Davis-Bacon to the top

I have been posting more in last few weeks than over whole year. Forgive my motor mouth.

The Davis-Bacon thread is interesting. It has a hidden fact associated with it that was not brought up, and is probably the reason that congress has likely been lobbied to add surveyors to Davis-Bacon minimum rates. It has nothing to do with professionalism or lack of it in the surveying business. It is all about money--to the very parties that one would think would be against it until.......

Davis-Bacon wages has a lot of hidden agenda associated with it.

The promotion of Davis-Bacon for surveyor wages on all federal projects has a twist that many people might not know about. Many of the federal contracts for engineering/surveying firms are negotiated at an hourly rate. And one might think that the contract engineer/surveyor firm might want the rates to be lower than Davis-Bacon wage rates. But the opposite is true. The profit the firm makes on this type of federal job is tied to a percentage of gross earnings.

For example, assume a firm supplies a survey crew to the government by the hour and the expense of the direct hourly pay for the members of the survey crew is $50. per hour. The government audits or makes the firm establish by audit, its overhead factor. An engineering/surveying firm overhead is often in the category of 1.2 or more. So, assuming 1.2 the overhead is 1.2 X 50 = $60/hr. The profit is figured at some negotiated rate. Let's assume 5%. The net hourly rate that the firm can charge is (50 direct salary +60 overhead) x 1.05 profit factor or $115.50 per hour.

Now assume that the Davis-Bacon rate requires salaries of $70/hr.

70*1.2 = $84/hr. for overhead

so (70 direct pay +84 overhead )*1.05 profit factor = $161.70

So the rate of direct pay went up $20/hr, and the income to the firm went up by $46.20 per hour. The overhead for G/A is about 25%, so the G/A would come off that to the tune of about $20/hr, but the net increase to the firm simply because of Davis-Bacon was about $25 per hour for a survey crew. That is a huge percentage increase of take-home money for the firm, mainly because the in-house overhead is not affected by higher direct pay, and the audit comes before the increase. And that number is lower than many of the figures pointed out in the previous Davis-Bacon thread.

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Another complication or weird thing about it is that it gives the same consulting firms another distinct advantage in some ways. For example, surveying on federal projects is often a different type of surveying that the normal boundary survey firm does. The work on federal projects requires people who know how to survey federal projects when they vary from standard boundary work. When the contract between the firm and the government ends, often after 1 or 2 years, the firm has these extra employees. The worry of layoffs arises, and what it does to unemployment insurance rates for the firm. But the higher-paid Davis-Bacon employees don't want to work at the lower rates for non-federal, non-Davis-Bacon jobs, so they quit and go to work for the next firm that gets the fed contract, thereby eliminating the layoff headache.

The employee will often go where the money is.

There are at least 20 spins on these two simple thoughts about this. I am sure about the basics of above because I have seen it happen multiple times. However, this is not the case on all government projects.