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The Hidden Costs Of Being Non-Compliant

June 12, 2019


Compliance remains an ongoing threat to a contractor’s business when working with federal and state governments. Each level of government has a fringe benefit requirement and many have very strict compliance and audit requirements. On September 13, 2018, the US Department of Labor announced that it found that a California-based contractor and five of its subcontractors had violated federal contract provisions of the McNamara-O’Hara Service Contract Act (SCA).

Its investigation determined that the contractor owed over $3.5 million to 1,416 workers for failing to pay federal prevailing wages and required health and welfare benefits to workers. In addition to that finding there was also a separate DOL investigation for SCA violations regarding a federal contract to move military cargo that was stored at the contractor’s warehouse site.

https://www.prnewswire.com/news-releases/justice-for-port-drivers-leading-logistics-company-at-ports-of-lalong-beach-with-long-track-record-of-breaking-labor-and-safety-laws-resulting-in-7-disruptive-labor-strikes-chooses-to-abandon-workers-rather-than-reach-agreement–300779963.html

What’s concerning is that experts in the space have suggested that as many as 50% of contractors to the federal government are out of compliance. if you are out of compliance as a contractor you are potentially subject to fi­nes and penalties, both civil and criminal, and if your subcontractors are out of compliance with the DOL requirements you are responsible.

At risk are not only fines, but the ability to bid and win new contracts. For this reason it is critical that companies contract with transparent third party administrators that emphasize compliance. They need to have the ability to track your company and its subcontractors fringe spend to a penny, providing a true fiduciary partner to your firm.