Davis-Bacon and Prevailing Wages
Why federal construction wages are set by law, and what that means for your bid and your payroll.
Many federally funded construction projects are covered by the Davis-Bacon Act, which requires workers to be paid at least the locally prevailing wage and fringe benefits for their classifications.
What a covered contract means
- The contract includes a wage determination listing classifications and minimum rates.
- You must pay the higher of the prevailing wage or the actual rate the worker would otherwise earn.
- You must submit certified payrolls that document hours and rates for each worker.
- Apprentices and helpers have specific rules; classifications must match the work performed.
Why it hits your estimate
Prevailing wages are often higher than local market rates, so a realistic bid builds them in from the start. Underestimating labor to win the job leads to disputes, back wages, and penalties during the job.
Staying compliant
Train your payroll staff, classify workers accurately, keep daily records, and reconcile certified payrolls before submitting. When in doubt about a classification, ask the contracting officer in writing.
General information for construction small businesses, not legal advice.