Tuesday, December 4, 2012

How Frequently Should Certified Payroll Reports be Submitted by Contractors on Public Works Projects?

Federal prevailing wage requirements on public works construction projects requires that the contractor and all subcontractors, regardless of tier, submit weekly certified payrolls to the public agency.

Audit finding:  Some public agencies with federal funding on a project do not pay attention to the requirement for weekly payrolls.  Sometimes, they don't collect the payroll reports at all, or they collect them in batches from the contractor (not weekly), or collect them at the end of the project.  The largest county in Washington, King County, recently received a finding from the Washington State Auditor's Office (see page 56) for failing to enforce the submission of weekly payroll reports.  Instead, the county collected payrolls at the end of their projects.

Best practices:  If you have public works construction projects with federal funding, pay attention to the following:
  • Frequency:  Are you collecting payroll reports weekly from the contractor and all subcontractors?
  • Subcontractors:  Do you have a system for determining what subcontractors are working on site?
  • Reviewing payrolls:  Are you reviewing the certified payroll reports on a weekly basis to ensure that prevailing wages are being paid to the workers?  As part of your review, are you evaluating the following: a) whether the classifications reported are appropriate, b) the hourly wage rate is at least the prevailing wage rate, c) the proper overtime rates are being paid, d) apprentices are registered apprentices who may be paid less than the journey-level wage, e) the payroll report is signed by an authorized individual?  
  • Documenting your review:  Are you documenting your review of the payrolls by marking the payroll reports?
  • Weekly pay:  Are you monitoring to ensure that the contractor and their subcontractors paying their workers on a weekly basis?  This is required by the federal Davis-Bacon Act.
  • Worker interviews:  Are you interviewing a representative sample of workers on-site, asking them questions about what work they are performing and how much they are being paid?  Are you correlating this information with what is reported on weekly payroll reports?
  • Invoices:  Do you have a process that ties in your approval of a contractor's monthly pay application and invoice with your review and approval of the weekly payroll reports?
Mike Purdy's Public Contracting Blog 
© 2012 by Michael E. Purdy Associates, LLC 


Nancy Smyth said...

Many of the contractors that I deal with (in all states) complain that they aren't informed up front that there are certified payroll reporting requirements involved for a project - additionally they say that they are also not made aware of the prevailing wage rates that they are supposed to be paying.

All of a sudden they are weeks or months into the project and are told that they need to file certified payroll reports and then they are hit with the fact that they haven't been paying the proper wage.

This becomes a huge paperwork burden which also involves wage restitution.

Aren't these requirements mentioned during bid meetings or made clear in the contracts any more?

Mike Purdy said...

Often, public agencies who obtain federal grants do not carefully read the terms of those grants to realize that federal prevailing wage requirements apply. And even if they do, for some agencies, it may be the first time they've ever encountered federal prevailing wage requirements and they don't really know what their obligations are. Sometimes, too, the requirements are included in the bidding documents, but simply not enforced by the agency due to a breakdown of communications.