[Senate Report 104-80]
[From the U.S. Government Printing Office]



                                                       Calendar No. 105
104th Congress                                                   Report
                                 SENATE

 1st Session                                                     104-80
_______________________________________________________________________


 
                     REPEAL OF THE DAVIS-BACON ACT

                                _______
                                

     May 12 (legislative day, May 1), 1995.--Ordered to be printed

_______________________________________________________________________


   Mrs. Kassebaum, from the Committee on Labor and Human Resources, 
                        submitted the following

                              R E P O R T

                         [To accompany S. 141]

    The Committee on Labor and Human Resources, to which was 
referred the bill (S. 141) to repeal the Davis-Bacon Act to 
eliminate excessive Federal construction costs and burdensome 
paperwork requirements, having considered the same, reports 
favorably thereon with an amendment and recommends that the 
bill (as amended) do pass.

                                CONTENTS

                                                                   Page
  I. Purpose..........................................................1
 II. Background and the need for the legislation......................2
III. Legislative consideration and votes in committee................11
 IV. Explanation of the bill and committee views.....................12
  V. Cost estimate...................................................17
 VI. Regulatory impact...............................................20
VII. Section-by-section analysis.....................................20
VIII.Changes in existing law.........................................21


                               I. Purpose

    Senate bill 141 repeals the Davis-Bacon Act of 1931, 40 
U.S.C. 276a et seq. and the Copeland Act's weekly payroll 
reporting requirements, 40 U.S.C. 276c. Davis-Bacon requires 
contractors on Federal construction projects costing over 
$2,000 to pay their workers no less than the ``prevailing 
wage'' as determined by the U.S. Department of Labor. The 
Copeland Act requires Federal contractors to submit weekly 
payroll records to the Federal Government.
    Through this legislation, the committee will save U.S. 
taxpayers $2.7 billion over 5 years through more efficient 
management of Federal construction projects. In addition, the 
legislation will reduce the paperwork associated with Federal 
procurement.
    Davis-Bacon was designed to prevent the Federal 
Government's purchasing power from depressing local wage rates. 
Another purpose was to prevent itinerant contractors from 
undermining local firms' wage schedules. These problems may 
well have existed during the Great Depression, but 
circumstances in the construction industry today are quite 
different.
    Senate bill 141 will permit market forces to determine the 
price of construction. We want the government to pay the market 
rate for goods and services procured for U.S. citizens. But we 
strongly oppose having the U.S. Department of Labor's Wage and 
Hour Division in Washington, DC establish wage rates for 
workers on Federal construction projects for every single 
county in the United States, especially when these Davis-Bacon 
rates are significantly higher than market rates.
    In fact, if the Davis-Bacon ``prevailing wage'' actually 
were the market wage that prevailed in the locality, then 
repealing Davis-Bacon would have no effect at all--taxpayers 
would simply pay the true prevailing market rate. But, as 
explained below, this is not the case.
    The committee believes that Davis-Bacon is no longer 
necessary to prevent wages from being bid-down when 80 percent 
of the private sector construction market successfully operates 
without Davis-Bacon wage supports. Moreover, one original 
purpose of Davis-Bacon--to prevent outside contractors from 
undermining local firms--has been turned on its head. Rather 
than protecting local firms, Davis-Bacon's inflated wage 
schedules disadvantage local firms and increase the likelihood 
that outside contractors will successfully bid for Federal 
projects.
    In addition, Davis-Bacon significantly limits job training 
opportunities for those on the lower rung of the disadvantaged. 
Repeal will create new training opportunities for the 
disadvantaged.
    Finally, the committee rejects arguments by Davis-Bacon 
proponents that repeal will reduce quality, productivity and 
safety on Federal construction sites. The committee also 
rejects arguments that repeal will cause dire economic 
consequences for the construction industry.
    In sum, Davis-Bacon is an outdated law, and the committee 
recommends that it be repealed.

            II. Background and the Need for the Legislation

    The Congress enacted the Davis-Bacon Act of 1931 during the 
Great Depression, which was a period of great economic 
instability. As the Nation's economy went into a tail-spin, 
Congress was rightfully concerned that high unemployment might 
lead Federal contractors to depress local wage rates as workers 
competed for any work they could find.
    Congressman Bacon, for whom the Federal prevailing wage law 
was named, stated during the debate in the House of 
Representatives that ``certain itinerant, irresponsible 
contractors, with itinerant, cheap, bootleg labor'' \1\ were 
successfully bidding for public works projects. As a result, 
they were denying local labor and local contractors the 
opportunity to fairly compete on Federal construction 
contracts.
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    \1\ U.S. Cong., House, floor debate, ``Rates of Wages for Laborers 
and Mechanics on Public Buildings of the United States,'' motion to 
pass S. 5904, Feb. 28, 1931, passed, 71st Cong., 3d Sess. 74 Cong. Rec. 
at 6510 (1931).
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    Specifically, Rep. Bacon appeared to be concerned that a 
Southern contractor underbid several New York contractors for a 
veterans hospital in Rep. Bacon's district. The successful 
bidder brought workers from the South to complete the 
project.\2\
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    \2\ Thioblot, Armand, ``Prevailing Wage Legislation,'' The Wharton 
School of Industrial Research, University of Pennsylvania, 1986, p. 29.
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    During the Depression, work was scarce. The gross national 
product fell by 30 percent, farm prices fell by 50 percent, and 
unemployment rose to 25 percent. Construction worker earnings 
fell by 50 percent as construction dollar volume slid from 
$10.8 billion to $2.9 billion. And 60 percent of the Nation's 
new construction was publicly financed.\3\
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    \3\ ``The Davis-Bacon Act Should Be Repealed,'' U.S. General 
Accounting Office, HRD79-18, April 27, 1979, p. 8 (hereinafter, ``GAO 
Report'').
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    With the economy contracting, legislators were concerned 
that competitive pressures would drive down wages. As economist 
Armand Thioblot stated in his book on prevailing wage laws:

          The actual purpose of prevailing wage legislation can 
        safely be characterized as that of protecting local 
        wage scales from the consequences of competitive 
        pressures on contractors to submit the low bid. * * * 
        [During the Depression] * * * many * * * were willing 
        to take [construction jobs] at almost any wage, thus 
        driving down the already meager pay rates.\4\
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    \4\ Armand Thioblot, ``Prevailing Wage Legislation,'' supra, p. 28.

    As the Depression deepened, President Herbert Hoover sought 
to deal with the crisis in a variety of ways. In public, he 
espoused hope and confidence, attempting to reassure the public 
and to encourage the business community. But ``[e]xpressions of 
confidence could not mitigate the impact of growing 
unemployment and reduced wages.'' \5\ In private, the President 
conceded the seriousness of the situation and beseeched 
business leaders to halt layoffs and not to reduce wages or 
prices, exacting pledges from industry to hold the line. Unable 
to stand by such pledges, however, employers ``desperately 
[tried] to cut [wages and employment] faster than prices 
fell.'' \6\
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    \5\ Schwarz, Jordan A. ``The Interregnum of Despair: Hoover, 
Congress, and the Depression.'' Urbana, The University of Illinois 
Press, 1970. p. 13.
    \6\ Sternsher, Bernard. ``Rexford Tugwell and the New Deal.'' New 
Brunswick, Rutgers University Press, 1964. p. 30. Dixon Wecter, in 
``The Age of the Great Depression, 1929-1941'' (New York, The Macmillan 
Company, 1948), p. 17-18, suggested that employers ``contrived to slash 
pay rolls about 40 percent between 1929 and September 1931,'' noting: 
``Many industries and small businesses denied even lip service to the 
administration's plea for maintenance of wage rates.''
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    Moving through 1930 and into 1931, President Hoover, 
interested in the concept of using public works to revive a 
depressed economy, sought additional funding from Congress with 
which to complete projects already begun.\7\ Compared with the 
scope of the crisis, however, the initiatives were modest.
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    \7\ Sternsher, supra, p. 142-145.
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                         Legislation is Adopted

    On January 31, 1931, Labor Secretary William Doak appeared 
before the House Committee on Labor and stressed that the 
prevailing wage legislation was ``really an emergency 
measure.'' \8\ On February 3, 1931, the Secretary made a 
similar appeal to the Senate Committee on Manufacturers. The 
legislation had been treated by the Administration, he noted, 
``as an emergency matter because it really was an emergency 
case.'' Referring to the federal construction program then 
underway, he explained that ``many of these contractors who 
[were awarded contracts] were going into the higher wage 
territories and bringing in laborers and mechanics and paying 
them reduced wage rates.'' And this practice, Secretary Doak 
affirmed, ``was not only disturbing to labor but disturbing to 
the business people as well.'' \9\
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    \8\ U.S. Congress. House. Committee on Labor. ``Regulation of Wages 
Paid to Employees by Contractors Awarded Government Building 
Contracts.'' Hearing, 71st cong., 3rd Sess., Jan. 31, 1931. Washington, 
U.S. Govt. Print. Off., 1931. p. 2.
    \9\ U.S. Congress. Senate. Committee on Manufacturers. ``Wages of 
Laborers and Mechanics on Public Buildings.'' Hearing, 71st Cong., 3rd 
Sess., Feb. 3, 1931. Washington, U.S. Govt. Print. Off., 1931. p. 2-3.
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    Upon the urging of the Administration, Congress acted 
quickly. The legislation was adopted without a roll call vote 
and, on March 3, 1931, was signed into law by President Hoover 
(P.L. 71-798).\10\ The act set the locally prevailing wage as 
the wage floor on public building contracts of $5,000 or 
more.\11\
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    \10\ Congressional Record, Feb. 4, 1931, p. 3918-3919, Feb. 28, 
1931, p. 6504-6521, and Mar. 3, 1931, p. 6906.
    \11\ The threshold was later reduced to $2,000.
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    Those were the conditions when the Congress enacted the 
Federal prevailing wage law. At that time, there were no other 
Federal worker protections.\12\
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    \12\ Later, Congress passed the Fair Labor Standards Act of 1938 
(minimum wage, overtime and child labor protections), the Miller Act of 
1935 (performance and payment bond requirements to assure that workers 
were paid for work performed), the Contract Work House and Safety 
Standards Act of 1962 (overtime for working more than eight hours per 
day), and the Social Security and Wagner-Peyser Acts (unemployment 
compensation and the employment service).
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    Supporters of Davis-Bacon rely on protecting local labor 
conditions and preventing wages from competitive pressures as 
the justification for a continued commitment to a Federal 
prevailing wage law. Robert Georgine, the president of the 
Building and Construction Trades Council, testified before the 
committee:

          The philosophy of the Davis-Bacon Act is that the 
        Federal Government should not use its vast procurement 
        powers to depress the wages and living standards of 
        construction workers across the country. That 
        philosophy is as valid today as it was when the act was 
        originally passed.\13\
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    \13\ Testimony of Robert Georgine before the Senate Committee on 
Labor and Human Resources, ``Repeal of the Davis-Bacon Act, S. 141,'' 
S. Hrg., 104th Cong., 1st Sess., February 15, 1995, p. 4 (hereinafter 
``S. Hrg., 104th Cong., 1st Sess.'').

    The committee respectfully disagrees with Mr. Georgine that 
the Federal Government's ``vast procurement powers'' will 
depress workers' wages without Davis-Bacon, and that the 
philosophy applied in 1931 is still applicable today. The 
committee is confident that our economic situation has 
dramatically changed over the past 60 years. As a result, 
repealing Davis-Bacon will not cause wages to be bid-down 
through competition below the normal local market wage.

             times change and our laws must change as well

    During the Great Depression, Congress was rightfully 
concerned that competition for work on Federal construction 
projects might depress local wage rates. When 60 percent of all 
construction was publicly financed, as was the case in the 
1930's, the government was the single dominant economic force 
in construction.
    The committee heard testimony from labor economist Armand 
Thioblot, who argued that during the Depression, the Federal 
Government ``was about the only game in town.'' \14\ However, 
Mr. Thioblot pointed out that times have changed:
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    \14\ Thioblot, S. Hrg., 104th Cong., 1st Sess., p. 2.

          As the economy recovered, private construction began 
        again and [Federal] contracting lost the element of the 
        monopsony. Now all public works construction, for State 
        and local as well as Federal Governments, amounts to 
        only about 20 percent of the industry's activity, and 
        government is simply one purchaser among many. The 
        Davis-Bacon Act here applies a cure (of awesome expense 
        and complexity) to a problem that simply does not 
        exist.\15\
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    \15\ Thioblot, supra at p. 3.

    When the Federal Government is responsible for less than 20 
percent of the construction market, it is difficult to suggest 
that competition for government contracts would depress local 
wage rates.\16\ Such wage depression does not occur in the 
private sector, and it will not occur when we repeal Davis-
Bacon.
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    \16\ The Federal Government finances 10 percent of new 
construction, and State and local governments finance the other 10 
percent. See ``Trends in U.S. Construction, 1995 to 1999,'' 
Construction Review, International Trade Administration, U.S. 
Department of Commerce, Fall 1994.
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    The General Accounting Office agrees with this analysis. 
While examining the changed economic conditions, GAO concluded:

          The Davis-Bacon Act is no longer needed. Other wage 
        legislation and changes in economic conditions and in 
        the construction industry since the law was passed make 
        the law obsolete; and the law is inflationary. GAO 
        believes it should be repealed.\17\
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    \17\ GAO Report, supra at p. i.

    The General Accounting Office also found that in those rare 
cases where, for one reason or another, the Davis-Bacon wage 
rate was lower than the market rate in a locality, that 
contractors ``paid workers at rates higher than those 
stipulated by Labor.'' \18\ So the competition had ``little, if 
any adverse effect'' on local wage markets.\19\
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    \18\ GAO Report, supra at p. 69.
    \19\ GAO Report, supra at p. 69.
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    This finding confirmed that competition for Federal 
contracts will not depress local wages. Otherwise, firms would 
not have paid workers more than required under Davis-Bacon.

            davis-bacon adversely affects local contractors

    In the committee's view, not only is Davis-Bacon 
unnecessary, but its original purpose of protecting local 
contractors from ``itinerant'' firms has been turned on its 
head. Davis-Bacon makes it more likely that outside contractors 
will successfully bid on Federal construction projects.
    During the 103d Congress, the committee received testimony 
from the National Association of Minority Contractors (NAMC), 
whose Executive Director, Samuel Carradine, wrote:

          Rather than protecting local contractors from unfair 
        competition, Davis-Bacon has practically fostered a 
        closed group of large contractors who follow Federal * 
        * * construction work around the country to the 
        exclusion of smaller, local contractors.\20\
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    \20\ Testimony of the National Association of Minority Contractors, 
``Davis-Bacon Reform,'' S. Hrg. 103-749, July 28, 1994, p. 74.

    This anecdotal evidence confirmed the findings of both the 
GAO and a research team at Oregon State University, both of 
whom found that Davis-Bacon worked to the disadvantage of local 
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contractors. According to the GAO:

        [t]he increased costs [due to Davis-Bacon] may have had 
        the most adverse effect on local contractors and their 
        workers--those the act was to protect--by promoting the 
        use of nonlocal contractors on Federal projects. We 
        found that nonlocal contractors worked on the majority 
        of these projects, indicating that the higher rates may 
        have discouraged local contractors from bidding.\21\
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    \21\ GAO Report, supra at p. 68-69.

    Through interviews with contractors, GAO found that 
``rather than disrupt their wage structures and worker 
classification practices, they [local contractors] would not 
bid on federally financed projects.'' \22\ This ``limited the 
competition'' for Federal projects and ``probably accounted for 
the success of nonlocal contractors with receiving the majority 
of the contracts in those localities where Labor's rates were 
higher than prevailing rates.'' \23\
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    \22\ GAO Report, supra at p. 73.
    \23\ GAO Report, supra at p. 74.
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    Similar to GAO's findings, the Oregon State University 
study of Davis-Bacon in rural areas found that the Federal 
prevailing wage law adversely affected local contractors. The 
authors stated:

          There appears to be some validity to the charge that 
        the way the Davis-Bacon Act is now administered puts 
        local contractors at a disadvantage instead of ensuring 
        local firms and residents their share of the jobs as 
        the law apparently intended. Compared to contractors on 
        private projects, contractors on public projects are 
        less likely to be within the same county as the 
        project. * * *
          Contractors on public jobs were more likely to come 
        from noncontiguous counties. * * * If we use private 
        projects as a guide to what would happen in the absence 
        of Davis-Bacon, the act does seem to have the effect of 
        making it more difficult for local contractors to 
        successfully bid on public projects.\24\
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    \24\ Fraundorf, Martha Norby, Farrell, John P., and Mason, Robert, 
``Effect of the Davis-Bacon Act on Construction Costs in Non-
Metropolitan Areas of the United States,'' Department of Economics, 
Oregon State University, January 1982, p. 18.
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          davis-bacon unnecessarily raises construction costs

    The Davis-Bacon Act promotes a failed procurement policy by 
artificially increasing Federal construction costs. According 
to the Congressional Budget Office (CBO), Davis-Bacon repeal 
will save taxpayers $2.7 billion over a 5-year period.\25\ This 
represents a significant budget savings for the country.\26\
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    \25\ In its 1983 analysis of Davis-Bacon, CBO (under the direction 
of CBO Director Alice Rivlin) stated: ``CBO estimates that the total 
amount by which Davis-Bacon raises Federal construction costs (the sum 
of these effects) is approximately 3.7 percent.* * * '' ``Modifying the 
Davis-Bacon Act: Implications for the Labor Market and the Federal 
Budget,'' Congressional Budget Office, July 1983, p. xii.
    \26\ In his testimony before the committee, Robert Georgine 
criticized the CBO estimate because it allegedly failed to account for 
Labor Department administrative changes in computing the prevailing 
wage and failed to account for decreased compliance costs in the age of 
computer technology. CBO has responded in a letter to the House 
Economic and Educational Opportunities Committee that it has adjusted 
its methodology over the years and stands by its most recent budget 
savings estimates.
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    We can discern no justification for taxpayers footing the 
bill for higher construction costs, particularly at a time when 
the Federal Government is experiencing a large budget deficit. 
This would be reason enough to justify Davis-Bacon repeal.
    The committee heard testimony from numerous witnesses 
regarding the construction premium that accompanies Davis-
Bacon. Cindy Athey, owner of Precision Wall Tech in Northern 
Virginia, testified that her painters earn $14 per hour on 
private sector projects, but the Davis-Bacon wage is $21.24 per 
hour for projects at the National Institutes of Health (NIH) 
and the Navy Yard in the metropolitan DC area.\27\
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    \27\ Testimony of Cindy Athey before the Senate Committee on Labor 
and Human Resources, ``Davis-Bacon Reform,'' S. Hrg. 103-749, July 28, 
1994, p. 35.
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    Similarly, Hamilton Bowser, owner of Evanbow Construction 
in East Orange, N.J., testified that his journeymen earn $15 
per hour on private sector projects and $25 per hour on Davis-
Bacon projects.\28\ Again, U.S. citizens pay a premium for 
Federal construction that is wholly unjustifiable.
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    \28\ Testimony of Hamilton Bowser before the Senate Committee on 
Labor and Human Resources, S. Hrg. 103-749, supra, at p. 34.
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    And finally, Boyd Boehlje testified for the National School 
Boards Association that Loudon County, VA, at one point had 
been offered a $24,000 grant for a technical center, but the 
school board declined the grant. If the school board had 
accepted the grant, then Davis-Bacon would have applied to the 
project and the Federal grant money would have been used to 
cover the increased construction costs associated with Davis-
Bacon.\29\
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    \29\ Boehlje, S. Hrg. 104th Cong., 1st Sess., at p. 3.
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    Numerous academic studies confirm that Davis-Bacon raises 
construction costs. The GAO found that Federal prevailing wage 
increased construction costs by 3.4 percent, and the Oregon 
State study indicated cost increases of 26-38 percent of rural 
areas.
    At the State level, scholars and experts also have 
concluded that State prevailing wage laws increase construction 
costs.\30\ For instance, before repealing their State 
prevailing wage law, Florida experimented by exempting school 
construction from the State prevailing wage law between 1974-
78. Surveying local school districts, the Florida State School 
Board found that State taxpayers had saved $37 million, or 
approximately 15 percent of total construction costs.\31\
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    \30\ See also testimony of Armand Thioblot before the Senate Labor 
and Human Resources Committee, 104th Cong., 1st Sess., at p. 6:
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      Studies performed in Florida, Iowa, Kentucky, Louisiana, 
      Maryland, Minnesota, and New Hampshire in conjunction with 
      repeal or attempted repeal of State prevailing wage laws in 
      those States found average anticipated construction savings 
      of 9.4 percent from eliminating them.
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    \31\ Thioblot, ``Prevailing Wage Legislation,'' at p. 163.
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    Similarly, the West Virginia Graduate Business School 
analyzed the costs associated with construction of an academic 
center in Preston County, WV from 1987-89. The study found that 
$1.5 million could have been saved if there were no prevailing 
wage requirements. In addition, the State prevailing wage law 
added $405,000 to the $1.35 million cost of building a garage 
and municipal building in Clarkesburg, WV.\32\
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    \32\ Government Union Review, Summer 1990, at p. 41.
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    Sometimes the increased costs were due to higher than 
market wages being paid on prevailing wage projects, and other 
times the increased costs were due to declining productivity. 
The Florida school system contended that wages were 23-41 
percent higher than market rates, and the West Virginia study 
found the State prevailing wage law ``significantly [drove up] 
the labor costs on public construction projects by 
approximately 30 percent.'' \33\
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    \33\ Government Union Review, Summer 1990, at p. 41.
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                    Davis-Bacon Reduces Productivity

    Witnesses who testified before the committee suggested that 
Davis-Bacon's wage rates and prevailing work rule restrictions 
significantly diminished productivity. For instance, Cindy 
Athey of Precision Wall Tech testified that a 5,000 hour job 
would take 6,000 hours to complete under Davis-Bacon.\34\
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    \34\ According to Ms. Athey, ``This makes sense. Why would anyone 
want to complete a project that is almost doubling their paycheck?'' S. 
Hrg. 103-749, supra, at p. 36. See also the testimony of Hamilton 
Bowser that workers on Davis-Bacon projects have a ``tendency to string 
out the work.'' Id., at p. 37.
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    Work rule restrictions decrease productivity as well. The 
CBO highlighted this point in its 1983 cost study:

          Although the effect of Davis-Bacon on wages receives 
        the most attention, the act's largest potential cost 
        impact may derive from its effect on the use of labor. 
        For one thing, DOL wage determinations require that, if 
        an employee does the work of a particular craft, the 
        wage paid should be for the craft. * * *  For example, 
        carpentry work must be paid for at carpenters' wages, 
        even if performed by a general laborer, helper or 
        member of another craft.\35\
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    \35\ CBO Report, supra, at p. 27.

    CBO noted that many construction firms categorize these 
individuals as ``general building mechanics,'' but if the Labor 
Department has not issued a wage determination for the class of 
workers, then ``workers must be paid a composite rate 
reflecting several crafts, weighted for how much time is spent 
on each task; this increases * * * contractors' costs for 
labor.'' \36\
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    \36\ CBO Report, supra, at p. 27.
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    As Sam Carradine, Executive Director of the National 
Association of Minority Contractors, testified, ``Davis-Bacon 
requires work assignments and payroll reporting along rigid 
craft-by-craft lines reminiscent of the 1930s. It fails to 
reflect industry practice in private sector construction 
today.'' \37\
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    \37\ S. Hrg. 103-749, supra, at p. 74.
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    Precision Wall Tech's Cindy Athey also expressed these 
concerns. Ms. Athey testified that the ``tools of the trade'' 
restrictions in David-Bacon reduced productivity. Either she 
had to pay a high wage to an unskilled worker simply because he 
held a paint brush, or she had to pay a high wage to an 
experienced worker for menial tasks. In Ms. Athey's view, 
``There are many individuals who are able to hold a paint brush 
or a pipe wrench, but could not be classified as a painter or 
even a plumber. However, these individuals are required to be 
paid the rate of a painter or plumber by the Davis-Bacon Act.'' 
\38\
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    \38\ Athey, S. Hrg. 103-749, supra, at p. 86.
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   Davis-Bacon Diminishes Training Opportunities and Entry-Level Jobs

    In addition to raising construction costs, Davis-Bacon also 
makes it harder to hire lower-skilled workers on construction 
projects. As described above, contractors must pay the Davis-
Bacon wage scale for individuals that perform a given craft's 
work. As a result, Davis-Bacon creates a disincentive to hire 
entry-level workers and train them on-the-job.
    Testifying for the Davis-Bacon Repeal Coalition, Maurice 
Baskin told the committee this year that the Federal prevailing 
wage law made it more difficult to hire lower-skilled workers 
on construction projects. Mr. Baskin stated:

          Helpers assist skilled journeymen and provide 
        entrance into the industry and the opportunity to 
        receive hands-on training. Clearly if contractors must 
        pay one high ``prevailing'' wage, they will always 
        choose the already skilled worker and have limited 
        slots available for new entrants into the industry. 
        This is seen most clearly in the inner cities, where a 
        large amount of Federal construction dollars are 
        concentrated.\39\
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    \39\ Baskin, S. Hrg. 104th Cong., 1st Sess., supra, at p. 3.

    Other witnesses who appeared before the committee 
reiterated the concerns expressed by Mr. Baskin. The National 
Association of Minority Contractors argued that Davis-Bacon 
``freezes out lower-skill minority workers.'' \40\ And Clark 
Becker, testified for the National League of Cities that:
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    \40\ S. Hrg. 103-749, supra, at p. 73.

          A large portion of Federal construction dollars are 
        targeted toward inner city development and repair. 
        Unemployed residents of the inner cities, a large 
        percentage of whom are minorities, often have not 
        previously been trained in the skills of the 
        construction industry. The Davis-Bacon Act's prevailing 
        wage restrictions create a disincentive for local 
        government contractors to offer inner city residents a 
        chance to work in their own neighborhoods. Repeal of 
        the Davis-Bacon Act would give urban cities the 
        discretion to create more opportunities for the 
        citizens who are most in need of training and 
        employment.\41\
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    \41\ Becker, 104th Cong., 1st Sess., supra, at p. 5.

    By repealing Davis-Bacon, the committee seeks to create job 
opportunities for thousands of individuals in a high paying 
industry. Art Pearson, a minority contractor in Washington 
State, told Readers' Digest in December 1994, that Davis-Bacon 
repeal would enable him to hire inner-city kids that are not 
being hired now for Federal construction projects. Mr. Pearson 
stated that he knew ``gang leaders who got [construction] jobs 
at $10 per hour and it changed their lives.'' \42\
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    \42\ Eugene Methvin, ``A Scandalous Law That's Costing Taxpayers 
Billions,'' Readers' Digest, December 1994, p. 125. Mr. Pearson's 
comments are easily understood because construction is a high paying 
industry. The average hourly earnings of construction workers was 
$14.41 per hour in 1993, second only to mining workers who earned 
$14.68 per hour. In contrast, the average hourly wage in private firms 
was $10.96 per hour.
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                davis-bacon is impractical to administer

    In addition to raising construction costs and decreasing 
job opportunities Davis-Bacon also is highly impractical to 
administer. GAO concluded that after over 50 years trying to 
determine ``prevailing wages,'' the U.S. Department of Labor 
has yet to develop an effective system to plan or manage the 
data collection for producing accurate wage schedules.\43\
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    \43\ See generally, GAO Report, supra, at p. ii.
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    Most recently, GAO updated its seminal 1979 report 
recommending Davis-Bacon repeal. In 1994, GAO wrote:

        [O]ther concerns we noted in 1979 remain, most notably 
        the potential for wage determinations to be based on 
        low-quality data. For example, wage determinations 
        [were] completed with response rates as low as 25 
        percent. * * * In addition, Labor does not verify the 
        data received, even on a sample basis. Finally, Labor 
        reports that the average age of a wage survey is more 
        than 7 years.\44\
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    \44\ GAO Letter to Sen. Larry Craig, Rep. Charles Stenholm, et. 
al., GAO/HEHS-94-95R, February 7, 1994, at p. 3-4.

    Even assuming that the Labor Department could effectively 
determine accurate market wages, the paperwork burdens for 
Federal contractors to comply with Davis-Bacon reporting 
requirements overwhelm many construction firms and city 
administrators. Mayor Clark Becker told the committee that 
Dallas, TX each year devotes over 4,000 hours of city staff 
time to ensuring compliance with Davis-Bacon requirements.\45\
---------------------------------------------------------------------------
    \45\ 104th Cong., 1st Sess., supra, at p. 5.
---------------------------------------------------------------------------
    The paperwork component of the Davis-Bacon Act, known as 
the Copeland Act of 1934, which we also repeal in S. 141, 
requires Federal contractors to file weekly payroll schedules 
(hours worked, wages, earnings, deductions and net pay) of all 
workers on the Davis-Bacon project. CBO estimated in 1983 that 
this added $50 to $100 million to Federal contractor costs,\46\ 
and the Davis-Bacon Repeal Coalition's counsel, Maurice Baskin 
concurred with this figure during the committee hearing.\47\
---------------------------------------------------------------------------
    \46\ CBO Report, supra, at p. 29.
    \47\ S. Hrg, 104th Cong., 1st Sess., supra, at p. 3.
---------------------------------------------------------------------------
    The committee notes that the Clinton administration appears 
to agree that significant paperwork burdens accompany the 
Davis-Bacon Act. In its initial reinventing government 
initiative, Vice President Gore recommended eliminating the 
weekly payroll submissions and substituting a monthly 
certification of compliance.
    The committee firmly believes that Davis-Bacon is no longer 
needed to prevent competition from depressing wage rates and to 
protect local contractors from outside competition. In fact, 
contrary to its original purpose, Davis-Bacon now disadvantages 
local contractors by disrupting their wage schedules and makes 
it more likely that outside contractors will successfully bid 
for Federal construction projects.
    In addition, Davis-Bacon raises construction costs and 
decreases productivity on construction sites. The act reduces 
training opportunities and remains highly impractical to 
administer.
    For all these reasons, the committee strongly endorses 
Davis-Bacon repeal.

         III. Legislative Consideration and Votes in Committee

    On the first day of the 104th Congress, (January 4, 1995), 
Senator Kassebaum, along with Senators Jeffords, Coats, Gregg, 
Chafee, Brown, Craig, Nickles, Cochran, Domenici, Grassley, 
Simpson, Warner, Pressler, and Gramms introduced the Davis-
Bacon Repeal Act, S. 141.
    On February 15, 1995, the Senate Committee on Labor and 
Human Resources held a hearing on Davis-Bacon repeal. The 
following individuals provided testimony:
          The Honorable John Chafee, U.S. Senator from Rhode 
        Island and Chairman of the Senate Committee on 
        Environment and Public Works;
          The Honorable Clark Becker, Mayor of Woodland Park, 
        Colorado, testifying on behalf of the National League 
        of Cities;
          Boyd Boehlje, School Board Member in Pella, Iowa, and 
        President of National School Boards Association, 
        testifying on behalf of the National School Boards 
        Association;
          Gary Hess, Hess Mechanical Corporation of Upper 
        Marlboro, MD;
          Mill Butler, Handon Diving Inc., of Washington, DC;
          Armand Thioblot, Economist, Baltimore, MD;
          Maurice Baskin, Esq., testifying on the Davis-Bacon 
        Repeal Coalition;
          The Honorable Bernard Anderson, Assistant Secretary 
        for the Employment Standards Administration, U.S. 
        Department of Labor, Washington, DC;
          Robert Georgine, President of the Building and 
        Construction Trades Council, Washington, DC.
    Additional statements or letters regarding S. 141 were also 
received and placed in the record.
    On March 29, 1995, the committee considered S. 141. A 
quorum being present, Senator Simon offered an amendment in the 
nature of a substitute, which was defeated by a 9-7 vote. 
Senator Frist offered an amendment to except the Tennessee 
Valley Authority from prevailing wage requirements, which the 
committee adopted. The committee then ordered the bill reported 
favorably by a 9-7 vote.

            IV. Explanation of the Bill and Committee Views

    Senate bill 141 repeals the Davis-Bacon Act of 1931, a law 
that requires firms performing Federal construction costing 
over $2,000 to pay their workers no less than the ``prevailing 
wage,'' as determined by the U.S. Department of Labor. Senate 
bill 141 also repeals the section of the Copeland Act that 
requires Federal contractors to submit weekly payroll records 
to the Federal Government.
    Specially, Section 2 of S. 141 states as follows: ``The Act 
of March 3, 1931 (commonly known as the Davis-Bacon Act) (40 
U.S.C. 276a et seq.) is repealed.''
    Section 3 of S. 141 states as follows: ``Section 2 of the 
Act of June 13, 1934 (40 U.S.C. 276c) (commonly known as the 
Copeland Act) is repealed.''
    In repealing the Davis-Bacon Act, the legislation permits 
local market forces to govern the bidding process. As a result, 
firms will not be required to include wage schedules prepared 
by the U.S. Department of Labor in their bid submissions for 
Federal public works projects. Wages will no longer be 
regulated, just as the prices for materials and supplies are 
not regulated by the Federal Government.
    In repealing the weekly reporting requirements of the 
Copeland Act, S. 141 reduces the burdensome paperwork 
associated with Federal construction projects. The Vice 
President's reinventing government initiative has recognized 
that these payroll submissions place an unnecessary burden on 
Federal contractors.
    The committee believes that Davis-Bacon repeal will promote 
an efficient Federal Government procurement process. The price 
of construction services will be established by local markets, 
rather than by U.S. Department of Labor employees in 
Washington, DC. And private sector work rules and pay schedules 
will apply to government-funded construction.
    The committee concludes that Davis-Bacon, a Depression-era 
labor standards statute, is no longer necessary to prevent 
competition from depressing wages. Roughly 80 percent of U.S. 
construction is private sector work.\48\
---------------------------------------------------------------------------
    \48\ Ten percent of U.S. construction is federally funded, and 10 
percent is funded by State and local governments. In contrast, during 
the Depression, 60 percent of construction was government-funded. See 
``Construction Review,'' U.S. Department of Commerce, supra and GAO 
Report, supra.
---------------------------------------------------------------------------
    The private sector functions well without a federally 
established wage schedule. The committee has not witnessed 
``cut-throat'' competition in the private sector with respect 
to wages, or the pricing of materials and supplies, and the 
committee does not believe that repealing Davis-Bacon will 
cause wages to be bid-down in the public sector.
    Because Davis-Bacon wage schedules tend to be higher than 
the actual local market wage, and productivity is lower when 
workers must follow narrow ``prevailing'' work rules, the 
Federal prevailing wage law raises Federal construction costs. 
The Congressional Budget Office estimates that Davis-Bacon 
repeal will save U.S. taxpayers $2.7 billion over the 5-year 
budget cycle. The committee believes that Davis-Bacon repeal 
constitutes a significant budgetary savings during a time when 
the Federal Government is experiencing a severe budgetary 
shortfall. The Congress can ill-afford to spend hard-earned 
taxpayer dollars to finance Federal construction at higher than 
market rates.
    The committee has taken notice of the General Accounting 
Office study indicating that Davis-Bacon, contrary to its 
original purpose of protecting local firms and local wage 
standards, actually disadvantages local contractors. When 
Davis-Bacon rates were higher than local market rates, local 
firms frequently did not bid for projects because they did not 
wish to disrupt their wage schedules. As a result, outside 
contractors frequently were the successful bidder.
    The committee believes that Davis-Bacon adds costs and 
reduces efficiency by requiring Federal construction 
contractors to follow local prevailing work rules. The private 
sector knows how to staff a job. It does not need the U.S. 
Department of Labor to interpret the locally prevailing work 
rules.
    As a result, Davis-Bacon reduces training opportunities for 
entry level workers. The committee believes that when 
contractors must pay Davis-Bacon wage rates for all individuals 
who handle the tools of the trade,\49\ then firms most likely 
will hire the most experienced workers and actually have a 
disincentive to hire entry level workers.
---------------------------------------------------------------------------
    \49\ That is to say, any workers who handle a hammer must be paid 
the journeyman carpenter's rate.
---------------------------------------------------------------------------
    For all the above reasons, the committee believes that 
Davis-Bacon repeal is in the best interest of the country at 
this time. Nevertheless, Davis-Bacon supporters have advanced 
various arguments for the Federal prevailing wage law, and the 
committee will briefly address those arguments.
    Serious Economic Consequences: Davis-Bacon supporters have 
argued that serious economic and social consequences will 
follow if Congress repeals the Federal prevailing wage law. The 
committee rejects this argument.
    The U.S. Department of Labor raised this contention in 1979 
when GAO recommended Davis-Bacon repeal, and GAO responded to 
the Labor Department with this statement:

          Labor said that repeal of the Davis-Bacon Act would 
        have a serious social and economic effect on 
        construction workers and would undermine a basic legal 
        protection of the wage of American workers in one of 
        the largest, most economically unstable, and complex 
        industries. * * *
          We [GAO] disagree * * * less than an estimated 1 
        million construction workers in 1977 were working on 
        contracts subject to the Davis-Bacon Act. * * * We 
        found no indications, and Labor did not present any 
        evidence, of an adverse effect on or exploitation by 
        contractors of the estimated 3.0 million workers 
        employed on construction projects not covered by the 
        act. (emphasis added) \50\
---------------------------------------------------------------------------
    \50\ GAO Report, supra, p. 17.
---------------------------------------------------------------------------

             negative effect on minority job opportunities

    Davis-Bacon repeal opponents also claim that job 
opportunities will decline for minorities if repeal efforts are 
successful. The committee rejects this contention.
    The committee notes that Federal contractors remain subject 
to Executive Order 11246, which prohibits Federal contractors 
from discriminating on the basis of race, religion, gender or 
national origin. Similarly, all firms with more than 15 
employees are covered by Title VII of the Civil Rights Act of 
1964, which prohibits discrimination on the basis of race, 
gender, national origin, or religion.
    In addition, the committee received testimony from the 
National Association of Minority Contractors that Davis-Bacon 
``freezes out lower-skill minority workers.'' At the hearing, 
the National League of Cities, which endorsed Davis-Bacon 
repeal, testified that:

          Davis-Bacon Act's prevailing wage restrictions create 
        a disincentive for local government contractors to 
        offer inner city residents a chance to work in their 
        own neighborhoods. Repeal of the Davis-Bacon Act would 
        give urban cities the discretion to create more 
        opportunities for the citizens who are most in need of 
        training and employment.\51\
---------------------------------------------------------------------------
    \51\ Testimony of Clark Becker, S. Hrg. 104th Cong., 1st Sess., 
supra.

    Finally, the U.S. Department of Labor argued in 1979 that 
minorities had a ``tenuous foothold'' in the construction 
industry and they would be ``especially vulnerable to the wage 
exploitation which could occur with repeal of Davis-Bacon.'' 
\52\ GAO, responding to the Labor Department ``provide[d] no 
factual or logical basis for its viewpoint.'' \53\
---------------------------------------------------------------------------
    \52\ GAO Report, supra, p. 31.
    \53\ GAO Report, supra, at p. 31.
---------------------------------------------------------------------------

                    Quality, Safety and Productivity

    Davis-Bacon supporters contend that Federal construction is 
higher quality work due to Federal prevailing wage 
requirements. They believe that ``you get what you pay for,'' 
and any attempt to save funds through Davis-Bacon repeal will 
be unsuccessful because the projects will cost more in the long 
run.
    The committee has considered and rejects this argument. We 
have seen no evidence that private sector commercial 
construction suffers from lack of quality. Commercial office 
buildings are not falling down. They all meet local and state 
building codes, even in areas known for earthquakes and other 
natural disasters.
    During the committee hearing, Mr. Mill Butler, testifying 
in favor of Davis-Bacon, told the committee that 70 percent of 
his work was covered by Davis-Bacon and 30 percent of his 
business was private sector work. When Senator John Ashcroft 
asked Mr. Butler whether his company, Handon Diving, 
Washington, DC, performed lower quality work on private sector 
projects, he replied, ``No, absolutely not, no.'' \54\ And Gary 
Hess, testifying against Davis-Bacon, pointed out that the 
``contract specifications are the same, the quality 
requirements are the same'' whether or not Davis-Bacon 
requirements apply to the project.\55\
---------------------------------------------------------------------------
    \54\ S. Hrg, 104th Cong., 1st Sess., transcript at p. 68.
    \55\ Id., at p. 69.
---------------------------------------------------------------------------
    The committee finds no merit to the claim that Davis-Bacon 
requirements per se improve construction quality. If the 
concern is that the Federal Government cannot control the 
quality of products it procures, then we must direct our 
attention to our procurement laws. But we note that no one 
appears to be complaining about the quality of other goods and 
services in the nonconstruction arena and yet these products 
are not subject to Davis-Bacon mandates.
    Davis-Bacon supporters also claim that safety is higher on 
prevailing wage projects. The committee rejects this argument.
    During the committee hearing, Senator Ashcroft inquired 
whether Occupational Safety and Health Act (OSHA) requirements 
were the same on Davis-Bacon and non-Davis-Bacon sites. The 
witness, Mr. Hess of Hess Mechanical Corporation in Maryland, 
replied, ``Of course they are.'' \56\
---------------------------------------------------------------------------
    \56\ S. Hrg., 104th Cong., 1st Sess., supra, hearing transcript at 
p. 69.
---------------------------------------------------------------------------
    Mr. Georgine, relying upon a flawed University of Utah 
study,\57\ suggested during the committee hearing that injury 
rates would increase by 15 percent if Congress repealed the 
Federal prevailing wage law. The committee rejects this 
argument. There is no reason to believe that injury rates would 
increase simply because private sector compensation and work 
rules would apply to publicly funded construction projects.
---------------------------------------------------------------------------
    \57\ Mangum, Garth, et. al., ``Losing Ground: Lessons from the 
Repeal of Nine `Little Davis-Bacon' Acts,'' University of Utah, 
February 1995. The self-described ``working paper'' was funded by the 
AFL-CIO and the Plumbers and Pipefitters of Utah, which support the 
Davis-Bacon Act.
---------------------------------------------------------------------------
    To the best of our knowledge, no one has performed a 
comprehensive study comparing safety records for Davis-Bacon 
and non-Davis-Bacon work sites. However, OSHA has compared 
union versus non-union construction safety records and found 
their safety records to be comparable.\58\
---------------------------------------------------------------------------
    \58\ OSHA's Analysis of Construction Fatalities database for 1985-
89 found that ``the distribution of fatalities among union and nonunion 
work sites is similar to the composition of the construction work force 
in terms of union and nonunion workers.''
    Some have argued that the Journal of Occupational Medicine (Nov. 
1990) found that union sites were safer. However, the study also 
concluded that when age differences were taken into account, the safety 
records of union and nonunion sites were comparable. Apparently, from a 
statistical standpoint, older workers have fewer accidents.
    Using union safety records as a proxy for Davis-Bacon site safety 
records is not a perfect analogy because some non-union firms 
successfully bid for Federal construction projects and many unionized 
firms perform private sector work. Nevertheless, the Utah working paper 
appears to assume that prevailing wage laws primarily affect union 
firms (see working paper, p. 11), so it seems appropriate in responding 
to the working paper to analyze safety records as a function of union 
status.
---------------------------------------------------------------------------
    Finally the committee rejects arguments that Davis-Bacon 
improves productivity. Davis-Bacon supporters cite Federal 
Highway Administration statistics suggesting that with regard 
to highway construction, many low-wage States had higher 
average costs per mile and therefore lower productivity, and 
many high-wage States had lower average costs and therefore 
higher productivity. \59\ Accordingly, supporters argue that 
prevailing wage laws improve productivity.
---------------------------------------------------------------------------
    \59\ See testimony of Robert Georgine, S. Hrg., 104th Cong., 1st 
Sess., supra, pp. 6-7, citing ``Wages, Productivity and Highway 
Construction Costs,'' National Alliance for Fair Contracting, 
Washington, DC, 1995.
---------------------------------------------------------------------------
    We have not reviewed the study's methodology, so we cannot 
thoroughly analyze its findings, but we believe that climate, 
State sales taxes on construction, the amount of bridge versus 
road work and other factors probably account for much of the 
difference in cost per mile of highway construction. However, 
we note that the allegedly low-wage, low-productivity States in 
the study include Tennessee, Texas, West Virginia, and 
Minnesota, which have State prevailing wage laws. So it seems 
that prevailing wage laws failed to improve productivity in 
these States.
    The fact is that if prevailing wages laws actually improved 
productivity, then private sector contractors immediately would 
voluntarily adopt Davis-Bacon wage scales and work rules to 
assure they were the successful bidders on all construction 
projects. Moreover, if prevailing wage laws actually improved 
productivity, then after Davis-Bacon repeal, Federal 
contractors would retain prevailing wage scales to maintain 
their productivity. However, the committee believes this would 
not be the case.
    In the committee's view, without Davis-Bacon, firms bidding 
for Federal projects will use the same practices that they 
utilize in the private sector. The committee firmly believes 
that Davis-Bacon repeal will not affect productivity.

                           boost local demand

    Davis-Bacon supporters also argue that the Federal 
prevailing wage law is necessary to boost local demand. By 
increasing government spending, construction workers have more 
money to spend and the local and national economy benefit.
    This argument assumes that Federal money is free. As 
economist Armand Thioblot testified, ``The local economy would 
be improved even more by mandating a double-prevailing-rate 
wage, and would be staggering boosted by requiring construction 
workers to be paid the prevailing professional baseball player 
wage rate,'' \60\ but neither of those policies would be sound. 
The goal of boosting local demand cannot justify paying 
artificially high Federal construction costs.
---------------------------------------------------------------------------
    \60\ S. Hrg., 104th Cong. 1st Sess., supra, p. 5.
---------------------------------------------------------------------------
    The committee also rejects the contention that repealing 
Davis-Bacon will increase the deficit by lowering Federal tax 
revenues. When we spend less money at the Federal level, that 
will save money. Only in the Congress would individuals argue 
that if the Federal Government spent more money, then the 
Federal Government would collect more revenue and the deficit 
would be lower.

                unions will collapse without Davis-Bacon

    Some have argued that without Davis-Bacon, organized labor 
in the construction industry will cease to exist. We reject 
this argument.
    Over 80 percent of the construction industry is private 
sector construction that is not subject to Federal prevailing 
wage laws. Union contractors compete effectively for these 
projects under current law and they will continue to do so 
without Davis-Bacon.

                   simon substitute was unacceptable

    The committee notes that the substitute offered by Senator 
Simon during the committee markup constituted a vast expansion 
of the Federal prevailing wage law. The committee rejected 
Senator Simon's amendment by a 9-7 vote.
    The Simon substitute failed to produce significant budget 
savings. Although it raised the Davis-Bacon contract threshold 
from $2,000 to $100,000 for new construction and $50,000 for 
renovation and repair, CBO estimated in 1993 that only $115 
million would be saved over 5 years--an almost insignificant 
amount. Significantly, under the new threshold, 96.5 percent of 
the Federal construction contract dollar volume would still be 
subject to Davis-Bacon.
    In addition, the Simon substitute expanded Davis-Bacon to 
cover off-site work and leased construction. In fact, the 
legislation sought to codify U.S. Department of Labor 
regulations expanding Davis-Bacon to off-site work despite the 
fact that two recent appellate court decisions invalidated the 
regulations as inconsistent with Davis-Bacon.\61\
---------------------------------------------------------------------------
    \61\ Building and Construction Trades Department, AFL-CIO v. U.S. 
Department of Labor Wage Appeals Board, 932 F. 2d 985 (D.C. Cir. 1991) 
(``Midway Excavators''); Ball, Ball & Brosamer, Inc. v. Reich, No. 92-
5366, (D.C. Cir. 1994).
---------------------------------------------------------------------------
    Moreover, the substitute added a new private cause of 
action, with liquidated damages, to the Federal prevailing wage 
law. These provisions would provide yet another litigation 
incentive at a time when we want to reduce litigation and its 
associated costs.
    For all of the above reasons, the committee rejected the 
substitute offered during the committee markup.
    The committee adopted an amendment by Senator Frist to 
eliminate the Federal prevailing wage requirements for 
construction by the Tennessee Valley Authority (TVA). When 
Congress created the TVA, rather than include Davis-Bacon by 
reference, the Congress instead provided a separate prevailing 
wage provision. The committee sees not reason why the TVA 
should be required to follow prevailing wage requirements and 
therefore approved the Frist Amendment.

                            V. Cost Estimate

                                     U.S. Congress,
                               Congressional Budget Office,
                                    Washington, DC, April 21, 1995.
Hon. Nancy Landon Kassebaum,
Chairman, Committee on Labor and Human Resources,
U.S. Senate, Washington, DC.
    Dear Madam Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 141, a bill to 
repeal the Davis-Bacon Act, as ordered by the Committee on 
Labor and Human Resources on March 29, 1995.
    Enactment of S. 141 would not affect direct spending or 
receipts. Therefore, pay-as-you-go procedures would not apply 
to this bill.
    If you wish further details on this estimate, we will be 
pleased to provide them.
            Sincerely,
                                         June E. O'Neill, Director.
    Enclosure.

               Congressional budget office cost estimate

    1. Bill number: S. 141.
    2. Bill title: The Davis-Bacon Repeal Act.
    3. Bill status: As ordered reported by the Committee on 
Labor and Human Resources on March 29, 1995
    4. Bill purpose: Effective 30 days after enactment, S. 141 
would repeal the Davis-Bacon Act, which requires that employees 
working on Federal or federally financed construction projects 
receive prevailing wages and fringe benefits. The Department of 
Labor determines the prevailing wage rates and benefits for 
workers on Federal construction projects, generally based on 
the construction wages and benefits in the locality of the 
proposed project.
    5. Estimated cost to the Federal Government: S. 141 would 
reduce the cost of federal or federally financed construction 
projects by allowing the payment of lower compensation than 
under current law. The following table shows the potential 
savings to the federal government if appropriations are reduced 
to reflect the lower costs of construction beginning in 1996.

----------------------------------------------------------------------------------------------------------------
                                                              1996       1997       1998       1999       2000  
----------------------------------------------------------------------------------------------------------------
Estimated authorization of appropriations................       -826       -848       -875       -900       -931
Estimated outlays........................................       -150       -440       -616       -723       -809
----------------------------------------------------------------------------------------------------------------

    The budgetary impacts of this bill fall in many budget 
functions.
    The authorizations of appropriations in the above table 
represent estimated obligational authority, which includes 
estimates of appropriated budget authority as well as estimated 
obligations from certain transportation trust funds, which are 
not considered budget authority. Budget authority savings for 
construction projects subject to the Davis-Bacon Act (not 
including trust fund obligations) are estimated to be $432 
million for fiscal year 1996 and $2.3 billion over the five 
years from 1996 to 2000.
    6. Basis of estimate: The requirements of the Davis-Bacon 
Act (DBA) affect contracts on Federal construction or federally 
assisted construction of $2,000 or more, without regard to the 
nature of the project. Currently, the Department of Labor makes 
it wage determinations based on the specific wages and benefits 
earned by at least 50 percent of workers in a classification, 
or on the weighted average of the wages and benefits paid to 
workers in that classification. The former method tends to be 
used in heavily unionized construction markets, and the latter 
in less unionized settings.
    A Congressional Budget Office (CBO) study in 1983 estimated 
that the requirements of the DBA increase federal construction 
costs by 3.7 percent. This estimate was based on a method of 
determining prevailing wages called the ``30 percent rule.'' 
When the 30 percent rule was changed to the currently used 
``majority wage'' calculations, CBO revised its estimate to 3.3 
percent. The 3.3 percent estimate also included the effects of 
certain restrictions on the use of helpers, which contributed 
1.6 percentage points of the total effects of the DBA. Since 
that time, a Federal Court of Appeals has ruled that the 
Department of Labor could impose regulations designating 
helpers as a separate class of workers, which effectively would 
eliminate the DBA restriction on helpers. Although the fiscal 
year 1995 appropriations bill for the department prohibited the 
Secretary from using any funds under that act to implement the 
new helper regulations, the prohibition expires with the 1995 
funds themselves. Therefore, CBO estimates that the DBA will 
increase federal construction costs for contracts let after 
1995 by 1.7 percent. A repeal of the DBA would allow for a 
reduction in federal outlays of $150 million in fiscal year 
1996 and $2.7 billion over the next five years, if 
appropriations are reduced accordingly.
    Any estimate of the cost implications of the DBA is 
uncertain. Very little empirical work has been published on the 
subject since CBO's 1983 report, and even then there was little 
consensus as to the precise cost impacts. At the time, CBO's 
estimate was toward the low end of the range of estimated 
impacts, which stretched from 0.1 percent in a study by Steven 
Allen of North Carolina State University to as much as 11 
percent in a study by President Carter's Council of Economic 
Advisers.
    Trends since 1983 give conflicting indications as to 
possible changes in the impact of the DBA. For example, fewer 
construction workers are represented by unions--21.0 percent in 
1993, compared with 29.4 percent in 1983. As a result, union 
wages could have less of an impact in the determination of a 
prevailing wage, thereby lessening the impact of the DBA on 
federal construction costs. Furthermore, the wage differential 
between union and nonunion construction workers has declined in 
the past decade. The ratio of cash wages for union construction 
workers to those for nonunion construction workers was 1.62 in 
1993, as compared with 1.72 in 1983.
    However, the cash wage ratio does not account for fringe 
benefits, which are also covered by the requirements of the 
DBA. While the wage differential may have declined, the 
difference between total compensation--including fringe 
benefits like health insurance--received by union and nonunion 
construction workers may have grown. Unfortunately, there is no 
continuous data series for total compensation of construction 
workers. The first year that wage and compensation data are 
available for blue collar workers is 1987, but these data cover 
all blue collar workers, of which construction workers are a 
subset. CBO's 1983 report was based on 1979 figures, which 
indicated that the ratio of the total compensation for union 
construction workers to that of nonunion workers was 1.54. The 
corresponding ratio for blue collar workers (of which 
construction workers are a subset) was 1.74 in 1994, the same 
level as in 1987.
    Finally, the data discussed above apply to a broad spectrum 
of construction or blue collar workers, while much of the 
federal construction funding is for highways. Whether broad 
trends are indicative of the compensation patterns in highway 
construction is uncertain. Thus, relevant data are sparse, the 
broad trends are ambiguous, and the applicability of the 
available information to estimating the impact of the DBA is 
uncertain. Therefore, although we have made minor changes to 
our method for estimating the federal cost impact of the DBA, 
in the absence of any clear evidence to contradict the results 
of the 1983 report, CBO has based this estimate on the findings 
indicated in its 1983 study.
    CBO projects spending authority for Federal or federally 
financed construction to grow from about $48 billion in 1996 to 
about $55 billion by 2000. The largest percentage of federal 
construction spending is for transportation programs, at $22.7 
billion in spending authority for fiscal year 1996,a or about 
47 percent of the total. This amount includes spending from the 
Highway Trust Fund, the Airport and Airway Trust Fund, the 
Harbor Maintenance Trust Fund, and the Inland Waterways Trust 
Fund. Other major areas of construction spending are natural 
resources and environment ($8.4 billion), national defense 
(($6.0 billion), and income security ($4.7 billion). 
Construction outlays tend to flow slowly from spending 
authority. Accordingly, outlays from new spending authority in 
fiscal year 1996 are expected to be approximately $8.8 billion, 
including $3.3 billion for transportation, $0.7 billion for 
defense, and $3.5 billion for natural resources and 
environment. Fiscal year 1996 construction authority in the 
income security function is not reflected in outlays until 
fiscal year 1997 and subsequent years. The estimated savings 
from repeal of the Davis-Bacon Act are 1.7 percent of these 
amounts.
    7. Pay-as-you-go considerations: None.
    8. Estimated cost to State and local government: The 
provisions of S. 141 would have some impact on construction 
costs for State and local governments. Projects involving State 
and local matching funds would become less costly under S. 141. 
CBO has not estimated these savings.
    9. Estimate comparison: None.
    10. Previous CBO estimate: On April 21, 1995, CBO prepared 
a cost estimate for H.R. 500, a similar bill forwarded to the 
House Committee on Economic and Educational Opportunities by 
the Subcommittee on Workforce Protections on March 2, 1995. The 
two estimates are identical.
    11. Estimate prepared by: Christi Hawley.
    12. Estimate approved by: Robert C. Sunshine for Paul N. 
Van de Water, Assistant Director for Budget Analysis.

                         VI. Regulatory Impact

    The committee has determined that there will be no increase 
in the regulatory burden imposed by this bill.

                    VII. Section-By-Section Analysis

    Section 2 of the bill repeals the Davis-Bacon Act of 1931, 
40 U.S.C. 276a, 276a-1 through 276a-5. This eliminates the 
current requirement that all contracts for construction, 
renovation and repair over $2,000 to which the United States or 
the District of Columbia is a party, contain a provision that 
firms will pay workers on those projects no less than the 
prevailing wage as determined by the Secretary of Labor.
    Section 3 of the bill repeals section 2 of the Copeland Act 
of 1934, 40 U.S.C. 276c, that requires Federal contractors to 
submit weekly payroll records to the Federal Government.
    Section 4 of the bill provides that the legislation will 
take effect 30 days after the date of enactment. However, the 
legislation will not affect any contract already in existence 
at that time, or any contract that is made pursuant to an 
invitation for bids that is outstanding at that time.

                     VIII. Changes in Existing Law

    In compliance with rule XXVI paragraph 12 of the Standing 
Rules of the Senate, the following provides a print of the 
statute or the part or section thereof to be amended or 
replaced (existing law proposed to be omitted is enclosed in 
black brackets, new matter is printed in italic, existing law 
in which no change is proposed is shown in roman):

                         DAVIS-BACON REPEAL ACT

                      TITLE 40--UNITED STATES CODE

[Sec. 276a. Rate of wages for laborers and mechanics

    [(a) The advertised specifications for every contract in 
excess of $2,000 to which the United States or the District of 
Columbia is a party, for construction, alteration, and/or 
repair, including painting and decorating, of public buildings 
or public works of the United States or the District of 
Columbia within the geographical limits of the States of the 
Union or the District of Columbia, and which requires or 
involves the employment of mechanics and/or laborers shall 
contain a provision stating the minimum wages to be paid 
various classes of laborers and mechanics which shall be based 
upon the wages that will be determined by the Secretary of 
Labor to be prevailing for the corresponding classes of 
laborers and mechanics employed on projects of a character 
similar to the contract work in the city, town, village, or 
other civil subdivision of the State in which the work is to be 
performed, or in the District of Columbia if the work is to be 
performed there; and every contract based upon these 
specifications shall contain a stipulation that the contractor 
or his subcontractor shall pay all mechanics and laborers 
employed directly upon the site of the work, unconditionally 
and not less often than once a week, and without subsequent 
deduction or rebate on any account, the full amounts accrued at 
time of payment, computed at wage rates not less than those 
stated in the advertised specifications, regardless of any 
contractual relationship which may be alleged to exist between 
the contractor or subcontractor and such laborers and 
mechanics, and that the scale of wages to be paid shall be 
posted by the contractor in a prominent and easily accessible 
place at the site of the work; and the further stipulation that 
there may be withheld from the contractor so much of accrued 
payments as may be considered necessary by the contracting 
officer to pay to laborers and mechanics employed by the 
contractor or any subcontractor on the work the difference 
between the rates of wages required by the contract to be paid 
laborers and mechanics on the work and the rates of wages 
received by such laborers and mechanics and not refunded to the 
contractor, subcontractors, or their agents.
    [(b) As used in sections 276a to 276a-5 of this title the 
term ``wages'' ``scale of wages'', ``wage rates'', ``minimum 
wages'', and ``prevailing wages'' shall include--
          [(1) the basic hourly rate of pay; and
          [(2) the amount of--

                  [(A) the rate of contribution irrevocably 
                made by a contractor or subcontractor to a 
                trustee or to a third person pursuant to a 
                fund, plan, or program; and
                  [(B) the rate of costs to the contractor or 
                subcontractor which may be reasonably 
                anticipated in providing benefits to laborers 
                and mechanics pursuant to an enforcible 
                commitment to carry out a financially 
                responsible plan or program which was 
                communicated in writing to the laborers and 
                mechanics affected,

        for medical or hospital care, pensions on retirement or 
        death, compensation for injuries or illness resulting 
        from occupational activity, or insurance to provide any 
        of the foregoing, for unemployment benefits, life 
        insurance, disability and sickness insurance, or 
        accident insurance, for vacation and holiday pay, for 
        defraying costs of apprenticeship or other similar 
        programs, or for other bona fide fringe benefits, but 
        only where the contractor or subcontractor is not 
        required by other Federal, State, or local law to 
        provide any of such benefits:

Provided, That the obligation of a contractor or subcontractor 
to make payment in accordance with the prevailing wage 
determinations of the Secretary of Labor, insofar as sections 
276a to 276a-5 of this title and other Acts incorporating 
sections 276a to 276a-5 of this title by reference are 
concerned may be discharged by the making of payments in cash, 
by the making of contributions of a type referred to in 
paragraph (2)(A), or by the assumption of an enforcible 
commitment to bear the costs of a plan or program of a type 
referred to in paragraph (2)(B), or any combination thereof, 
where the aggregate of any such payments, contributions, and 
costs is not less than the rate of payment described in 
paragraph (1) plus the amount referred to in paragraph (2).
    [In determining the overtime pay to which the laborer or 
mechanic is entitled under any Federal law, his regular or 
basic hourly rate of pay (or other alternative rate upon which 
premium rate of overtime compensation is computed) shall be 
deemed to be the rate computed under paragraph (1), except that 
where the amount of payments, contributions, or costs incurred 
with respect to him exceeds the prevailing wage applicable to 
him under sections 276a to 276a-5 of this title, such regular 
or basic hourly rate of pay (or such other alternative rate) 
shall be arrived at by deducting from the amount of payments, 
contributions, or costs actually incurred with respect to him, 
the amount of contributions or costs of the types described in 
paragraph (2) actually incurred with respect to him, or the 
amount determined under paragraph (2) but not actually paid, 
whichever amount is the greater.]
          * * * * * * *

[Sec. 276a-1. Termination of work on failure to pay agreed wages; 
                    completion of work by Government

    [Every contract within the scope of sections 276a to 276a-5 
of this title shall contain the further provision that in the 
event it is found by the contracting officer that any laborer 
or mechanic employed by the contractor or any subcontractor 
directly on the site of the work covered by the contract has 
been or is being paid a rate of wages less than the rate of 
wages required by the contract to be paid as aforesaid, the 
Government may, by written notice to the contractor, terminate 
his right to proceed with the work or such part of the work as 
to which there has been a failure to pay said required wages 
and to prosecute the work to completion by contract or 
otherwise, and the contractor and his sureties shall be liable 
to the Government for any excess costs occasioned the 
Government thereby.]
          * * * * * * *

[Sec. 276a-2. Payment of wages by Comptroller General from withheld 
                    payments; listing contractors violating contracts

    [(a) The Comptroller General of the United States is 
authorized and directed to pay directly to laborers and 
mechanics from any accrued payments withheld under the terms of 
the contract any wages found to be due laborers and mechanics 
pursuant to sections 276a to 276a-5 of this title; and the 
Comptroller General of the United States is further authorized 
and is directed to distribute a list to all departments of the 
Government giving the names of persons or firms whom he has 
found to have disregarded their obligations to employees and 
subcontractors. No contract shall be awarded to the persons or 
firms appearing on this list or to any firm, corporation, 
partnership, or association in which such persons or firms have 
an interest until three years have elapsed from the date of 
publication of the list containing the names of such persons or 
firms.
    [(b) If the accrued payments withheld under the terms of 
the contract, as aforesaid are insufficient to reimburse all 
the laborers and mechanics, with respect to whom there has been 
a failure to pay the wages required pursuant to sections 276a 
to 276a-5 of this title, such laborers and mechanics shall have 
the right of action and/or of intervention against the 
contractor and his sureties conferred by law upon persons 
furnishing labor or materials, and in such proceedings it shall 
be no defense that such laborers and mechanics accepted or 
agreed to accept less than the required rate of wages or 
voluntarily made refunds.]
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[Sec. 276a-3. Effect on other Federal laws

    [Sections 276a to 276a-5 of this title shall not be 
construed to supersede or impair any authority otherwise 
granted by Federal law to provide for the establishment of 
specific wage rates.]
          * * * * * * *

[Sec. 276a-4. Effective date of sections 276a to 276a-5

    [Section 276a to 276a-5 of this title shall take effect 
thirty days after August 30, 1935, but shall not affect any 
contract then existing or any contract that may thereafter be 
entered into pursuant to invitations for bids that are 
outstanding on August 30, 1935.]
          * * * * * * *

[Sec. 276a-5. Suspension of sections 276a to 276a-5 during emergency

    [In the event of a national emergency the President is 
authorized to suspend the provisions of sections 276a to 276a-5 
of this title.]
          * * * * * * *

[Sec. 276c. Regulations governing contractors and subcontractors

    [The Secretary of Labor shall make reasonable regulations 
for contractors and subcontractors engaged in the construction, 
prosecution, completion or repair of public buildings, public 
works or building or works financed in whole or in part by 
loans or grants from the United States, including a provision 
that each contractors and subcontractor shall furnish weekly a 
statement with respect to the wages paid to each employee 
during the preceding week. Section 1001 of Title 18 shall apply 
to such statements.]
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