PCCA Journal|4
th
Quarter 2010
17
T
here are tremendous opportunities for contrac-
tors to benefit from the broadband provisions
of the American Recovery and Reinvestment
Act (ARRA), commonly called the stimulus
bill. But while there is plenty of excitement,
there is also a fair amount of anxiety in the
broadband community about how contractors can
benefit from the various competitive broadband grant
programs.
Specifically, the ARRA authorized $7.2 billion for
broadband programs, including $4.5 billion designated
for the National Telecommunications and Information
Administration (NTIA) and $2.5 billion for the Ru-
ral Utilities Service (RUS). Part of the purpose of this
program is to provide broadband service (e.g., faster
internet access) to consumers in unserved areas of the
country and improved broadband service to consum-
ers in underserved areas. Contractors bidding on these
broadband projects created by the ARRA are subject
to the provisions of the Davis-Bacon Act, which may
be uncharted waters for many who haven’t previously
worked on government-funded jobs.
What Is the Davis-Bacon Act,
and How Does It Apply to Me?
The Davis-Bacon Act is a federal law that applies to all
projects funded by ARRA dollars. Passed in 1931, the
law requires that any contract greater than $2,000 “to
which the Federal Government or District of Columbia
is a party, for construction, alteration or repair, includ-
ing painting and decorating of public buildings and
public works...shall contain a provision stating the
minimum wages to be paid to all mechanics and labor-
ers employed directly upon the site of the work.” In
2009, the Obama administration required that all proj-
ects funded by the ARRA, regardless of dollar amount,
comply with the Davis-Bacon Act.
The Davis-Bacon Act requires payment of locally
“prevailing wages,” including the “anticipated cost of
prevailing benefits.” Generally this is expressed as a
per-hour wage and per-hour cash equivalent value of
benefits and is often based on a union scale. Prevailing
wages are set by the Department of Labor (DOL) or the
local contracting agency and are included in the bid
specifications of covered contracts. Thirty-one states
have enacted state prevailing wage legislation, which
are commonly referred to as “Little Davis-Bacon” pro-
visions. These provisions require payment of prevailing
wages and fringe benefits on state projects as well as
federal projects.
Offering Benefits Can
Make Bids More Competitive
When it comes to the prevailing wage provisions of the
Davis-Bacon Act, contractors have choices as to how
the fringe benefit portion is paid. Many contractors
pay the fringe benefit portion of the prevailing wage as
additional cash wages, believing it’s the easiest way to
comply with the law. But allocating this amount to a
bona fide benefit plan or plans can work to a contrac-
tor’s advantage on a number of levels. When contrac-
tors use the fringe portion of the prevailing wage to
provide “bona fide” benefit plans for their workers,
these dollars are taken off the payroll and are therefore
exempt from payroll taxes such as FITA, FUTA, and
SUTA as well as other expenses such as workers com-
pensation and general liability. This represents consid-
erable savings on job costs, which translates into lower
bids and better chances of winning jobs. Benefits that
might be included in a bona fide benefit plan offering
are retirement, medical, dental, vision, and life insur-
ance plans.
Here’s an example of the savings that can be real-
ized by putting the fringe toward benefits instead of in
your employees’ paychecks. Although there are vari-
ances in the rates for unemployment taxes and workers
compensation, conservatively these taxes represent an
additional 25 cents on each dollar paid as cash wages.
ARRA Offers Opportunity and
Anxiety for Broadband Contractors
By John Allen
Continued on page 18
When contractors use the fringe portion of the
prevailing wage to provide “bona fide”benefit
plans for their workers, these dollars are taken off
the payroll and are therefore exempt from payroll
taxes such as FITA, FUTA, and SUTA as well as other
expenses such as workers compensation and general
liability. This represents considerable savings on job
costs, which translates into lower bids and better
chances of winning jobs.