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Michigan Minority Contractors Assn.
Davis-Bacon and Prevailing Wage Overview
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Agenda
● Define Government Markets Niche
● Demonstrate the Market Opportunity
● Review Industry Specific Business Problems & Solutions
● The Contractors Plan powered by Fringe Benefit Group
● Questions & Answers
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Government Markets
● Construction & Maintenance Contractors Bidding Work Subject to Prevailing Wage Laws
● Federal & State Davis Bacon Act
● Federal Service Contract Act
● Required or Available Fringe Benefit Allocation
● Non-Union or Split Shop
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U.S. Housing Starts1991–2011
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Value of Public Construction Put in Place 1993 – 2011
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Solving Industry-Specific Business Problems
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Sample Wage Determination
BASEWAGE
$30
FRINGE BENEFIT
$10
+
TOTAL HOURLY WAGE
$40
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Employer Decides How toSatisfy the Wage Obligation
● Contractors typically pay the “base” amount in cash and then choose how to pay the “fringe” portion; ➔ For vacation and holidays,
➔ Into an approved apprenticeship program,
➔ Furnish “bona fide” fringe benefits, or
➔ As cash, and have it treated as wages
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The problem when performing Gov’t Work……..
All cash wages subject to payroll burden:
➔ FICA 7.65%➔ FUTA & SUTA* 2.00%➔ General Liability* 2% - 15%➔ Workers’ Comp* 10% - 40%
The actual payroll burden can be 11%-60%This increases your labor costs!!!
*varies by company & state
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How it works…Plumber, Ohio
$2.58/hr savings per
person
Pay Fringe to “Bona Fide” Plan
Base Wage $34.52
Total Wage $34.52
Payroll Burden $ 8.63(25%)
“Bona Fide” Plan $10.33
Bid Cost $53.48
Pay Fringe in Paycheck
Base Wage $34.52Fringe $10.33
Total Wage $44.85
Payroll Burden $11.21(25%)
Bid Cost $56.06
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Plumbing Contractor
● About 75% of this contractor’s work is government➔ 2080 annual hours x 75% = 1560 hours
● There are 25 hourly employees
● The hourly savings by removing the fringe from payroll is $2.58
● The annual savings:➔ 1560 hours x 25 EEs x $2.58 hour = $100,620
Many pay for health premium or retirement contributions “on top”!
Many pay for health premium or retirement contributions “on top”!
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Sample Bidders List
Fairchild Hall Rehabilitation Project Jan 8, 2011
1 Scotts Industrial Electric, 3178 Bincrete Lane (999) 298-7481 $674,595.00
2 Heatherville Electric, 360 Industrial Drive (999) 743-1220 $675,900.00
3 Johnson Electric, 1145 Bellbrook Ave (999) 372-8205 $681,000.00
4 Chappelle Electric ,1985 Founders (999) 222-2290 $732,442.00
5 Caret Electric Company, 3925 Pansini Lane (999) 669-3399 $735,000.00
6 Kastle Electric, 4501 Libby Blvd (999) 254-2681 $740,300.00
7 BBW Electrical Contractors, 3400 Kettering Blvd (999) 293-6138 $745,897.00
8 Debra/Kuempel ,1948 W.Phyllis Lane (999) 531-5455 $770,000.00
9 Schamberger Electric, 6901 Americana Pkwy (999) 863-1844 $788,500.00
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The Solution:
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What Makes a Fringe Benefit Plan “Bona Fide?”
● Specified in writing and communicated to covered employees
● Irrevocable contributions
● Group benefit plan
● Contributions made to a third party or trust
● Convey a benefit to the person actually performing the work
● Accounted for on an hourly basis (weekly payroll reporting form WH347)
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Does this make sense for you?
● Union or non-union (merit, open or split shop)?
● Bidding or working on prevailing wage projects? if so, what % of your work is prevailing wage?
● How do you handle the fringe portion of the wage determination?
● How many hourly employees?