Sunday, February 23, 2014

Bill Requiring Certified Payrolls on Public Works Passes Washington State House of Representatives

On February 13, 2014, the Washington State House of Representatives approved (on a 54 - 44 vote) HB 2331 that would require all public agencies in the state to obtain certified payroll reports from the contractor and every subcontractors before making any payment on a public works project. 

Bill may increase cost of public works projects:  There is currently no state law that requires submission of payroll reports to public agencies, and HB 2331 imposes a major new requirement.  The bill will delay payments to contractors (and subcontractors), discourage contractors from bidding public works projects, and potentially result in increased bid prices to public agencies due to:
  • Less competition:  A more limited pool of contractors bidding public works projects

  • Cost of managing new requirement:  Contractors bidding more to manage the collection and submission of the payroll reports
  • Cost of delayed payments:  Contractors bidding more to compensate for delayed payments from public agencies. 
Payrolls already required for federally funded projects:  Only if a project is federally funded are certified payrolls required.  Public agencies already have the contractual right to withhold payment in the event that payrolls have not been submitted on a federally funded project.  A new law that applies to all public works projects regardless of funding represents a major new requirement for public works contracting. 

Payroll submission already required by regulations:  WAC 296-127-320 already provides the option for Labor and Industries or an interested party to request certified payrolls on a public works project.  Mandating that certified payrolls be submitted on all public works projects by all contractors and subcontractors is not necessary and complicates public works bidding and contract administration.

What must a public agency do with the payrolls?  Interestingly, HB 2331 does not say that a public agency must do anything with the payroll reports other than collect them prior to making payment to the contractor.  In fact, the bill implies that a public agency's only role is to collect the payroll reports: "The awarding agency shall be held harmless and is not liable for the currency, completeness, or accuracy of certified payroll records submitted under this section."

Managing confidential information:  Because the payroll reports will become a matter of public record once received by the public agency, anyone may request the documents through a public records request (further increasing the workload of public agencies).  There is nothing in the bill that protects disclosure of confidential information (Social Security number, address, etc) on the certified payrolls to outside parties.

Impact on small businesses:  HB 2331 will have an especially negative impact on small contractors and subcontractors that do not have the administrative support systems in place to comply with this proposed new requirement.  

Status of the bill:  There was a public hearing on the bill on Friday, February 21, 2014 in the Senate Committee on Commerce & Labor.
Mike Purdy's Public Contracting Blog
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