Bidding on a prevailing wage job introduces requirements that differ from private sector projects. The process centers on correctly calculating and applying government-mandated wage rates to your labor costs, which significantly influences your final bid price. Navigating this landscape requires a methodical approach to ensure both compliance and competitiveness. This guide provides a walkthrough of the prevailing wage bidding process, from research to final bid assembly.
Understanding Prevailing Wage Requirements
A “prevailing wage” is a minimum rate of pay established for laborers and mechanics working on government-funded construction projects. This system is designed to prevent government contracts from depressing local wage standards. The legal foundation for these requirements on federal projects is the Davis-Bacon Act, which applies to contracts exceeding $2,000 for the construction, alteration, or repair of public buildings or public works. Many states have also enacted their own similar laws, often called “Little Davis-Bacon” acts, which govern state-funded projects.
These laws mandate that workers receive compensation no less than the rates for similar work in that geographic area. This compensation package includes an hourly wage and fringe benefits. The official document listing these required rates is the “wage determination,” which dictates the minimum labor costs you must factor into your project estimate.
By setting a floor for labor costs, prevailing wage laws aim to ensure that contractors compete based on efficiency and skill, rather than by reducing worker pay. This creates a stable and predictable wage environment for local construction markets on public works projects.
Finding the Correct Wage Determination
The first place to look for the correct wage determination is within the bid package provided by the contracting agency. The agency often includes the document to ensure all bidders use the same requirements.
If the wage determination is not included in the bid documents, you must find it yourself. For federal projects, the official source is the System for Award Management at SAM.gov. There, you can search for the specific wage determination using details about the project’s location and type of construction, such as building, residential, heavy, or highway. You must match these details precisely to your project.
For projects funded by state or local governments, consult the website of that state’s Department of Labor or equivalent agency. These agencies maintain databases of rates for public works in their state. Always verify that you have the most current version of the wage determination, as rates are updated periodically and using an outdated document can lead to a non-compliant bid.
Calculating Labor Costs for Your Bid
Calculating labor costs for a prevailing wage job requires accuracy. The wage determination sheet is your guide, and it lists various worker classifications, such as “Carpenter,” “Electrician,” or “Laborer,” and provides a specific minimum compensation rate for each one. This rate is broken down into two main components: a base hourly rate and a fringe benefit rate.
The total prevailing wage for an employee is the sum of the base rate and the fringe benefit rate. For example, if the wage determination lists a base rate of $30 per hour for a carpenter and a fringe benefit rate of $10 per hour, the total compensation for that worker must be at least $40 per hour. This combined rate is the minimum you must pay for every hour that employee works on the project.
There are two primary ways to satisfy the fringe benefit portion of the requirement. The first method is to pay the fringe amount directly to the employee as additional cash wages. The second option is to contribute that amount to “bona fide” benefit plans, such as health insurance or a 401(k), on behalf of the employee.
To calculate your total labor cost, first identify every job classification you will need for the project. Then, using the wage determination, find the total hourly rate (base + fringe) for each classification. Finally, multiply this rate by the total number of hours you estimate each classification will work on the project.
Assembling the Complete Bid Package
After calculating your prevailing wage labor costs, integrate this figure into your complete bid package. This involves combining your labor estimate with other standard cost components of a construction bid, including materials, equipment rentals, and subcontractor quotes.
To these direct costs, you must add your company’s overhead. Overhead includes indirect expenses necessary to run your business, such as office support, project management salaries, and insurance. Finally, add your desired profit margin to the subtotal of all direct and indirect costs.
The sum of all these elements results in your final bid price. Your bid should account for:
- Prevailing wage labor
- Materials
- Equipment
- Subcontractors
- Overhead
- Profit
Post-Bid Compliance Considerations
During the bidding stage, consider the compliance responsibilities that arise after winning a prevailing wage contract. These responsibilities represent business costs that should be factored into your overhead calculations. A primary responsibility is the submission of weekly certified payroll reports.
Certified payroll is the mechanism for proving that you are paying workers in accordance with the wage determination. Each week, you must submit a detailed report, often on a specific form like the federal Form WH-347, to the contracting agency. This report documents each worker’s name, job classification, hours worked, rate of pay, and the gross wages earned for that project.
This requires meticulous record-keeping. You must accurately track the hours each employee works and the specific tasks they perform, as different tasks may fall under different job classifications with different pay rates. The administrative effort to maintain these records and prepare weekly reports is a tangible cost. You must retain these records for at least three years after the project is completed.