit must be filed following completion of each individual project or ‘call-out.’”
Analysis of
proposed requirements for other on-call contracts: The following are my comments on
these proposed requirements:
- Effective date of prevailing wages: One of the main problems with requiring that the effective date for prevailing wages for these on-call contracts be the date of the work order is that it eliminates any basis for competitive selection of the on-call contractor during the bidding process. If the prevailing wages in effect as of the bid submission deadline mean nothing, why would there still be a requirement to notify contractors of the applicable prevailing wages? Essentially, under the proposed policy, all work orders would be negotiated without relying on prices bid as part of the selection process for the on-call contractor. It is unclear why L&I is applying such a different standard for these on-call contracts than they are proposing for the hybrid contracts.
- Intents and Affidavits: My comments above relating to Intents and Affidavits being required for each work order apply here as well.
Other Features of L&I’s Draft Policy:
L&I’s draft policy also addresses Job Order Contracting, Building
Service Maintenance (Janitorial) Contracts, and regular Public Works contracts.
More Information:
L&I has published both the draft policy and an explanatory memo. Click below to view these documents:
Comments:
Comments are due to L&I by April 2, 2012. If you have any comments, observations, or
questions for me, please contact me.
Mike Purdy's Public Contracting Blog
© 2012 by Michael E. Purdy Associates, LLC
http://PublicContracting.blogspot.com
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