New SCA Fringe Rate Announcement Delayed

We’ve been advised that any adjustments to the prevailing health and welfare fringe benefits required by the McNamara-O’Hara Service Contract Act (SCA) will be delayed until the Department of Labor has received additional Employment Cost Index figures. Generally any changes are announced annually in June. The rate is currently $3.50 per hour.

How Does the DOL’s Budget Reduction Impact its Enforcement Efforts?

You may be wondering how reductions in the DOL budget for 2012 will impact its enforcement activity. The DOL’s new budget contains $77 billion less when compared to last year. But don’t think this means there will be an equal reduction in the agency’s enforcement efforts – far from it.

In fact, the DOL plans to hire more than 350 new employees, including 177 investigators and enforcement personnel. Nancy Leppink of the Wage and Hour Division is quoted as saying, “In 2010, the Wage and Hour Division pursued an aggressive enforcement and outreach program of the government contract programs, the Davis-Bacon Act and the Service Contract Act. Wage Hour’s proposed FY 2012 budget would allow us to continue these and other enforcement efforts.”

The Wage and Hour division also plans to establish a “compliance baseline” for the construction industry in 2011, so it can measure improvements in compliance going forward.

Despite operating with less funding overall, the US Department of Labor has not lessened its focus on compliance for government contractors. It continues to be a priority for the DOL and other federal agencies, as evidenced by the joint DOL-Treasury initiative to identify and prevent misclassification of employees as independent contractors. This effort includes $12 million for the Wage and Hour Division to hire 90 new investigators. The announcement for the program specifically mentioned the construction industry as having “misclassification characteristics”.

Contractors who work on taxpayer-funded projects can expect increased scrutiny for compliance over the next two years, despite budget reductions for federal agencies.

Seattle-based SCA Contractor Debarred

The US Department of Labor recently debarred an SCA contractor from future government contracts for three years, citing “significant and repeated violations of the McNamara-O’Hara Service Contract Act and the Contract Work Hours and Safety Standards Act”.  

HWA, Inc. President John Wood and Vice President Barbara Wood were debarred last month.  Since 2001 the DOL’s Wage and Hour Division has conducted more than 15 investigations of HWA, finding that significant back wages were owed to hundreds of workers nationwide. Seattle-based HWA provided security services as a contractor to various federal facilities, government offices and public works projects in Washington, Oregon, Idaho, Missouri and New York.  

Read the US Department of Labor’s news release here.

PacifiCare is now UHC of California

One of our medical coverage partners recently changed its name. PacifiCare, a UnitedHealthcare Company, changed its name to UHC of California effective May 1, 2011.  Administration and operations remain the same, but materials and communications will now bear the UnitedHealthcare name.

Leaked Executive Order Requires Disclosure of Political Spending

There are reports that President Obama has circulated a draft Executive Order which mandates corporate political disclosure for federal government contractors, their directors and officers. The Executive Order is said to be thought necessary by the White House to “increase transparency and accountability” and to “ensure integrity in the federal contracting process.” 

If issued, the Executive Order would require corporations who do business with the federal government to disclose to the Federal Acquisition Regulatory Council:

(1) all contributions or expenditures to or on behalf of federal candidates or party committees for the two years prior to submitting a bid for a government contract

(2) all personal political contributions of their officers and directors, even if they work for a subsidiary, for two years prior to submitting an offer; and

(3) all contributions to a third party, where there is a “reasonable expectation” that the third party may use the contribution for independent expenditures or electioneering communications for two years prior to bid submission. 

These proposed requirements were explicitly defeated when Congress failed to pass the DISCLOSE Act last year.  The proposed Executive Order focuses entirely on corporate disclosure, and includes no requirements for labor union political activity. 

Corporations that contract with the federal government, and their directors and officers, should be prepared to comply with these potential new disclosure requirements if they intend to secure future federal government contracts.  Corporations should implement political compliance plans that enable them to report all personal political contributions of their officers and directors, and ensure that all contributions to third parties that may reasonably be used for independent political advertising are accounted for.

DOL Guidance on Counting Administrative Fees toward the Fringe

Recently a question came into our office regarding counting administrative or consultative fees toward the fringe portion of the prevailing wage.  The U.S. Department of Labor states that costs incurred by an SCA or Davis Bacon contractor’s insurance carrier in its administration and delivery of benefits to employees can be credited toward the fringe. However the letter which delivers this guidance goes on to state that these costs are generally included in the carrier’s charge to provide coverage to the employees. In other words, any costs for administration and delivery of benefits are generally wrapped into the premium or administrative costs for prevailing wage benefits.

Contractors who use a third party which charges consulting fees cannot count this consulting fee toward the fringe portion of the prevailing wage.  The salary, or a portion of the salary, of a person on the contractor’s staff who is responsible for recordkeeping and remittance of contributions to a prevailing wage plan, is also not allowed to be counted toward the fringe portion of the prevailing wage.

Regarding this, the letter states: “The cost of administrative services of a third party for the convenience of the contractor, e.g., flexible benefits record keeping costs associated with payroll administration, and expenses incurred in the research and development of new insurance plans would be considered business expenses of the contractor. Therefore, the cost of these services cannot be credited toward the contractor’s fringe benefit obligations under the SCA.”  This holds true for Davis Bacon contractors, as well.

Do you have a compliance question? Email it to us and we’ll address it in a future blog.

Manning & Napier Wins Lipper Fund Award

Manning & Napier Advisors, Inc. recently received a 2011 Lipper Fund Award in recognition of its category-leading performance of International Multi-Cap Core Funds. Lipper, a leading global provider of mutual fund research and analysis, based the award on the calculation of a consistent return value for the three-year time period ending December 31, 2010. The Lipper Fund Awards are presented annually to only one fund within each Lipper classification.  Manning & Napier is the investment advisor through which The Contractors Plan Target Date and Target Risk series of funds are offered.

US DOL Announces Schedule for Prevailing Wage Conferences

The Wage and Hour Division of the US Department of Labor recently announced its 2011 schedule for Prevailing Wage conferences.

Topics to be covered include:

-The Davis-Bacon Act and McNamara O’Hara Service Contract Act
-The process of obtaining wage determinations and adding classifications
-Compliance assistance and enforcement processes
-The process for appealing wage rates, coverage, and compliance determinations
-The labor standards provisions of the American Recovery and Reinvestment Act of 2009

If you’re interested in attending one of the conferences, email whdpwc@dol.gov.  In your email, include your name, title, organization, email address, and location of the conference you’d like to attend. There is no fee for attending any of these conferences, however, space is limited. Once your email has been received, you’ll get a response advising you whether your request can be accommodated.

Fringe Rates for Apprentices

Construction Outlook for 2011

Last week, economists from the American Institute of Architects, Associated General Contractors and Reed Construction Data teamed up to present their economic forecast for the remainder of 2011.  The information presented was sobering, particularly the statistic that while total private employment figures have improved, employment in the construction industry continues to decline, with a total national rate over 20% for two years in a row.

Architectural billings, one of the leading indicators for construction, have finally edged into growth territory, according to Kermit Baker of the AIA.  Baker went on to say that when architects were surveyed about their predictions for 2011, most were least optimistic about the institutional sector, and more optimistic about the outlook for commercial and industrial construction.  In conclusion, Baker stated that most architects expect construction spending in 2011 to be flat, with a move into a true nonresidential construction recovery in 2012.

Jim Haughey of Reed Construction Data stated that in his opinion, public construction funding will decline further in 2011, with a partial recovery in 2012. He added that state and municipal budgets are already tightening, and he expects it to be more serious in 2011 than in 2010. Construction in the power industry may increase because of environmental incentives, however Haughey expects that to ebb when Congress takes those incentives away. And he expects very little change in labor costs.

Haughey says credit is still a lingering problem in housing, but less for the economy as a whole.  “People will have trouble getting credit,” he said.  “That will be the issue, not interest rates.”

Lastly, Haughey remarked, “Construction is a local market.”  He points to the western point of the U.S. as still having the worst time with the recession, while the northeast and midwest are faring better.

Ken Simonson of the AGC echoed many of Haughey’s sentiments, saying, “State and local spending may be a drag on the economy in the immediate future.”  He cautions that while the House recently did vote to extend the Highway Tust Fund, neither highway nor airway trust funds are near reaching a long-term extension beyond this fiscal year, which could mean a big drop in spending.  Simonson says that public spending at state and local levels is already depressed, and that while state tax levels have recently been on the rise, this will not be sufficient to offset what local governments received from the federal government under the ARRA. He added, however, that about $8 billion in stimulus funds for highway projects still remains to be spent.

Simonson closed by saying the best news has been in power construction, and that the possibility of approvals for nuclear power plants could add to spending totals at the end of this year and into 2012.  He also sees the possibility for increased spending on coal-fired plants, gas-fired plants, wind, solar and transmission as the U.S. seeks solutions to rising foreign oil prices.

To listen to the archived webinar, register here.