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Full text of "Joint field hearing on Davis-Bacon fraud and abuse : joint hearing before the Subcommittee on Workforce Protections and the Subcommittee on Oversight and Investigations of the Committee on Economic and Educational Opportunities, U.S. House of Representatives, One Hundred Fourth Congress, second session, joint field hearing held in Oklahoma City, Oklahoma, January 18, 1996"

JOINT HELD HEARING ON DAVIS-BACON FKAUD 
AND ABUSE 



Y 4.SCI 2:104/78 

[EARING 

Technological Solutions to Inprove... tE the 

SUBCOMMITTEE OX WORKFORCE PROTECTIONS 

AND THE 

SUBCOMMITTEE OX 0\^RSIGHT AND 
IXl^STIGATIOXS 

OF THE 

COMMITTEE ON ECONOMIC AND 

EDUCATIONAL OPPORTUNITIES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED AND FOURTH CONGRESS 

SECOND SESSION 



JOINT FIELD HEARING HELD IN OKLAHOMA CITY, OKLAHOMA, 
JANUARY 18, 1996 



Serial Number 104-78 



Printed for the use of the Committee on Economic and 
Educational Opportunities 







> 



U.S. GOVERNMENT PRINTING OFFICE 
WASHINGTON : 1996 



For sale by the U.S. Government Printing Office 
Superintendent of Documents. Congressional Sales Office, Washington. DC 20402 
ISBN 0-16-053915-3 



36-049 - 96 - 1 



JOINT HELD HEARING ON DAVIS-BACON FKAUD 
AND ABUSE 



V 4. SCI 2:104/78 ^^^^^^ 

Technological Solutions to Inprove... ie the 

SUBCOMxMITTEE OX WORIiFORCE PROTECTIONS 

AND THE 

SUBCOMMITTEE OX 0\^RSIGHT AXD 
LX\^STIGATIOXS 

OF THE 

COMMITTEE ON ECONOMIC AND 

EDUCATIONAL OPPORTUNITIES 

U.S. HOUSE OF REPRESENTATI\^S 

ONE HUNDRED AND FOURTH CONGRESS 

SECOND SESSION 



JOINT FIELD HEARING HELD IN OKLAHOMA CITY, OKLAHOMA, 
JANUARY 18, 1996 



Serial Number 104-78 



Printed for the use of the Committee on Economic and 
Educational Opportunities 







U.S. GOVERNMENT PRINTING OFFICE 
WASHINGTON : 1996 



For sale by the U.S. Government Printing Office 
Superintendent of Documents, Congressional Sales Office, Washington, DC 20402 
ISBN 0-16-053915-3 



COMMITTEE ON ECONOMIC AND EDUCATIONAL OPPORTUNITIES 

WILLIAM F. GOODLING, Pennsylvania, Chairman 

WILLIAM (BILL) CLAY, Missouri 
GEORGE MILLER, California 
DALE E. KILDEE, Michigan 
PAT WILLIAMS, Montana 
MATTHEW G. MARTINEZ, California 
MAJOR R. OWENS, New York 
THOMAS C. SAWYER, Ohio 
DONALD M. PAYNE, New Jersey 
PATSY T. MINK, Hawaii 
ROBERT E. ANDREWS, New Jersey 
JACK REED, Rhode Island 
TIM ROEMER, Indiana 
ELIOT L. ENGEL, New York 
XAVIER BECERRA, CaUfornia 
ROBERT C. "BOBBY" SCOTT, Virginia 
GENE GREEN, Texas 
LYNN C. WOOLSEY, CaUfornia , 
CARLOS A. ROMERO-BARCELO, 

Puerto Rico 
CHAKA FATTAH, Pennsylvania 



THOMAS E. PETRI, Wisconsin 

MARGE ROUKEMA, New Jersey 

STEVE GUNDERSON, Wisconsin 

HARRIS W. FAWELL, Illinois 

CASS BALLENGER, North Carolina 

BILL E. BARRETT, Nebraska 

RANDY "DUKE" CUNNINGHAM, California 

PETER HOEKSTRA, Michigan 

HOWARD P. "BUCK" McKEON, California 

MICHAEL N. CASTLE, Delaware 

JAN MEYERS, Kansas 

SAM JOHNSON, Texas 

JAMES M. TALENT, Missouri 

JAMES C. GREENWOOD, Pennsylvania 

TIM HUTCHINSON, Arkansas 

JOSEPH K. KNOLLENBERG, Michigan 

FRANK D. RIGGS, CaUfornia 

LINDSEY O. GRAHAM, South Carolina 

DAVE WELDON, Florida 

DAVID FUNDERBURK, North CaroUna 

MARK SOUDER, Indiana 

DAVID McINTOSH, Indiana 

CHARLIE NORWOOD, Georgia 

Jay Eagen, Staff Director 
Gail E. Weiss, Minority Staff Director 



Subcommittee on Workforce Protections 



CASS BALLENGER, North CaroUna Chairman 



Y. TIM HUTCHINSON, Arkansas 
LINDSEY O. GRAHAM, South Carolina 
DAVID FUNDERBURK, North CaroUna 
CHARLIE NORWOOD, Georgia 
HARRIS W. FAWELL, IlUnois 
BILL BARRETT, Nebraska 
PETER HOEKSTRA, Michigan 
JAMES C. GREENWOOD, Pennsylvania 



MAJOR R. OWENS, New York 
GEORGE MILLER, California 
PATSY T. MINK, Hawaii 
ROBERT E. ANDREWS, New Jersey 
ELIOT L. ENGEL, New York 
LYNN C. WOOLSEY, California 
CARLOS A. ROMERO-BARCELO, 
Puerto Rico 



Subcommittee on Oversight and Investigations 



PETER HOEKSTRA, Michigan, Chairman 



BILL BARRETT, Nebraska 

CASS BALLENGER, North Carolina 

RANDY "DUKE" CUNNINGHAM, California 

HOWARD P. "BUCK" McKEON, CaUfornia 

MICHAEL N. CASTLE, Delaware 

DAVID WELDON, Florida 

WILLIAM F. GOODLING, Pennsylvania 

HARRIS W. FAWELL, Illinois 



THOMAS C. SAWYER, Ohio 

MATTHEW G. MARTINEZ, CaUfornia 

JACK REED, Rhode Island 

TIM ROEMER, Indiana 

ROBERT C. "BOBBY" SCOTT, Virginia 

GENE GREEN, Texas 

CHAKA FATTAH, Pennsylvania 



(II) 



CONTENTS 



Page 

Joint Field Hearing held in Oklahoma City, Okalahoma, January 18, 1996 1 

Statement of: 

Ballenger, Hon. Cass, a Representative in Congress from the State of 

North Carolina 1 

Bumpers, Terry, Director, National Alhance for Fair Contracting 123 

Connelly, Jim, Connelly Paving Company 104 

Estell, Bill, Quickway Excavating 110 

Istook, Hon. Ernest, a Member of Congress from the State of Oklahoma .. 12 

Lester, Jeff, Deputy Commissioner, Oklahoma Department of Labor 35 

Marshall, Jim, Chief of Staff, Oklahoma Department of Labor 35 

Matthews, Gary, Matthews Trenching Company 96 

Milner, James, Director, Oklahoma Citizens for a Sound Economy 106 

Reneau, Brenda, Commissioner, Oklahoma Department of Labor 19 

Witness A 129 

Witness C 134 

Prepared statements, letters, supplemental materials, et cetera: 

Associated Builders & Contractors, broadcast excerpt 154 

Ballenger, Hon. Cass, a Representative in Congress from the State of 

Nortn Carolina, prepared statement of 2 

Bumpers, Terry, Director, National Alliance for Fair Contracting, pre- 
pared statement of 127 

Connelly, Jim, Connelly Paving Company, prepared statement of 105 

The Davis-Bacon Act, and Fraudulent Wage Data Investigative Report 

document, an Executive Summary 150 

Estell, Bill, Quickway Excavating, prepared statement of 113 

Istook, Hon. Ernest J., a Member of Congress from the State of Okla- 
homa, prepared statement of 14 

Lester, Jeff, Deputy Commissioner, Oklahoma Department of Labor, pre- 
pared statement of 44 

Marshall, Jim, Chief of Staff, Oklahoma Department of Labor, prepared 

statement of 35 

Matthews, Gary, Matthews Trenching Company, prepared statement of ... 96 
Miller, Hon. George, a Representative in Congress from the State of 

California, prepared statement of 148 

Milner, James, Director, Oklahoma Citizens for a Sound Economy, pre- 
pared statement of 109 

Owens, Hon. Major R., a Representative in Congress from the State 

of New York, prepared statement of 156 

Reneau, Brenda, Commissioner, Oklahoma Department of Labor, pre- 
pared statement of 21 

Souder, Hon. Mark E., a Representative in Congress from the State 

of Indiana, prepared statement of 161 

Taylor, Lonnie P., Vice President, Congressional Affairs, Chamber of 
Commerce of the United States, Washington, DC, prepared statement 

of 148 

Witness A, prepeired statement of 130 

Witness C, prepared statement of 136 



(III) 



FIELD HEARING ON DAVIS-BACON FRAUD 
AND ABUSE 



THURSDAY, JANUARY 18, 1996 

House of Representatives, Subcommittee on Over- 
sight AND Investigations with the Subcommittee 
ON Workforce Protections, Committee on Eco- 
nomic and Educational Opportunities, Oklahoma 
City, OK. 

The subcommittee met, pursuant to call, at 10 a.m., in the U.S. 
Courthouse, 200 N.W. Fourth Street, Oklahoma City, Oklahoma, 
Hon. Cass Ballenger, Chairman of the Subcommittee on Workforce 
Protections, presiding. 

Members present: Representatives Ballenger and Hoekstra. 

Also present: Representative Istook. 

Chairman BALLENGER. A quorum being present, I would like to 
call together this joint hearing of the Subcommittee on Workforce 
Protections and the Subcommittee on Oversight and Investigations. 

The subcommittee is meeting today to hear the testimony on al- 
legations of fraud, abuse and favoritism in the Davis-Bacon Act 
uncovered by the Oklahoma Department of Labor. I have a brief 
opening statement. 

The Davis-Bacon Act requires contractors on federally funded 
construction projects valued at over $2,000 to pay a government- 
determined prevailing or inflated salary in a specific city or area. 

When the Act was passed in 1931, there were no Federal mini- 
mum wage laws or other labor laws with protection for workers, 
and since that time Congress has enacted numerous laws to protect 
the wages and working conditions for all workers, including con- 
struction workers. Some $48 million annually in Federal construc- 
tion spending falls under the Davis-Bacon Act requirements. 

Also, the Congressional Budget Office says that the Davis-Bacon 
Act raises the government construction costs on the order of $1 bil- 
lion a year; clearly, Davis-Bacon drives up construction costs. Elec- 
tricians in Philadelphia who are working on a Davis-Bacon project 
are paid $37 an hour, compared with an electrician on a private 
contract, who is paid only $15.76. Or consider the backhoe operator 
in Oklahoma whose salary was $22 an hour on a Federal construc- 
tion job, compared with the private rate of $8.40 an hour. Compa- 
nies cannot stay in business paying $37 or $22 an hour to an em- 
ployee when the market rate is much less. 

The total cost of Davis-Bacon extends to State and local govern- 
ment construction programs, thus having the same practical impli- 
cations as an unfunded mandate. Davis-Bacon is particularly bur- 
densome in the area of school construction. Consider this — a county 

(1) 



in West Virginia built a high school, an elementary and middle 
school and an academic center at a total cost of $5.8 million, aver- 
aging out at $78.81 per square foot of construction. Interviews with 
contractors in the county established that open shop contractors 
usually charge an average of $52 per square foot as compared to 
$78. Using those figures, one-third of the cost could have been 
saved had the schools been exempt from the Davis-Bacon Act. The 
savings could have been realized by the taxpayers or used in other 
ways to help the educational system. 

There are additional costs to Federal agencies which must col- 
lect, process and disseminate thousands of wage rates. And as we 
will hear from our witnesses today, these are potentially serious 
flaws in a prevailing wage determination project. Likewise, there 
are direct costs to contractors who must comply with record-keep- 
ing and paperwork requirements under the Copeland Act. Compli- 
ance costs to the industry total about $100 million — money which 
would be better spent creating additional jobs. 

In addition to the wasteful and burdensome paperwork require- 
ments of this prevailing wage law, recent investigations suggest 
that the system of collecting wage information is so flawed as to 
allow for systemic submission of fraudulent and false data. 

The hearing today will focus on the allegations of fraud, waste 
and abuse in the administration of the Davis-Bacon Act. We first 
learned of these charges in July of 1995, and at that time the Okla- 
homa Department of Labor had uncovered three specific cases 
where the survey data on Federal projects was submitted and ghost 
employees were identified, presumably with the intent of inflating 
prevailing wage determinations. Basing the wages on inflated and 
perhaps fraudulent data would drive up the cost of government 
construction projects, wasting hundreds of millions of taxpayer dol- 
lars. 

Because of the serious nature of the allegations uncovered by the 
Oklahoma Department of Labor, Bill Goodling, Chairman of the 
House Economic and Educational Opportunities Committee, Pete 
Hoekstra, Chairman of the Oversight and Investigations Commit- 
tee and I wrote the Department of Labor to demand some answers. 
And as a result of this action and the concern about developing 
scandal, the U.S. Department of Labor withdrew the prevailing 
wage determinations for Oklahoma City and Tulsa. 

Here is what the Department of Labor found after the initial re- 
view of the WD- 10 forms used in Oklahoma. And by the way, for 
those of you that are not conversant with the government-speak, a 
WD- 10 form is the survey form used by the Department of Labor 
to determine the Davis-Bacon wage. Out of 259 forms submitted, 
only 124, or a little under half of the forms submitted, remained 
usable. The Department of Labor listed several reasons for exclud- 
ing forms, including the information that could not be verified. I 
have a copy of a letter from the Department of Labor, along with 
a chart detailing this information which will be submitted for the 
record. 

We have also asked the General Accounting Office, the GAO, the 
U.S. Department of Justice and the Inspector General's Office of 
the U.S. Department of Labor — or the agency's watchdog — to inves- 
tigate allegations of fraud, abuse and favoritism in the Oklahoma 



Davis-Bacon Act. We anticipate receiving these reports later this 
year. 

Needless to say, the events and information you will hear today 
are quite disturbing. If all the allegations are true, the only conclu- 
sion to be drawn is that the Davis-Bacon Act and its system of 
wage information collection is fatally flawed. Every year the De- 
partment of Labor must collect and monitor thousands of wage sub- 
missions on billions of dollars of federally financed contracts. If the 
dubious interested parties here in America's heartland are so easily 
able to penetrate and dupe the Department of Labor's best efforts, 
it certainly raises the possibility that similar activities are taking 
place in other States. The Department of Labor uses the same col- 
lection process across the country that they do in Oklahoma. And 
while the case here may be particularly egregious, unfortunately I 
believe that it is unlikely that this system is better elsewhere. 
Moreover, the Oklahoma investigation certainly reinforces the re- 
ports by the GAO, released in 1979, which said that after nearly 
50 years, the Department of Labor has not developed an effective 
program to issue and maintain current and accurate wage deter- 
minations. A GAO follow-up report in 1994 noted that the potential 
for wage determinations to be based on low quality data continues 
to exist. 

We will hear from three panels of witnesses today, including the 
Honorable Ernest Istook, representing the Fifth District of Okla- 
homa; Commissioner Brenda Reneau, Oklahoma Department of 
Labor and Deputy Commissioner Jeff Lester; and a panel of con- 
tractors. 

Because of concern for their personal safety and possible retalia- 
tion by those opposed to exposing this fraud, waste and abuse, four 
of our witnesses have asked and been granted anonymity. We will 
hear testimony from these witnesses and we will be able to ques- 
tion them, but due to the concern for their personal safety and that 
of their families and co-workers, their identity will be closely pro- 
tected. In that regard, I will clear the hearing room and allow these 
witnesses to be brought in, seated and then shielded with protec- 
tive partitions. And I hope you can be patient during this process. 

Thank you. That is the end of my statement. 

Congressman Hoekstra. 

[The prepared statement of Hon. Cass Ballenger follows]: 

Statement of Hon. Cass Ballenger, a Representative in Congress from the 
State of North Carolina 

The Davis-Bacon Act requires contractors on federally funded construction 
projects valued over $2,000 to pay a government determined "prevailing" or inflated 
salary in a specific city or area. When the Act was passed in 1931, there were no 
Federal minimum wage law or other labor laws with protections for workers. Since 
that time. Congress has enacted numerous laws to protect the wages and working 
conditions of all workers, including construction workers. Some $48 bilUon annually 
in Federal construction spending falls under the Davis-Bacon Act requirements. 
Also, the Congressional Budget Office says that the Davis-Bacon Act raises govern- 
ment construction costs on the order of $1 bilUon a year. 

Clearly, Davis-Bacon drives up construction costs. Electricians in Philadelphia 
who are working on a Davis-Bacon project are paid about $37 an hour compared 
with electricians on a private contract who are paid an average of $15.76 an hour. 
Or consider that a backhoe operator in Oklahoma whose salary was $22 an hour 
on a Federal construction job compared with a private rate of $8.40 an hour. Com- 



panics can not stay in business paying $37 or $22 an hour to an employee when 
the market rate is less. 

The total cost of Davis-Bacon extends to State and local government construction 
programs, thus having the same practical implications as an unfunded mandate. 
Davis-Bacon is particularly burdensome in the area of school construction. Consider 
this example: a county in West Virginia built a high school, an elementary/middle 
school, and an academic center at a total cost of over $5.8 million, averaging out 
to $78.81 per square foot of construction. Interviews with contractors in the county 
established that open shop contractors usually charged an average of $52 per square 
foot for similar facilities. Using those figures, one-third of the cost could have been 
saved had the schools been exempt from Davis-Bacon. The savings could have been 
readized for the taxpayers or used in other ways the educational system. 

There are additional costs to Federal agencies which must collect, process, and 
disseminate thousands of wage rates. And, as we will hear from our witnesses 
today, there are potentially serious flaws in the prevailing wage determination proc- 
ess. Likewise, there are direct costs to contractors who must comply with record- 
keeping and paperwork requirements under the Copeland Act. Compliance costs to 
the industry total nearly $100 million per year, money which could be better spent 
creating additional jobs. In addition to the wasteful and burdensome paperwork re- 
quirements of this prevailing wage law, recent investigations suggest that system 
of collecting wage information is so flawed as to allow for systematic submission of 
fraudulent and false data. 

The hearing today will focus on allegations of fraud, waste, and abuse in the ad- 
ministration of the Davis-Bacon Act. We first learned of these charges in July, 
1995. At that time, the Oklahoma Department of Labor had uncovered three specific 
cases where survey data on phantom projects was submitted and ghost employees 
were identified, presumably with the intent of inflating prevaiUng wage determina- 
tions. Basing the wages on inflated and perhaps fraudulent data would drive up the 
costs of government construction projects — wasting hundreds of millions of taxpayer 
dollars. 

Because of the serious nature of the allegations uncovered by the Oklahoma De- 
partment of Labor, Bill Gk)odling, Chairman of the House Economic and Educational 
Opportunities Committee, Pete Hoekstra, Chairman of the Oversight and Investiga- 
tions Subcommittee and I wrote the Department of Labor to demand some answers. 
As a result of this action and concern about a developing scandal, the U.S. Depart- 
ment of Labor withdrew the prevailing wage determinations for Oklahoma City and 
Tulsa. 

Here is what the Department of Labor found after their initial review of the WD- 
10 forms used in Oklahoma. By the way, for those of you not conversant in "govern- 
ment speak," a WD-10 form is a survey form used by the U.S. Department of Labor 
to determine a Davis-Bacon wage. Out of 259 forms submitted, only 124, or a little 
under half of the forms submitted, remained usable. The Department of Labor listed 
several reasons for excluding forms including that the information could not be veri- 
fied. I have a copy of the letter from the Department of Labor, along with a chart 
detailing this information, which will be submitted for the record. 

We have also asked the General Accounting Office (GAO), the U.S. Department of 
Justice, and the Inspector General's Office of the U.S. Department of Labor or the 
Agency's watchdog to investigate allegations of fraud, abuse, and favoritism in the 
Oklahoma Davis-Bacon Act. We anticipate receiving these reports later this year. 

Needless to say the events and information you will hear toaay are quite disturb- 
ing. If all the allegations are true, then the only conclusion to be drawn is that the 
Davis-Bacon Act and its system of wage information collection is fatally flawed. 
Every year, the Department of Labor must collect and monitor thousands of wage 
submissions on billions of dollars of federally financed contracts. If the dubious "in- 
terested parties" here in America's heartland are so easily able to penetrate and 
dupe the Department of Labor's best efforts, it certainly raises the possibility that 
similar activities are taking place in other States. 

The Department of Labor uses the same collection procedures across the country 
that they do in Oklahoma, and while the case here may be particularly egregious, 
unfortunately I believe that it is unlikely that this system is better elsewhere. More- 
over, the Oklahoma investigation certainly reinforces the reports by the GAO re- 
leased in 1979 which said that "after nearly 50 years, the Department of Labor has 
not developed an effective program to issue and maintain current and accurate wage 
determinations." A GAO follow-up report in 1994 noted that "the potential for wage 
determinations to be based on low quality data" continues to exist. 

We will hear from three panel's of witnesses today, including the Honorable Er- 
nest Istook, representing the 5th District of Oklahoma; Commissioner Brenda 



Reneau, Oklahoma Department of Labor; Deputy Commdssioner of Labor Jeff Les- 
ter; and a panel of contractors. 

Because of concern for their personal safety and possible retaliation by those op- 
posed to exposing fraud, waste and abuse, four of our witnesses have asked for and 
been granted anonymity. We will hear testimony from these witnesses and we will 
be able to question them, but due to concern for their personal safety and that of 
their families and coworkers, their identity will be closely protected. To that regard, 
I will clear the hearing room and allow these witnesses to be brought in, seated, 
and then shielded by protective partitions. I hope you can be patient during this 
process. 

Thank you. 





COMMITTEE ON ECONOMIC 
AND EDUCATIONAL OPPORTUNITIES 

U.S. HOUSE OF REPRESENTATIVES 

2161 RAYBURN MOUSE Of FICE BUILCHNG 

WASHINGTON. DC 20515-6100 



MINOmlY — IJ02) 225-3725 



(rTY)_l202l 229-31 V 

November 28, 1995 

VIA FACSIMILE #202/219-4753 

Ms. Maria Echaveste 

Administrator 

Wage and Hour Division 

U.S. Department of Labor 

200 Constitution Ave., NW 

Washington, D.C. 20210 

Dear Ms. Echaveste: 

On October 19, 1995 you were invited to brief a number of Members on the findings of the Wage and 
Hour Division (Division) regarding the allegation that fi-audulent information was submitted to the Division in 
response to a prevailing wage survey conducted in Oklahoma. At that briefing you were also asked to provide 
follow-up responses to a number of additional questions. 

Approximately one month has passed since that briefing and we have yet to receive the information we 
requested regarding, among other things, the WD- 10s filed by interested third parties. Accordingly, please 
provide to us by December 5, 1995 the following: 

1. the total number of WD-lOs reviewed by the Division related to the Oklahoma situation divided by 
party (e.g. interested third party, contractors, unions); 

2. the number of WD-lO's that the Division "set aside "/excluded, the reason that they were "set 
aside'/excluded and the party to whom the WD- 10 was attributed; aixl 

3. in those instances where the Division did decide to "set aside'/exclude a WD-IO, please explain in 
detail whedier the Division advised the Department of Justice of the WD-lOs ttiat were "set 
aside'/excluded fi'ora consideration in the prevailing wage determination. In the event that the Department 
of Justice was not advised of the Division's findings with regard to then WD-lOs, please explain. 

Thank you in advance for your prompt and timely responses to our inquiries. 

Sincerely, 




CaU^M 



CASS BALLENGER 
Chairman, Chairman, 

Subcommittee on Oversight Subcommittee on Workforce 

and Investigations Protections 



^nr- 



U.S. Department of Labor Employment standards Admif 

Wage and Hour Division 
Washington, DC. 20210 



DEC 7 



The Honorable Pete Hoekstra 

Chairman 

Subcommittee on Oversight and Investigations 

The Honorable Cass Ballenger 

Chairman 

Subcommittee on Workforce Protections 

Committee on Economic and Educational Opportunities 
U.S. House of Representatives 
Washington, D.C. 20615-6100 




Dear Chairmen Hoekstra and Ballenger: 



Thank you for your letter of November 28 requesting additional 
information regarding the Davis-Bacon heavy construction wage 
survey conducted in Oklahoma City, Oklahoma. 

There apparently is a misunderstanding. At the meeting, we 
thought you had agreed that you would submit any follow-up 
questions you had in writing. We just received your letter. 
I hope the following is helpful. 

Of the total WD-lO's submitted in response to the survey and 
reviewed by the Department, 145 WD-lO's were submitted by various 
contractors; 85 WD-lO's were submitted by unions; and an employer 
group submitted one WD-10. An additional 28 WD-lO's represent 
information that was transcribed directly from contracting 
agencies' certified payroll records on projects that were subject 
to the Davis-Bacon Act. 

In response to question 2, 3 VJD-lO's (all from contractors) were 
excluded because they were received after the cut-off date for 
data collection. Fifty-five WD-lO's from contractors; 19 WD-lO's 
from unions; one WD- 10 from an employer group; and 4 of the 
agency-transcribed WD-lO's were eliminated because the 
information on the form was outside the scope of the survey.' 



Outside of scope means that the project was not in 
progress during the survey time frame; the project was 
not constructed in the area being surveyed; the project 
value was less than $2000; the project was for a type 
of construction other than that being surveyed; or the 
contractor did not perform construction work ( e.g. . a 
material supplier) . 

Working for America 's Workforce 



One WD-10 submitted by a contractor was not used because it couia 
not be verified. Thirty-three WD-10 's submitted by unions were 
not used because they could not be verified. Nineteen WD-lO's 
(eight from contractors and 11 from unions) were excluded because 
they represented duplicate information. 

We have previously provided the Committee with all of the raw 
data that form the basis for these responses. 

With respect to your final question regarding the information we 
have provided to the Department of Justice (DOJ) , we have provid- 
ed DOJ with all original documents related to the survey. These 
documents include all WD-lOs that were not used and indicates why 
those WD-lOs were not used. 

Should you require further information, I would be pleased to 
respond to your written request. 

Sincerely, 



^J}^^Jf^^ 



Maria Echaveste 
Administrator 



10 

Mr. HOEKSTRA. Thank you. 

Until I was halfway between Memphis and Oklahoma last night 
the first sentence in my statement was accurate. I wanted to thank 
Cass for bringing us here to Oklahoma City. 

[Laughter.] 

Mr. HoEKSTRA. Four hours later, and when I looked out the win- 
dow this morning, I am not sure that is still true. But we are here, 
and we are here on a very important issue, one that I have been 
interested in for a number of years — and that is the Davis-Bacon 
program. It is a very old program, and as Cass identified, the 
Labor Department has not effectively found a way to implement 
provisions of the Davis-Bacon Act. 

I would also like to thank the Department of Labor in Oklahoma, 
Ms. Reneau, for the work that her staff has done on this issue for 
the last number of months. I really believe that the work that has 
begun here in Oklahoma, along now with the efforts that have built 
off of that activity which include additional work by the Depart- 
ment of Labor, the Inspector General, the Department of Justice 
and activities by many of the governors around the country, will 
lead to, I hope, getting to the bottom of programs and a law that 
is costing the taxpayers of this country billions and billions of dol- 
lars on an annual basis. Those of you that are watching the other 
things that are going on in Washington can understand the impact 
of perhaps finding a seven-year period potential savings in the tens 
of billions of dollars, and how much easier that would make it for 
us to reach a solution and a compromise with the budget discus- 
sions going on in Washington. 

So, we would like to take this opportunity to encourage the De- 
partment of Justice and the Inspector General and Department of 
Labor and the General Accounting Office to move forward as expe- 
ditiously as possible to complete their work and move forward with 
criminal proceedings if they find that those are warranted. 

I am also going to take this opportunity at this hearing to release 
several documents from the U.S. Department of Labor regarding 
the Davis-Bacon program. And with the Chairman's permission, I 
would like those documents be made part of today's hearing. 

Chairman Ballenger. Without objection. 

Mr. HOEKSTRA. So once again, Cass, thank you for taking us on 
this wonderful junket. 

[Laughter.] 

Mr. HOEKSTRA. I will see you by the outdoor pool after the hear- 
ing this afternoon. 

[Laughter.] 

Mr. HOEKSTRA. Thank you. 

[The material referred to follows:] 



[Due to the size of the document, the document will be on file with the Committee 
on Economic and Educational Opportunities document's clerk located at B345, Ray- 
burn House Office Building, Washington, DC] 

Chairman Ballenger. Thank you. 

Before we start, I would like to show a brief news clip from NBC 
News, so if you will, roll the tape, please ma'am. 

[Videotaped news excerpt shown as follows:] 

Mr. Brokaw. NBC News In Depth tonight— What further? The 
legal consequences for Simpson. 



11 

A major step for the reduced Medicare benefits, the House Ways 
and Means Committee agrees on the bill. 

And the Fleecing of America — how non-existent work projects are 
costing taxpayers millions. 

Voice. From NBC News, this is NBC Nightly News with Tom 
Brokaw, reporting tonight from Los Angeles. 

Mr. Brokaw. When we come back, the Fleecing of America. 

[Pause.] 

Mr. Brokaw. Fake construction projects that are costing tax- 
payers a fortune. Why? We've got the answers next. 

Time now for our regular Wednesday feature about your money 
and how your government wastes it. Tonight, how phantom con- 
struction projects are driving up the cost of real buildings. 

NBC's Robert Hager has details now in this fleecing of America. 

Mr. Hager. Mustang, Oklahoma, a rural town in the Nation's 
heartland with a brand new $2 million storage tank. But where is 
it? 

Mr. Morgan. No, this is not an underground storage tank. 

Mr. Hager. In fact, the underground tank was never built, need- 
ed or even proposed. It only exists in these documents. Federal 
wage survey forms, fraudulently submitted to the U.S. Labor De- 
partment, complete with fake salaries and fake jobs, intended to 
persuade the government to set higher construction wage scales for 
that area. Remarkably, it worked. 

And since until recently by law, Oklahoma had to pay using the 
same wage scales, the State Labor Commissioner is furious, saying 
the fraud is costing taxpayers there millions of dollars. 

Ms. Reneau. The wage rate for this area was based on that non- 
existent or ghost project. 

Mr. Hager. A Federal law, the Davis-Bacon Act, requires that 
construction workers on almost all U.S. government projects, be 
paid the prevailing or going salary for a specific region. Those sala- 
ries are set by the wage survey. But critics say many of those sur- 
veys are being rubber stamped without any checking. 

In Oklahoma, the impact on the State's wage rate is tremendous. 
A backhoe operator whose salary was $8.40 an hour started getting 
$22 an hour. A truck driver whose salary was $7.30 got $15 an 
hour. Total additional taxpayer cost — $21 million. 

On Capitol Hill, there's concern. 

Chairman Ballenger. If they found out in Oklahoma that you 
could get away with cheating, it's not a secret they must have kept 
in Oklahoma. It's got to be elsewhere in the country. 

Mr. Hager. And NBC News has learned the FBI is now inves- 
tigating. Because of this, the U.S. Labor Department says it's lim- 
ited in what it can say. 

Mr. Williamson. We take very seriously allegations of fraud that 
call into question the integrity or accuracy of any wage surveys 
used by the Davis-Bacon program. 

Mr. Hager. In Oklahoma, more fakery. Someone wanted to dou- 
ble pay for asphalt workers, so a form was sent to the U.S. Labor 
Department claiming asphalt workers had made big wages to re- 
surface a parking lot. But a look today reveals it was never paved 
with asphalt. Another survey detailed high wages to put up a 
building at a water treatment plant. But a look today reveals no 



12 

building to be found, only barbed wire. Now, because of continued 
abuse, the U.S. Labor Department has withdrawn the prevailing 
wage rate for Oklahoma. 

And because she first raised questions of fraud, the State Labor 
Commissioner's life has been threatened. But that's not stopping 
her. 

Ms. Reneau. It's fraud. It's fraud at the fullest extent. 

Mr. Hager. No one has been charged yet, but there's growing 
concern that the system of setting wages on U.S. government con- 
struction projects is so flawed that it's fleecing taxpayers of hun- 
dreds of millions of dollars. 

Robert Hager, NBC News, Washington. 

[End of videotaped presentation.] 

Chairman Ballenger. Thank you. 

Let me just say that in our statistics, it shows that more than 
a billion dollars a year, but that is just Federal money we are talk- 
ing about. When you talk about State money, it would be massive. 

We are going to begin our testimony now, hearing testimony 
from our witnesses. And I would like to remind witnesses if I can 
that we have a committee rule that you are supposed to limit your 
oral statement to five minutes, however your full statement will be 
entered in the record. 

Our first panel is Congressman Ernest Istook, Vice Chairman of 
the Appropriations Committee on Labor and HHS 

Mr. Istook. Labor, Education and Health and Human Services. 

Chairman Ballenger. Yes, sir — the Honorable Ernest Istook 
from Oklahoma. Fire away. 

STATEMENT OF HON. ERNEST ISTOOK, A MEMBER OF 
CONGRESS FROM THE STATE OF OKLAHOMA 

Mr. Istook. Thank you. And I will abbreviate my oral remarks 
and have the full text for the record. 

Chairman Ballenger and Chairman Hoekstra, I am very grateful 
to you for coming to Oklahoma to investigate the fraud that the 
Oklahoma Labor Commission has discovered in the Oklahoma 
wage surveys, part of the prevailing wage procedures under the 
Davis-Bacon Federal law. 

The origins of the original Davis-Bacon Act are well known. 
Originally, it was designed to prevent so-called cheap labor crews 
from the South from winning all the bids on government contracts, 
thus preventing local labor in different parts of the country from 
receiving those contracts. It was believed that the Federal Govern- 
ment was such a major player in the market that those jobs could 
depress labor prices and lower prevailing wages in areas unless 
they were artificially kept high. So this idea was born. It was born 
in a time when many believed that government intervention was 
the answer to the problems faced by the country. But from exten- 
sive experience today, we know that in fact too often government 
is the problem, not the solution. 

The concept of having any government set wages needs careful 
examination. The framers of our Constitution based their under- 
standing of economics on the work of Adam Smith, the Scottish 
economist who published "The Wealth of Nations." They knew the 
problems of government attempts to control the economy. In fact, 



13 

when the Constitution was adopted in 1789, America was suffering 
from a severe depression brought about by burdensome Revolution- 
ary War debt, tariffs between the colonies that restricted trade and 
chaos in currency markets due to millions in unbacked paper cur- 
rency put out by the government and being circulated. The framers 
of the Constitution worked to stabilize the government-created eco- 
nomic chaos and replace it with sound economic principles. 

Nevertheless, during the Great Depression, when the Davis- 
Bacon Act was crafted, it was decided that public works programs 
by themselves were not enough. Wage controls were desired. The 
Hoover Administration urged passage of the Davis-Bacon Act as 
part of the Hoover effort to jump-start the economy through a mas- 
sive Federal construction program. Now we have the hindsight of 
seeing the effects of 64 years of the Davis-Bacon Act and of all the 
other attempts that governments have made to control the econ- 
omy. 

And I should hope that we have learned that there already exists 
a very efficient way to determine what are the prevailing wages in 
a community, a way that guarantees that they will actually be 
paid. And that is a real way, not an artificial way, it is simply 
called the free market system. The market system on a broad scale 
determines prevailing wage rates instead of trying to take a small 
sample and saying that somehow it has become the standard 
against which everything else is measured. If that sample is there- 
fore corrupted or misused, so too the results will not be right. 

Just as some people try to sway public opinion by using polls 
which they manipulate to show whatever they want them to show, 
so too the process of determining prevailing wages can be and is 
manipulated to inflate artificially the wages being paid on public 
works projects, and this costs taxpayers billions of dollars. 

In 1979, the U.S. General Accounting Office issued a report to 
Congress. The title was "The Davis-Bacon Act should be repealed." 
I quote from the three reasons which they gave. 

1. "There have been significant changes in the economy since 
1931 which we believe make continuation of the Act unnecessary. 

2. "After nearly 50 years, the Department of Labor has yet to de- 
velop an effective program to issue and maintain accurate wage de- 
terminations, and it may be impractical to ever do so, and 

3. "The Act is inflationary and results in unnecessary construc- 
tion and administrative costs of several hundred million dollars 
each year." 

Based on what we have learned from the Oklahoma Department 
of Labor's experience, this situation has not changed since that re- 
port was prepared in 1979. I believe the evidence gathered and the 
indications of reluctance to prosecute fraud, indicate the systemic 
nature of what Oklahoma found upon examining the evidence and 
may provide a model whereby this committee and others can find 
similar patterns of abuse other places in the country. The mecha- 
nism is so simple to manipulate, so ripe with the potential for 
fraud, that it is hard to believe that people would try this manipu- 
lation only in Oklahoma and not in the rest of the country. I think 
you can look at the patterns that can be established here and that 
will give you an idea of what to look for in other States, and I ex- 
pect and fear that indeed that manipulation will be found. 



14 

What do we do? We should not squander precious and scarce re- 
sources — public money on public works projects. I do not believe 
that it is possible to change the Davis-Bacon Act. Say maybe in- 
stead of a tiny sample, you will take a big sample, but with all the 
extra millions of dollars that would cost to try to administer it still 
with the potential for manipulation, there is still a simple answer 
that is available. The simple answer is, rather than trying to fix 
a fatally flawed system, repeal it. Repeal the Davis-Bacon Act, re- 
peal the problems of fraud that go with it, and repeal the waste 
of billions of dollars each year of taxpayers' money, which I fear 
will continue so long as the law remains on the books. 

I thank you again for coming to Oklahoma and sharing this time 
together. I thank you also for the courtesy of being able to partici- 
pate on the panel. In my work on the Appropriations Subcommittee 
that oversees, among others, the Labor Department, the informa- 
tion gathered should be very helpful in our efforts in appropriating 
money to the Labor Department that is in charge of this process. 

Thank you very much. 

[The prepared statement of Mr. Istook follows:] 

Statement of Hon. Ernest J. Istook, Jr., a Representative in Congress from 
THE State of Oklahoma 

First, Chairman Ballenger, Chairman Hoekstra, and distinguished members of 
this panel, thank you for coming to Oklahoma to investigate the fraud the Okla- 
homa Labor Commission has discovered in the Oklahoma Wage Survey. 

Origins of Davis-Bacon 

The origins of the original Davis-Bacon Act are well known. It was originally de- 
signed to prevent "cheap" labor crews from the South from winning all of the bids 
on government contracts, thus preventing local labor from receiving Federal Govern- 
ment contracts. It was believed that the Federal Gk)vernment is such a big player 
in the market that it could depress labor prices and lower prevailing wages in an 
area unless they were kept artificially high. Thus, this idea was born. It was born 
in a time when many believed government intervention was the answer to the prob- 
lems America faced. Today we know from extensive experience that, in fact, govern- 
ment is too often the problem, not the solution. 

The concept of any government's setting "wages" should be examined. The framers 
of our Constitution based their understanding of economics on the work of Adam 
Smith, the Scottish economist who published "The Wealth of Nations" in 1776. They 
knew the problems of government attempts to control the economy. In 1789, our Na- 
tion was suffering from a severe depression brought about by burdensome revolu- 
tionary war debt, tariffs between the colonies that restricted trade, and chaos in cur- 
rency markets due to millions in unbacked paper currency in circulation. The fram- 
ers of the Constitution worked to stabilize this government-spawned economic chaos 
and replace it with sound economic principles. 

But during the Great Depression, when the Davis-Bacon Act was crafted, it was 
decided that public works programs by themselves were not enough. Wage controls 
were added. The Hoover Administration urged passage of the Davis-Bacon Act as 
part of Hoover's effort to jump-start the economy through a massive Federal con- 
struction program. We now have seen the effects of 64 years of the Davis-Bacon 
Act, plus all of the other attempts that governments have made to control the econ- 
omy. It is significant that Professor Robert Lucas, from the Chicago School of Eco- 
nomics, won the Nobel Prize in 1995 for showing that government regulators could 
not "manage," much less "fine-tune" the economy. 

GAG Says Davis-Bacon is Broken 

In 1979, the U.S. General Accounting Office issued a Report to Congress entitled 
"The Davis-Bacon Act should be repealed." Their reasons were three-fold: 

1. "There have been significant changes in the economy since 1931 which we 
believe make continuation of the Act unnecessary. 

2. After nearly 50 years, the Department of Labor has yet to develop an effec- 
tive program to issue and maintain accurate wage determinations, and it may 
be impractical to ever do so, and; 



15 

3. The Act is inflationary, and results in unnecessary construction and admin- 
istrative costs of several hundred million dollars annually." 

Based on what we've learned from the Oklahoma Department of Labor's experi- 
ence, the situation has not changed. I believe the evidence gathered, and the admin- 
istration's reluctance to prosecute outright fraud, is an indication of the systemic na- 
ture of what Oklahoma found upon examining the evidence. 

When I asked to whom these surveys had been sent, in the most recent survey 
of Oklahoma wages, I received an extensive list. I'll simply summarize it here. The 
administration claimed they sent the survey to 45 union halls, (28 of which were 
in Oklahoma). Thirty two contractor associations (8 of which were in Oklahoma), 
and 85 individual contractors. According to data gathered by the Oklahoma Depart- 
ment of Labor, there is a question whether that first survey was actually sent to 
the list provided to me. I believe the Oklahoma Department of Labor's testimony 
will expand upon this. 

The Administration's Mindset 

Robert Reich, President Clinton's Secretary of Labor, has testified before my sub- 
committee (Labor-Health & Human Services-Education/ Appropriations) on severed 
occasions. It has become apparent that he believes that wages can be legislated. He 
has testified that one solution to stagnant wages in America is to have the govern- 
ment mandate that wages be raised. This begs the question of why someone who 
wants a raise shouldn't ask their boss, rather tnan their Congressman. 

Sustainable Economic Growth Increases Standard of Living 

Legislation to set wages will not raise the standard of living for Americans. To 
raise the standard of living we must create a climate for sustained economic growth, 
which requires less government regulation, not more. 

In fact, there is consensus among virtually all economists that wages and prices 
cannot be regulated without severe distortions in the economy. Wage and price con- 
trols have never had the desired effect in any economy. They did not work in the 
Roman Empire, in the Nixon Administration, or in the former Soviet Union. This 
principle is taught in introductory economics courses across the Nation. Regulating 
wages higher than the market rate only causes higher unemployment (because more 
people want higher wages before they accept a job) and lewer jobs available for 
workers. One of Secretary Reich's mandates is to lower unemplojonent, and we are 

§aying billions in training, education, and placement programs to try to do that, 
et, a pohcy is being maintained that clearly increases unemployment. 

Scarce Resources Should Not Be Squandered 

In Philadelphia, an electrician makes $15.76 per hour, yet if that same electrician, 
with the same skill level, is employed on a Davis-Bacon contract, he or she wiU be 
paid $37.97 per hour or 241 percent more than the market wage. In other words, 
you could employ 2.4 electricians for the price you are forced to pay one! 

I have a letter from one of my constituents in Edmond, Oklahoma. He has in- 
formed me that he normally pays between $6.50 and $10 per hour to his employees. 
When he contracts on a Federal job, however, he is required to pay employees up 
to three times their normal pay to do the same work they usually do for less. In- 
stead of paying $6.50 to $10 per hour market wages, he has to pay $10 to $22 per 
hour. Wages are not linked to their individual skills, but their job "classification" 
under Davis-Bacon's complex rules. It is the taxpayers who ultimately pay for this 
padding of wages. 

There is a great deal of work that needs to be done in America. Artificially-in- 
flated wages make it more costly, and thus more difficult, to do this work. Testi- 
mony before the Transportation Committee describes the problems of the infrastruc- 
ture we built during the 1950s, and the highways and bridges that need to be re- 
placed. Housing projects run by the government have been abandoned because there 
isn't enough money to maintain or renovate them. The infrastructure of our public 
schools is deteriorating. The cry from the other side of the aisle is that we need to 
spend more taxpayer dollars on these problems, and hire more Federal bureaucrats 
to distribute this "new money." In reality, one key solution to these woes is much 
simpler. 

Solution: Repeal the Davis-Bacon Act 
Repeal the Davis-Bacon Act. How will this help? 

1. First, it will put hundreds of bureaucrats in Washington into new, produc- 
tive jobs. It takes the entire personal income tax of 9 families in America 
to support each bureaucrat in Washington! 

2. According to a conservative estimate from the Congressional Budget Office, 
repeeding Davis-Bacon would save $2.6 billion. This $2.6 billion represents the 



16 

entire annual personal income tax of 145 thousand families in America. The 
U.S. Air Force estimated that Davis-Bacon requirements added 33 percent to 
each construction job. 

3. Second, if we can stretch the labor dollars we are currently spending on 
transportation, we can hire 1.5 to 2.5 times the number of people, to do more 
work, to repair and replace our national infrastructure faster. 

4. Third, housing projects owned by or managed on behalf of the government 
will no longer have to pay exorbitant costs for repairs and improvements. 

5. Fourth, education infrastructure is greatly helped. It has amazed me that 
we hear the same thing over and over from educators in Oklahoma. First, they 
say, "we need more money." Then we start asking why. It is often those regula- 
tions the Federal Government has imposed. They need the Federal money to 
pay for the regulations. These include Davis-Bacon, which adds 15 percent to 
the cost of every school building or renovation project, according to the Okla- 
homa School Board Association. 

The repeal of Davis-Bacon would increase economic growth, which would in turn 
improve America's standard of living. In addition, our scarce resources would be 
spent more productively on actual construction instead of on bureaucracy. It would 
relieve broaa sectors of our society from having to pay inflated wages, thus decreas- 
ing costs. It is time to end this wasteful program. 

The concept of the prevailing wage has been grossly distorted by special interests. 
It is no longer designed to guarantee that market rates would not be depressed. It 
is designed to set exorbitant rates. I do not believe the Davis-Bacon prevailing wage 
system can or should be repaired. I believe the only equitable thing to do for the 
American people, the taxpayers of America is to repeal the Davis-Bacon Act. This 
is the way to fix what is broken. 

I also believe that the fraud in the system should be systematically investigated 
and that perpetrators of that fraud should be brought to justice, for stealing from 
the American people, and from the people of Oklahoma. 

I welcome your questions and thank you for your efforts. 

Chairman Ballenger. Peter, any questions? 

Mr. HOEKSTRA. Yes. Congressman Istook, you talked in your tes- 
timony about repealing Davis-Bacon. That is not the issue of to- 
day's hearing. 

Mr. ISTOOK. True. 

Mr. HoEKSTRA. But you outline some benefits and what might 
happen if we repealed it. I believe that those also would be true 
if we did develop a more effective way of applying Davis-Bacon and 
actually took the waste, fraud and abuse out. 

Would you care to explain what some of those benefits might be 
if we actually were able to take anywhere from two, three, four, 
five billion dollars of waste, fraud and abuse out of this program 
on an annual basis? 

Mr. ISTOOK. Certainly there is a multiplier effect. If you do not 
have to spend extra money of the taxpayers, you do not have to 
take it away from them in the first place. If each public works 
project does not cost more, frankly you can do more public works 
projects. There has been a lot of testimony and public comment 
about the infrastructure, whether you are talking about transpor- 
tation, education, utilities, sewer projects and so forth. Every time 
that you have to pay 10 to 30 percent extra for one of these 
projects, it means it is more difficult to fix the infrastructure of 
America, or to expand it. So a benefit is not only the cost savings, 
but if you spend the saved money, you are going to get a lot more 
for your spending on that. So it is both a savings potentially of cost 
and a savings because the taxpayers would get more public 
projects, and better public projects to improve the infrastructure for 
the same amount of money. 

Mr. HoEKSTRA. Why did Oklahoma take such an interest in 
Davis-Bacon? 



17 

Mr. ISTOOK. Well, I would like to think any Labor Department 
would do what has happened with Commissioner Reneau, and that 
is if there is an indication of fraud or abuse, you go after it. I do 
not believe that Oklahoma is isolated in this circumstance. I think 
the difference is that in Oklahoma, we have had a Labor Commis- 
sioner come in that was aggressive and began to look for this evi- 
dence, which I think could be found in other States also if similar 
efforts were made. 

Mr. HOEKSTRA. But the one key difference here is Oklahoma was 
required to use the numbers — the Federal numbers, correct? 

Mr. ISTOOK. You are exactly right. The Oklahoma statute that 
governs this was changed many years ago so that instead of the 
State of Oklahoma going out and making its own assessment of 
what would be so-called prevailing wage rates, it simply tried to 
save administrative costs by adopting the Federal standards under 
what we called the little Davis-Bacon Act in the State of Okla- 
homa. So that was done to seek after administrative savings, be- 
cause it cost a lot of money to try to survey people, which is why 
they do such a small sample instead of a larger, more representa- 
tive sample. 

As you may be aware, the Oklahoma Supreme Court a few 
months ago ruled our little Davis-Bacon Act unconstitutional for 
this very reason, because they said it delegated to the Federal Gov- 
ernment a function of State government; namely, making the deter- 
mination of prevailing wages within the State of Oklahoma, and 
then applying that to State projects. 

I might mention in that connection, I have heard a lot, for exam- 
ple, from educators. We constantly have bond issues in different 
school districts — they want to air condition the schools, they want 
to build a new elementary school, provide computer laboratories, 
whatever it may be. So it is common in education where money is 
very scarce to administer their programs, as they see it. I hear edu- 
cators say "Can we not find more money?" And I say, "Where is a 
way you can save in the system?" They say, "Get rid of a lot of the 
government regulations." Great, where would we start? The first 
one they say is, "Get rid of Davis-Bacon," because of how much it 
makes our school districts spend. The Oklahoma School Board As- 
sociation has given us their estimate that it adds 15 percent to the 
cost of every school project in the State of Oklahoma because of the 
Davis-Bacon or little Davis-Bacon requirements. 

Mr. HOEKSTRA. I would like to just make a couple more points. 
I think this is a good example of where it is very clear States and 
local communities watch their money much closer than Washington 
does, because for the one State out of 50 States that used the Fed- 
eral guidelines, they found out they were getting ripped off. 

Mr. ISTOOK. Sure. 

Mr. HOEKSTRA. And they said wait a minute, we have got to 
change this. And they also recognized — and maybe Brenda will talk 
about this a little bit later — but when they found out they were 
getting ripped off and they came to Washington to look for help, 
it has been very difficult for us to cut through that bureaucracy 
and actually change a system that was costing Oklahoma millions, 
but around the country it is costing the Federal Government bil- 
lions of dollars. 



18 

The other thing that I would like to point out is that this applies 
to all projects that get any more than $2,000 of Federal funds in 
that not only is it impacting things that are a top priority to this 
country, like education, which means we are spending more on 
education, doing things that we could be getting done more effi- 
ciently, but I think also in your subcommittee you deal with it in 
public housing. I believe that the elimination or the reform and 
getting accurate information — at a minimum, getting accurate in- 
formation on Davis-Bacon, rather than inflating prices, was one of 
the top priorities of public housing officials around the country, be- 
cause they are unable to build as many public housing units as 
they would like to and they are unable to do the amount of renova- 
tion and upkeep that they would like to do. I think it really gets 
back to what you were saying, we cannot get as much — we would 
get more done — with the dollars that we have if we could get 
Davis-Bacon to be accurate rather than inflated. 

Mr. ISTOOK. Let me give you an example from public housing, as 
you mentioned. In Washington, DC, they adopted a regulation as 
part of the public housing that if you are going to renovate a 
project — I am sorry, if you are going to move someone else in, you 
have got to repaint the unit. Well, the problem was they applied 
the Davis-Bacon standards to repainting the units and it about tri- 
pled the cost of every time that you wanted to repaint a unit. So 
they decided it was no longer economically feasible to repaint the 
units, therefore they could not move people into the public housing, 
therefore the public housing became dilapidated and had to be 
boarded up, all because every time you wanted to fix something 
that was wrong, it was too expensive to do so, even something as 
minor as repainting a unit. 

So that again is an example where Davis-Bacon undercuts the 
efforts to improve public housing, education, fixing up or expanding 
the infrastructure in this country. It is an impediment to progress 
and it gets in the way. 

Mr. HOEKSTRA. And inflated Davis-Bacon wages are a license to 
steal. This I think leads us into a good example of where we could 
be getting a lot more for our Federal taxpayer dollars or we could 
be getting a lot more done, not by spending more but by just taking 
a look at how we are spending the dollars that we have. 

Chairman Ballenger. We had a hearing, Ernest, in Washing- 
ton, and we had Steve Barber, who at that time was Mayor of Dal- 
las and I asked Steve just off the top of his head how much did 
he figure it cost the city of Dallas, Texas, as far as Federal funding 
was concerned, in housing. He said he thought it was about a 30 
percent increase in the cost. And at that same hearing, the Mayor 
of Kansas City was there, a black gentleman, and I asked him, did 
he in his community — the development block grants that he had for 
Kansas City — could he have gotten 30 percent more building if he 
did not have to work with Davis-Bacon wages? Obviously this gen- 
tleman did not want to say yes, but he finally did admit the fact 
that it was true. 

Really, if you want to do good work for poor people and get them 
housing and so forth, you should not waste the money that is going 
into construction. 



19 

Mr. ISTOOK. Sure. We have right here in Oklahoma City what is 
called the MAPS project, which is $250 million worth of improve- 
ments, principally in the downtown area. In fact, it was the pre- 
vailing wage rates that had come out just before the MAPS work 
was going to begin. That sparked the Supreme Court case that 
ended up in the little Davis-Bacon Act being overturned. If you 
take one of these projections of 10 percent extra cost or 30 percent 
extra cost, and apply it against a $250 million public improvement 
project, you greatly diminish the amount of public improvement 
that the taxpayers are able to get for their money because you have 
artificially inflated the price of doing so. And, you price a lot of peo- 
ple out of the market. 

How do we improve the downtown area? How do we provide 
more services to the public if every time we try to do so, we are 
told that it costs too much, because of this law that gets in the way 
of progress. 

Chairman Ballenger. Let me, Ernest, if I may, invite you to 
come and sit with us up here. 

Mr. ISTOOK. Certainly, I thank you for the courtesy. 

Chairman Ballenger. And we will start with the second panel, 
if we can. The second panel of witnesses are the Oklahom.a Com- 
missioner of Labor, Brenda Reneau; Oklahoma Deputy Commis- 
sioner of Labor, Jeff Lester and Chief of Staff, Jim Marshall. If you 
all will come forth. 

And as I said, your complete testimony will go into the record, 
but if you could kind of hold it down to about five minutes, it would 
be greatly appreciated. 

Mr. Hoekstra. It is my understanding you are going to run 
through a little bit more of an extensive presentation with some 
overheads and those types of things, which will make it very dif- 
ficult to stay 

Chairman Ballenger. I will back off. 

Mr. Lester. Mr. Chairman, approximately 20 minutes for the 
slide presentation and we will hold our remarks to a minimum in 
order to give the committee a maximum opportunity to view the 
facts. 

Chairman Ballenger. That is fine, thank you. 

STATEMENT OF BRENDA RENEAU, COMMISSIONER, 
OKLAHOMA DEPARTMENT OF LABOR 

Ms. Reneau. Thank you, Mr. Chairman and distinguished Mem- 
bers of this committee for the privilege of being here today. 

My name is Brenda Reneau, I am Commissioner of Labor for the 
Oklahoma Department of Labor. Prior to October 10, 1995, one of 
my duties as labor commissioner was to enforce Oklahoma's little 
Davis-Bacon Act. On October 10, the Oklahoma Supreme Court de- 
clared the State law unconstitutional because the law constituted 
an unauthorized delegation of authority to the Federal Government 
with regards to utilizing the Federal wage determinations. 

In January of 1995, I was contacted by a number of citizens in 
Oklahoma, including the Oklahoma City Mayor's office and the 
Governor's office, regarding the newly published prevailing wage 
rates for Oklahoma as determined by the U.S. Department of 
Labor. A comparison of some of the new rates with the old rates 



20 

showed increases as much as 162 percent. This increase, which is 
passed on to the taxpayer in the form of higher costs on pubUc con- 
struction projects such as our schools, prisons and the current ren- 
ovation of downtown Oklahoma City, was of major concern. The 
citizens and taxpayers of Oklahoma demanded an answer from me, 
as Labor Commissioner, as to how these high rates were estab- 
lished. 

We initiated contact with the U.S. Department of Labor Regional 
Office in Dallas, Texas because that office had conducted the most 
recent wage survey which produced the higher rates. We requested 
copies of the original wage survey forms that were used to deter- 
mine the rates. Our requests were denied. We were told that the 
information was confidential and that making the identities of the 
parties public might discourage participation in future surveys. We 
were also told that the information reported on the survey forms 
was protected under the Privacy Act, and that it was a trade se- 
cret. Our only alternative was to investigate the matter at the 
State level. 

This investigation found that grossly inaccurate information had 
been reported to the Federal Government by what the U.S. Depart- 
ment of Labor calls interested third parties. We found inflated 
numbers of employees on projects, inflated wage rates reported for 
these same non-existent workers and we found projects that were 
never built. We also noticed what appears to be a pattern in the 
reporting method on many of the wage survey forms, as our visual 
presentation will show here today. 

Our initial findings were documented in a report presented to 
Congress and to the Labor and Justice Departments in July of 
1995. Although the original investigative report identifies only 
three cases of what appears to be fraudulent activities, to date we 
have become aware of nearly 100 additional cases of a similar na- 
ture. 

Of particular concern to the Members of Congress should be that 
before and during the course of our investigation, we repeatedly in- 
formed officials at the U.S. Department of Labor that they had 
been given false information during the wage survey process. U.S. 
labor officials told us that although they knew that inaccurate in- 
formation was submitted during surveys, they did not make a prac- 
tice of verifying the information received, nor did they have suffi- 
cient resources to do so. 

However, as a result of the Oklahoma report, a follow-up inves- 
tigation conducted by the U.S. Department of Labor confirms that 
not only was a great deal of inaccurate information reported, as we 
had alleged, but U.S. Department of Labor documents show certain 
unions in Oklahoma City as the parties who submitted that infor- 
mation. It appears that false information may have been submitted 
to the U.S. Department of Labor in an attempt, purposefully, to in- 
flate Davis-Bacon wage rates. It is also apparent that the U.S. De- 
partment of Labor has not acted in the best interest of the public 
by requiring accountability for their survey information. 

Mr. Chairman, we fear that this problem is not unique to Region 
Six of the U.S. Department of Labor in Dallas, Texas. A memo 
from the U.S. Department of Labor dated June, 1995, supports the 
belief that the Federal agency itself now shares this same concern. 



21 

We suspect that this scheme uncovered in Oklahoma may be only 
the tip of the iceberg and symptomatic of a much larger problem 
nationwide. The Federal wage survey process may be inviting in- 
terested parties to take advantage of taxpayers in every State since 
the wage surveys are conducted in a similar manner nationwide. 
In fact, officials in five other States have contacted the Oklahoma 
Department of Labor with questions in preparation for launching 
their own investigations. 

Mr. Chairman, it is my charge to protect Oklahoma's workers 
and to be sure they are treated in a fair and safe manner. It is my 
intention to promote and encourage high wages for all hard-work- 
ing and deserving Oklahomans. However, we must draw the line 
at cheating in order to accomplish this goal. I maintain that we 
should strive instead for a trained and skilled work force. This will 
lead to higher wages and better job opportunities for all workers. 

I appreciate the opportunity to be here today and I welcome your 
investigation. I will be happy to answer any questions you may 
have. 

Chairman Ballenger. Thank you, Commissioner Reneau. Com- 
missioner Lester, or Mr. Marshall? 

Mr. Lester. I would actually like to defer to the chief of staff for 
his statement first. 

Chairman Ballenger. Okay. 

[The prepared statement of Commissioner Reneau follows:] 

Statment of Brenda Reneau, Commissioner of Labor, State of Oklahoma 

Thank you Mr. Chairman and distinguished members of this committee for the 
privilege of being here today. 

My name is Brenda Reneau and I am Commissioner of Labor for the State of 
Oklahoma. Prior to October 10, 1995, one of my duties as labor commissioner was 
to enforce Oklahoma's Httle Davis-Bacon Act. On October 10, the Oklahoma Su- 
preme Court declared the State law unconstitutional because the law constituted an 
unauthorized delegation of authority to the Federal Government with regards to uti- 
lizing Federal wage determinations. 

In January of 1995, I was contacted by a number of citizens in Oklahoma, includ- 
ing the Oklahoma City mayor's office and the governor's office, regarding the newly 
published "prevailing" wage rates for Oklahoma as determined by the U.S. Depart- 
ment of Labor. A comparison of some of the new rates with the old rates shows in- 
creases as much as 162 percent. (Exhibit B) This increase — which is passed on to 
the taxpayer in the form of higher costs on public construction projects such as our 
schools, prisons, and the current renovation of downtown Oklahoma City — was their 
major concern. The citizens and taxpayers of Oklahoma demanded an answer from 
me, as Labor Commissioner, as to how these high rates were estabhshed. 

We initiated contact with the U.S. Department of Labor Regional Office in Dallas, 
Texas, because that office had conducted the most recent wage survey which pro- 
duced the higher rates. We requested copies of the original wage survey forms that 
were used to determine the rates. Our requests were denied. We were told that the 
information was confidential, and that making the identities of the parties public 
might discourage participation in future surveys. We were also told that the infor- 
mation reported on the survey forms was protected under the Privacy Act and that 
it was a "trade secret". Our only alternative was to investigate the matter ourselves 
at the State level. 

This investigation found that grossly inaccurate information had been reported to 
the Federal Government by what the U.S. Department of Labor calls "interested 
third parties". We found inflated numbers of employees on projects; inflated wage 
rates reported for these same non-existent workers; and, we found projects that 
were never built. We also noticed what appears to be a pattern in the reporting 
method on many of the wage survey forms, as our visual presentation will show 
here today. 

Our initial findings were documented in a report presented to Congress and to 
the Labor and Justice Departments in July of 1995. Although the original investiga- 



22 

tive report identifies only three cases of what appears to be fraudulent activities, 
to date we have become aware of nearly 100 additional cases of a similar nature. 

Of particular concern to the Members of Congress should be that before and dur- 
ing the course of our investigation, we repeatedly informed officials at the U.S. De- 
partment of Labor that they had been given false information during the survey 
process. U.S. labor officials told us that although they knew that inaccurate infor- 
mation was submitted during surveys, they did not make a practice of verifying the 
information received, nor did they have sufficient resources to do so. 

However, as a result of the Oklahoma report, a follow-up investigation conducted 
by the U.S. Department of Labor confirms that not only was a great deal of inac- 
curate information reported as we had alleged, but U.S. Department of Labor docu- 
ments show certain unions in Oklahoma City as the parties who submitted the in- 
formation. (Exhibit C) It appears that false information may have been submitted 
to the U.S. Department of Labor in an attempt, purposefully, to inflate Davis-Bacon 
wage rates. It is also apparent that the U.S. Department of Labor has not acted 
in the best interest of the public by requiring accountability for their survey infor- 
mation. 

Mr. Chairman, we fear that this problem is not unique to Region Six of the U.S. 
Department of Labor in Dallas, Texas. A memo from the U.S. Department of Labor, 
dated June 1995, supports the belief that the Federal agency itself now shares this 
same concern. (Exhibit D) 

We suspect that this scheme uncovered in Oklahoma may be only the tip of the 
iceberg and symptomatic of a much larger problem nationwide. The Federal wage 
survey process may be inviting interested parties to take advantage of taxpayers in 
every State since the wage surveys are conducted in a similar manner nationwide. 
In fact, officials in five other States have contacted the Oklahoma Department of 
Labor with questions in preparation for launching their own State investigations. 

Mr. Chairman, it is mv charge to protect Oklahoma's workers and to be sure they 
are treated in a fair and safe manner. It is my intention to promote and encourage 
high wages for all hardworking and deserving Oklahomans. However, we must draw 
the line at cheating in order to accomplish this goal. I maintain that we should 
strive, instead, for a trained and skilled workforce. This will lead to higher wages 
and better job opportunities for all workers. 

I appreciate the opportunity to be here today and I welcome your investigation. 
I will be happy to answer any questions you may have at this time. 



23 



^ 



r^ 



IN THE SUPREME COURT OF THE STATE OF OKLAHOMA 



THE CITY OF OKLAHOMA CITY, 
B municipal corporation; 
OKLAHOMA CITY AIRPORT 
TRUST: OKLAHOMA CITY 
PUBLIC PROPERTY 
AUTHORITY; OKLAHOMA CITY 
WATER UTILITIES TRUST; and 
CENTRAL OKLAHOMA 
TRANSPORTATION AND 
PARKING AUTHORITY, 
public trusts. 



Appellees, 



THE STATE OF OKLAHOMA ex 
rel. OKLAHOMA DEPARTMENT 
OF LABOR, 




TOR OFFICIAL FU3L1CAT!0.N 



NO. 85.888 



APPEAL FROM THE DISTRICT COURT OF 
OKLAHOMA COUNTY, OKLAHOMA 
Honorable Jamas B. Blevlns, Judge 



City and Its public trusts sought declaratory Judgment that Prevailing 
Wage Act violated provisions of Oklahoma Constitution. Trial court 
granted City's motion for summary Judgment. 



William O. West 

Municipal Counselor 

Olane Lewis 

Deputy Municipal Counselor 

and 

Michelle G. Porta 

Assistant Municipal Counselor 

Oklahoma City, Oklahoma 



For Appellees 

City of Oklahoma City 
Oklahoma City Airport Trust 
Oklahoma City Public 

Property Authority 
Oklahoma City Water 

Utilities Trust 
Central Oklahoma 

Transportation and 

Parking Authority 




24 



W. A. Drew Edmondson 
Attorney General of Oklahoma 
Scott D. Boughton 
Assistant Attorney General 

Litigation Division 
Oklahoma City. Oklahoma 



For Appellant 

The State of Oklahoma 

ex rel. Oklahoma 
Department of Labor 



McCaffrey & Tawwater 
By: Loren Gibson 
Oklahoma City. Oklahoma 



For Amicus Curiae 

Oklahoma State Building 
and Construction Trades 
Council. Steve Skinner 
and Jimmy Fish 



HODGES. J. 

This dispute concerns the constitutionality of Oklahoma's Minimum 
Wages on Public Works Act. Okla. Stat. tit. 40. §§ 196.1 - 196.14 
<1991). also known as the Prevailing Wage Act or the Little Davis-Bacon 



Act. (This Court holds that the Act violates article IV. section 1. and 
article V. section 1 of the Oklahoma Constitution. It delegates the power 
to determine prevailing wages to a department of the federal government,, 
without setting standards for the exercise of that determination, pther 



assertions of unconstitutionality need not be addressed. 

The City of Oklahoma City (City) became concerned about dramatic 
increases in the prevailing wage between October 31, 1994. and 
December 30th of that year. The Oklahoma City Airport Trust filed a 
"Request for a Hearing. Protest and Objection to the Validity of the 
Prevailing Wage Rate Act. and Request to Void or Amend the Prevailing 
Wage Rates" with State Labor Commissioner. Brenda Reneau. asking her 
to review the wage determinations. In response. Reneau explained that, 
pursuant to the Act. the determinations were made by the United States 



MV lilt* 



25 



Department of Labor and that she had no statutory authority to 
investigate errors on inaccuracies in the federal determinations. 

The City and four of Its public trusts then filed an action in the 
district court seel<lng declaratory Judgment, a permanent injunction, and 
a petition for review of the Labor Commissioner's decision that she had 
no authority to review the federal agency's wage determinations. The 
City moved for summary Judgment raising several theories as to how the 
Act was void because it violated the Oklahoma Constitution. The trial 
court granted the motion without articulating the bases upon which the 
Act was constitutionally infirm. 

The appeal, brought by the State of Oklahoma to this Court, is 
governed by the accelerated procedures found in Rule 1 .203 of the Rules 
of Appellate Procedure in Civil Cases, Okla. Stat. tit. 12, ch. 15, app. 2 
(Supp. 1994). The parties were allowed to brief the issues on appeal. 
in addition, the Oklahoma State Building and Construction Trades Council 
was allowed to file a brief as amicus curiae. 

The challenged Act was promulgated in 1965. It mirrors provisions 

of the federal Davis-Bacon Act, 40 U.S.C. S§ 276a - 276a-5 (1994), 

which requires the payment of prevailing wages on federally financed 

construction projects. The Oklahoma Act declares the policy underlying 

hs passage: 

It is hereby declared to be the policy of the State of 
Oklahoma that a wage of no less than the prevailing hourly 
rate of wages for work of a similar character In the locality in 
which the work Is performed shall be paid to all workmen 
employed by or on behalf of any public body engaged in public 
works exclusive of maintenance work. 



26 



Okla. Stat. tit. 40. S 196.1. Thus, the Act prohibits state and local 
governments from driving down the amount of workers' wages through 
competitive bidding. 

The Act applies to the erection, construction, or Improvement of any 
Structure or building constructed for public use costing over 
$600.000. 00. See id. at §§ 196.2(7) & 196.2a. Since the Acts 
inception, its provisions have not applied to the Department of 
Transportation or the Turnpike Authority In the construction of roads. Id. 
at S 196.12. 

The Act originally gave Oklahoma's Labor Commissioner complete 
authority to compile wage data and to determine prevailing wages. These 
determinations were made Independently from any determination made 
by the United States Department of Labor. The Act required Oklahoma's 
Labor Commissioner to file wage determinations on July 1st of each year. 
Objections to those determinations were heard by the Labor 
Commissioner. Appeals from the commissioner's decisions were filed in 
district court. 

In 1981. the Oklahoma Legislature amended the Act to provide that 
the prevailing wage, already determined by the United States Department 
of Labor for federally funded projects pursuant to the Davis-Bacon Act, 
be adopted by Oklahoma's Labor Commissioner. Id. at f 196.6. The 
Labor Commissioner can now determine a prevailing wage only when the 
United States Department of Labor has not determined the prevailing 
wage In a particular category of work or In a particular geographic area. 
No procedure was provided to protest or challenge a federal wage 
determination before Oklahoma's Labor Commissioner or In Oklahoma 



27 



courts. A 198 5 amendment to the Act provides for review only of wage 
rates set by the Labor Commissioner for a locality for which a federal 
determination has not been made. 

The City charges that the Act impermissibly delegates the authority 
to make wage determinations to a federal agency while leaving 
Oklahoma's Labor Commissioner with no authority to check the accuracy 
of these determinations. The State of Oklahoma argues that the 
delegation is permissible because the United States Department of Labor 
is merely implementing the legislative policy articulated in the Act when 
it makes wage determinations. 

Section 1 of article IV of the Oklahoma Constitution provides: 

The powers of the government of the State of Oklahoma 
shall be divided into three separate departments: The 
Legislative, Executive, and Judicial: and except as provided in 
this Constitution, the Legislative, Executive, and Judicial 
departments of government shall be separate and distinct, and 
neither shall exercise the powers properly belonging to either 
of the others. 

Section 1 of article V requires that "(tlhe Legislative authority of the State 

shall be vested in a Legislature consisting of a Senate and i-iouse of 

Representatives . . . . " From these constitutional provisions comes the 

prohibition against the delegation of iegislative power. 

The prohibition "rests on the premise that the legislature must not 

abdicate its responsibility to resolve fundamental policy making by (1) 

delegating that function to others or {21 by fatllno to provide adequate 

directions for the implementation of Its declared policy." Democratic 

Party v. Eatep. 6B2 P.2d 271. 277 n.23 (1982). The facts of this case 

concern the second aspect of the prohibition. 



28 



The 1965 version of the Act prescribed the manner in which 
Oklahoma's Labor Commissioner determined prevailing wages. It gave 
the Labor Commissioner the responsibility to "Investigate and determine 
the prevailing hourly rate of wages In the localities." 1965 Okla. Sess. 
Laws B80. It specifically instructed the Commissioner to "consider the 
applicable wage rates established by collective bargaining agreements, if 
any, and such rates as are paid generally within the locality." Id- It 
instructed the Commissioner how to conduct hearings on objections to 
wage determinations. It also gave the Commissioner subpoena power 
and the authority to administer oaths. Id- at 581. 

Since the 1981 amendments, however, the Act has provided no 
definite standards or articulated safeguards for the United States 
Department of Labor to follow In implementing the legislative policy 
declared in the Act. The current Act leaves an Important determination 
to the unrestricted and standardless discretion of unelected bureaucrats. 
Worse. It delegates to an administrative arm of the federal government- 
As a result, the federal agency which actually determines the prevailing 
wage is less answerable to the will of the people of Oklahoma than is the 
Labor Commissioner who holds elected office. It leaves public entities 
with no Oklahoma forum In which to challenge the accuracy of the United 
States Department of Labor's wage determinations. 

When faced with a challenge to Arkansas' prevailing wage law. the 

Arkansas Supreme Court declared that its Act unconstitutionally 

delegated legislative authority. Sfifi Crowlv v. Thornbroug h. 294 S-W.2d 

62 (Ark. 1956). That court noted: 

The Act fails to establish a standard or formula by which 
a wage scale may be formulated: but rather delegates to the 



29 



Secretary of Labor of the United States the right to fix the 
minimum wage scale to be paid in a particular area of this 
State. The State retains no control over the Secretary of 
Labor of the United States. Therefore, the Act violates 
[provisions ofl our State Constitution. 

Id. at 66. After the decision. Arkansas revised its prevailing wage law to 

provide that the Arkansas Department of Labor would investigate and 

determine prevailing wages. Ark. Code Ann. S 22-9-313. Specific 

guidelines are provided to that department. ££fi Id- 

Of the thirty-one states that currently have a prevailing wage law. 
only Oklahoma's version delegates authority to the United States 
Department of Labor as the sole method of determining the prevailing 
wage. Connecticut gives Its Labor Commissioner the option of holding a 
hearing to determine the prevailing wage or adopting the federal 
determination. Conn. Gen. Stat. Ann. § 31 -53(d). In Oregon, the 
Commissioner of the Bureau of Labor and Industry may use the federal 
wage only if local wage data are not available in a particular locality. Or. 
Rev. Stat. § 279.350. These limited delegations of authority to the 
federal government have not been challenged in either state. 

in the other prevailing wage law states, the wage determination is 
assigned to a state official, an appointed committee, or the authority 
awarding the contract. Therefore, challenges to the delegation of wage 
determinations in those states have involved delegation to entities other 
than the federal government. Sfifl Annotation. Validity of Statute- 
Ordinance, or Charter Provision Reouirino that Wor k men on Public Works 
be Paid the Prevailing or Current Rate of Wage.. 18 A.L.R.3d 944, 965 
(1968). 



36-049 - 96 



30 



Oklahoma's Act suffers from the same constitutional Infirmity as did 
the Arkansas Act. It Is not enough that the Legislature declared its policy 
in the Act. because no standard was established to Implement the wage 
determinations. As this Court has noted: "No matter how laudable a 
piece of legislation may be in the minds of its sponsors, objective 
guidelines or standards should appear expressly in the Act." £al£a. 652 
P.2d at 277 n. 25. Otherwise, legislative authority is abdicated. 

The current version of Oklahoma's Act fails to articulate the 
necessary guidelines or standards for determining prevailing wages. 
Thus. It impermissibly delegates legislative power. The trial court did not 
err In granting the City's motion for summary Judgment. 

The State of Oklahoma and amicus urge that If portions of the Act 

are held unconstitutional, the remaining portions of the Act are severable 

and should stand. Section 11a(2) of title 75 provides: 

For acts enacted prior to July 1. 1989. whether or not 
such acts were enacted with an express provision for 
severability. It is the intent of the Oklahoma Legislature that 
the act or any portion of the act or application of the act shall 
be severable unless: 

a. the construction of the provisions or application 
of the act would be inconsistent with the 
manifest intent of the Legislature: 

b. the court finds the valid provisions of the act are 
so essentially and inseparably connected with 
and so dependent upon the void provisions that 
the court cannot presume the Legislature would 
have enacted the remaining valid provisions 
without the void one: or 

c. the court finds the remaining valid provisions 
standing alone, are incomplete and are incapable 
of being executed in accordance with the 
legislative Intent. 



31 



The offending provision of the Prevailing Wage Act is section 196.6 
which delegates the determination of prevailing wages to the United 
States Department of Labor. In the absence of this section, the valid 
sections of the Act, standing alone, are "incomplete and Incapable of 
being exercised in accordance with the legislative intent." Jd- at § 
11a(2)(c). This is because the federal wage can no longer be used and 
no Oklahoma entity is authorized to malce its own determination where 
the United States Department of Labor has already done so. That leaves 
a legislative intent that the prevailing wage be paid but no one authorized 
to mal<e the wage determination. Therefore, the entire Act must fail. It 
will be for the Legislature to decide whether the Act will be reenacted in 
a form that delegates the authority to an agency of this state with proper 
guidelines to implement the prevailing wage determination. 
AFFIRMED. 

Concur: HODGES. LAVENDER, HARGRAVE. OPALA. WATT, JJ. 
Concur in Result: WILSON, C.J., KAUGER, V.C.J., SUMMERS. J. 
Concur in Part. Dissent In Part: SIMMS, J. 



32 



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[EXHIBIT 



33 



CHANGES MADE TO 93-OK-008 - OKLAHOMA CITY TREATMENT PLANT 

PROJECT 001-OKL 

•> ata submitted by PEG local for - per call to firm 

11 data correct with the exception of they did not have 

.nerry pickers, laydovn machine or concrete machine 
2. Data submitted by plumbers, per call to firm thev did n ot >K 

employ plumbers (VERIFYING WITH UNION AT THIS TIME) 

PROJECT 00 3 -LOG 

1, Data submitted by piimhpr local, per call to firm th ey were ^ 
only a consultant (VERIFYING WITH UNICN AT THIS TIME) 

PROJECT 005-OKL 

This project has been omitted as it should be in building. The 

structure being built was not on treatment plant site 

PROJECT 010-OKL 

1. Used payroll period 10/30/92 instead of 11/6/92 as more 
accurate per call to firm. Also fringe benefits broken out 

2. Data from Data submitted b y Mill- ^ 
Wrights Loca.T »<nf» r'''""' ^ers local, per call to f irm they do not 

I employ millwrights or plumbers (V ERIFYING WITH UNION At THIS 
j TIME) 

! PROJECT 012 -OKL 

' 1. Data submitted by plumber union - per call to fi rm they did :f<: 
not employ plumbers (VERIFYING WITH UNION AT THIS TIME) 

PROJECTS 015-OKL & 017-CAN 

■• Data submitted by plumber local, per call to firm they did >f 
ot work on these projects (VERIFYING WITH UNION AT THIS TIME) 

J 2CT 018-OKL 

1. ^ata submitted by PEO local, per call to firm they did not %. 
work on project (VERIFYING WITH UNION AT THIS TIME) 

PROJECT 019-OKL 

This project has been omitted as it should be in water & sewer 



CHANGES MADE TO 93-OK-002 - OKLAHOMA CITY - HEAVY 

PROJECT 006-OK 

Project omitted as building construction 

PROJECT 030-OK 

Data for not used as per call to contractor, they 

did not work on this project (VERIFYING WITH UNION AT THIS TIME) 

PROJECT 031-OK 

Data for * not used as per call to contractor, they 

did not work on this project (VERIFYING WITH UNION AT THIS TIME) 

PROJECT 048-P 

Per clarification this is a building project 

•:CT 052-OK 
l" project has been omitted as per clarification call it is 
t ling 

PROJECT 054 -OK 

Data for not used as per call to contractor, they 

did not work on this project (VERIFYING WITH_UNION AT THIS TIME) 







U.S. Department of Labor 



34 



Employment Standards Administration 
Wage and Hour Division 
Washington. DC. 20210 



June 2, 1995 




Memorandum No. 95-22 



MEMORANDUM FOR WAGE AND HOUR REGIONAL ADMINISTRATORS 



MARIA ECHK' 
Administrator 




Verification of Data in Davis-Bacon Wage Surveys 



Incorrect information submitted by third parties has been found 
in several surveys. Therefore, strategies to deal with the 
verification of data submitted by other than some one in actual 
possession of project payrolls are being considered. Suggestions 
about verification procedures from the Regional Office survey 
staff will be welcome and we are also consulting with the various 
interest groups in this regard. In the meantime, however, the 
importance of at least verifying by telephone some sample of any 
data presented without the signature of an official of the 
employing firm is of the utmost importance. 



Working for America 's Workforce 




35 

STATEMENT OF JIM MARSHALL, CHIEF OF STAFF, OKLAHOMA 
DEPARTMENT OF LABOR 

Mr. Marshall. Mr. Chairman, I am going to keep my statement 
very short. 

We are going to present to you in our sUde presentation facts, 
documents that are of a public nature in some cases. And what we 
would like to do with regard to the slide presentation is to walk 
you through what we have done here in Oklahoma to expose what 
we believe to be fraud against the taxpayers in Oklahoma and tax- 
payers in America. 

The Reneau administration stands firmly committed to protect- 
ing working men and women from the abuses of fraud perpetrated 
upon the people of Oklahoma and United States by self-serving 
special interests. 

And with that, I would defer to the Deputy Commissioner. 

Chairman Ballenger. Commissioner Lester. 

[The prepared statement of Mr. Marshall follows:] 

Statement of Jim Marshall, Chief of Staff, State of Oklahoma Department 

OF Labor 

Chairman Ballenger, Chairman Hoekstra, Members of the Committee, members 
of the Oklahoma delegation and other guests. My name is Jim Marshall and I am 
Chief of Staff of the Oklahoma Department of Labor. I conducted the field investiga- 
tion, along with Deputy Commissioner Jeff Lester, of the Federal Davis-Bacon wage 
survey process at the request of Commissioner Reneau. 

Commissioner Reneau, Jeff Lester and I will present documented examples of 
bogus survey data submitted to the Federal Government during the Federal Davis- 
Bacon wage survey process — bogus information submitted by individuEils who had 
no direct knowledge of the projects for which they submitted data. 

Commissioner Reneau, Jeff Lester and I will present U.S. Department of Labor 
documents which confirm phantom projects and ghost workers were the basis of ac- 
tual wage rates issued by the Federal Government. We will show you U.S. Depart- 
ment of Labor findings which confirm that bogus data was submitted by officials 
from within the hierarchy of organized labor. 

We will show you examples from a growing pool of evidence — evidence that illus- 
trates the depth of this serious problem and showcases the U.S. Department of La- 
bor's apparent mismanagement of the wage survey process. 

The Reneau administration stands firmly committed to protecting working men 
and women from the abuses of fraud perpetrated by self-serving special interest. 

STATEMENT OF JEFF LESTER, DEPUTY COMMISSIONER, 
OKLAHOMA DEPARTMENT OF LABOR 

Mr. Lester. Thank you. 

Chairmen Ballenger and Hoekstra, Members of the committee, 
members of the Oklahoma delegation and other guests, thank you 
for taking time today to learn about a great injustice forced upon 
the hard-working citizens and taxpayers of Oklahoma. I am Jeff 
Lester, Deputy Commissioner of Labor for the State of Oklahoma. 
I was lead investigator in the Oklahoma Department of Labor in- 
vestigation into the Federal Davis-Bacon wage survey process. 

Today, I will show you documented examples of bogus survey 
data submitted to the Federal Government during the Federal 
Davis-Bacon wage survey process — bogus information submitted by 
individuals who apparently had no direct knowledge of the projects 
for which they submitted data. 

I will show you U.S. Department of Labor documents which con- 
firm that phantom projects and ghost workers were the basis of ac- 



36 

tual wage rates issued by the Federal Government. I will show you 
U.S. Department of Labor findings which confirm that bogus data 
was submitted by officials from within the hierarchy of organized 
labor. 

I will show you examples from a growing pool of evidence — evi- 
dence that illustrates the depth of this serious problem and show- 
cases the U.S. Department of Labor's apparent mismanagement of 
the survey process. 

Sadly, I will show you that the Federal Government knew about 
the poor quality of data prior to the time that the fraudulently in- 
flated wage rates were forced upon the taxpayers of Oklahoma. 
And finally, I will show you the actual financial impact on Oklaho- 
ma's taxpayers — a documented impact of up to 30 percent of the 
total cost of construction on a multi-million dollar project. 

In the interest of time, I encourage you to ask questions at the 
conclusion of the presentation. Experience tells me I will answer 
most of your questions as we move through the display. 

Mr. Marshall. Mr. Chairman, since the microphones are located 
at this table, if we could have a few minutes to allow the media 
to transport the microphones. 

Chairman Ballenger. Yes, go ahead. 

[Pause.] 

Mr. Lester. Congressman, the first slide I am going to show you 
is actually a slide that we borrowed from your committee. This is 
a representation of the 12-step process used by the U.S. Depart- 
ment of Labor to determine Federal wage rates. To begin, I want 
to walk you through the first six steps carefully. 

The regional office for us is in Dallas, Texas. They conduct the 
survey. They plan an annual survey activity and the regional ad- 
ministrator told us with these words, "The squeaky wheel gets the 
grease." So that means that not all regions get surveyed in a timely 
fashion. In fact, some Federal Government documents indicate that 
the average wage survey occurs every seven years. 

The regional office obtains an active project file. This is construc- 
tion that has occurred or may occur in an area. They use that as 
a basis for mailing lists. From that, they determine specific projects 
to be surveyed. They announce an annual survey by direct mail 
and through the media, then they conduct that survey using the 
WD-10 wage determination form, which is the survey instrument. 

That survey instrument, as you can see, is one side of one 8V2 
by 11 page, something similar to the IRS 1040-EZ form. Basic 
questions such as the name of the contractor who performed the 
work, a description and address for the project. Among other 
things, a list of the types of construction workers used, whether or 
not they were paid according to a union contract. And then at the 
bottom of the form, the signature of the individual who submitted 
the data. This has been a particular bone of contention between us 
and Secretary Reich, who has made public a number of these docu- 
ments in his own verification process. However, he maintains to us 
that the statistical information on the forms is apparently a public 
record, but the signature of those who submitted the information 
is protected by the Federal Trade Secret Act. We obviously do not 
buy that argument. 



37 

I will turn now to the 12-step process. Once the survey instru- 
ment has been distributed and collected, they conduct a follow-up, 
which in their words to us means if, based on steps 8, 9 and 10, 
if they feel that there are open spots on the survey, blanks that 
were not filled in, if they cannot read the handwriting, if they can- 
not interpret the information, they call the individual who submit- 
ted it. Of course, that may or may not, according to our findings, 
be someone who knew anything about the actual project. Then 
through these steps they determine the adequacy of the data. Can 
they read it, can they understand it well enough to type it into 
their computer data base. 

If so, based on those wage summary sheets, they compute the 
Federal prevailing wage rates and transmit them to the public for 
use to pay for public construction projects. 

Mr. Marshall. Mr. Chairman, what is absent is a block 13. 
Block 13 should be a verification process of the data. 

Mr. Lester. Nowhere in this 12-step process, as Mr. Marshall 
pointed out — and in fact, in our direct communications with the re- 
gional office in Dallas, they told us directly and specifically there 
has never, historically, been any practice or attempt to verify the 
accuracy or the authenticity of any of the information submitted. 

Now I would like to move into some actual evidence. First, I 
want to point to the fax indicia at the very top of this page. This 
was faxed on May 9 of 1995 from a 202 area code, which indicates 
that it came from the U.S. Department of Labor Wage and Hour 
Division in Washington, DC. It was faxed to a local contractor, the 
Concho Company. And in a telephone conversation, they asked the 
Concho Company to confirm or to verify the accuracy of this infor- 
mation. It indicates that the Concho Company worked on a high 
lift pump station at Oklahoma City's Lake Hefner Water Treat- 
ment Plant. It indicates that 16 specific categories of workers 
worked on the project, were paid according to a union collective 
bargaining agreement, and you can see listed out on the right-hand 
side, the wage rates and the fringe benefits. 

This document was date-stamped in at the U.S. Department of 
Labor March 18 of 1993. That is a critical fact for you to remember, 
and we will come back to this slide. 

The Concho Company, citing two of these forms that they were 
faxed. Lake Hefner Treatment Plant high lift and Lake Treatment 
Plant chemical building — they told us in late May, "The above-ref- 
erenced attached jobs were not projects awarded to the Concho 
Company." In other words, they did not work on those projects. 

We wanted to find out more about the nature of their dialogue 
with the U.S. Department of Labor. The bottom line is a Concho 
Company employee told us the U.S. Department of Labor refused 
to tell that company who signed the information and falsely attrib- 
uted it to their company. 

We wanted to make sure that we were not misunderstanding 
anything about the nature of the facts, so we went to the City of 
Oklahoma City and asked whether the Concho Company had done 
any work at Lake Hefner at the treatment plant. And the city indi- 
cated to us that sure, Concho is a contractor who does a lot of work 
for the city, and although the project in and around that time was 
not at the high lift, it was actually at some site grading at a loca- 



38 

tion adjacent to the Lake Hefner water treatment plant, as it indi- 
cates in the upper left-hand portion of this exhibit. The city engi- 
neer told us this was not to be confused with the high lift pump 
station. 

We asked the city who actually constructed the high lift pump 
station. You can see in this letter from the city's engineering man- 
ager with regard to that facility that Flintco, another local contrac- 
tor, constructed it. Further, the city says their records indicate that 
Concho was not used, even as a subcontractor on the project. They 
also indicated that they do not know of any other high lift pump 
stations that were constructed in and around that time. 

We asked the city to tell us more about the high lift pump sta- 
tion, the project that was apparently falsely reported on that form. 
So they gave us a copy of the letter that they sent to Flintco, the 
real contractor, to initiate the work. Note that the letter is dated 
May 14 of 1993. Attached was a copy of the contract. The contract, 
signed by the city on this $27 million treatment plant, or rather 
high lift pump station, was signed April 6 of 1993; the contract was 
signed to initiate that project. 

The apparently false wage form indicates that Concho did the 
work in July of 1992. Here's the peak week of activity for these em- 
ployees. And you will note that again, it was date-stamped in at 
the U.S. Department of Labor, March 18 of 1993, nearly a month 
before the contract was even signed. 

We knew at this point that there was something to this alleged 
problem. I indicated to you that Concho had received another fax. 
This one is regarding a chemical building at the Lake Hefner water 
treatment plant. You can see again, it is from the same address in 
Washington, DC, USDOL Wage and Hour. Chemical building — in- 
terestingly, the same exact categories of workers, paid exactly the 
same wage rates, and as the city indicated to us in this correspond- 
ence in June, no chemical building was constructed at the Lake 
Hefner water treatment plant. And in fact, Congressmen, you can 
drive to the Lake Hefner water treatment plant today where this 
alleged chemical building might have been built, you will find snow 
and dirt and grass and barbed wire. 

Mr. Marshall. Mr. Chairman, also if you will note in these par- 
ticular slides the handwriting, the similarities, and the fact that 
the name of the contractor was typed out rather than written out 
in longhand. 

Mr. Lester. Yet all the other information of course was written 
in by hand. 

Now I want to show you an example of another bogus project. 
This one actually verifiably resulted in Federal wage rates. This is 
a U.S. Department of Labor general wage decision. You can see the 
number up here, General Decision 950033. It is for heavy construc- 
tion for the six counties in the Oklahoma City metropolitan area. 
This is for heavy construction that does not include water and 
sewer lines or treatment plant projects. 

On page 2 of that wage decision, you see a category for plumbers 
and pipefitters, the wage rate being $17 per hour, the fringe bene- 
fits being $4.05 per hour for a total compensation of $21.05. 

Through the Freedom of Information Act, we received from the 
U.S. Department of Labor their Federal document. This is a sum- 



39 

mary sheet, the top half of one of the summary sheets that Usts 
all of the wages and how they were determined. You can see the 
two categories here of plumber and pipefitter, the two that were 
listed on that form; $17 and $4.05, which is consistent. And out to 
the right we find out how did the U.S. Department of Labor arrive 
at that specific wage rate. As we have been told by the regional ad- 
ministrator, by the folks at USDOL, all it takes from the accumula- 
tion of all the forms submitted in a survey is a total accumulated 
amount of six employees listed under any specific job classification 
in order to have the minimum threshold to establish a prevailing 
wage rate. This means, based on the two methods for establishing 
it, either a weighted average or by majority, that a simple majority 
of four workers making the same wage rate is the minimum 
threshold required to establish Federal prevailing wage rates for an 
entire area. 

In this instance, we see that like most of the work categories 
here, the rates were not an average, but were arrived at through 
the majority rule, which is the first rule of thumb in the Federal 
process. In the case of the plumbers, they say that of the 14 total 
plumbers identified on all the forms, 12 of them were making ex- 
actly the same wage and fringe benefit package. In the case of 
pipefitters, 10 of 12 making exactly the same wage and fringe bene- 
fit package, that being the basis. 

We looked further to find out where those 10 pipefitters and 12 
plumbers were located. And in fact, we found the majority, all 10 
pipefitters and 10 of the 12 majority plumbers on one project, an 
underground storage tank in Mustang, Oklahoma. 

Through numerous and exhaustive investigation, we are certain 
there is no $2 million underground storage tank in Mustang, Okla- 
homa. Therefore, these specific employees identified on this project, 
ghost employees on a phantom project, prevailed. This indicates to 
us that there is no accountability and no integrity in the U.S. De- 
partment of Labor wage survey process. 

Further, the U.S. Department of Labor, in one of its own docu- 
ments in attempting to verify our findings, verified that on that 
project, data was from the plumbers' union and per their call to the 
contractor, the contractor said they did not do the work. Folks, that 
is pretty much in black and white. This is the U.S. Department of 
Labor's own words, their own finding from their own document. As 
a result of this and other evidence, they withdrew that entire wage 
decision at the end of May. 

Mr. Marshall. Mr. Chairman, had the Oklahoma Department of 
Labor not stepped in with its investigation, those wage rates that 
had been established would be in existence today and the citizens 
of Oklahoma would be paying that inflated amount based upon the 
submission of false information. 

Mr. Lester. Let me show you now some more documents from 
the U.S. Department of Labor, a few wage summary sheets with 
the U.S. Department of Labor's own confirmed findings after they 
began their own investigation. 

Here, we have a Lake Hefner golf course, $28 million project. 
USDOL confirmed per call to the contractor, the contractor did not 
work on this project. 



40 

Water wells at Tinker Air Force Base, a Federal military facility. 
The information came directly from Operating Engineers local 
union, per call to the contractor, the contractor did not work on 
this project. 

Sanitary sewer project in Oklahoma City, data submitted as 
union scale, listed contractor is not a union contractor. Data omit- 
ted after review. 

Wastewater treatment plant, Langston, Oklahoma. Data submit- 
ted by plumbers' and pipefitters' union. Per call to the contractor, 
the contractor was only a consultant and did not use plumbers. 

Lake Overholser treatment plant. Data submitted by plumbers' 
and pipefitters' local union. Per call to the contractor, they did not 
employ plumbers. 

Wastewater treatment plant El Reno. Data submitted by plumb- 
ers. Per call to the contractor — did not work on this project. 

This goes on and on and on. And if you were to look at all of the 
U.S. Department of Labor's verifications and not just take their 
word for it, I think you would probably find many, many, many 
more examples of this same confirmed finding from the Federal 
Government. 

We of course became interested in who might benefit in this. Ob- 
viously the innocent workers working to make a living to put food 
on their tables, they would obviously be an unknowing beneficiary 
of this. We also found evidence that there might be others who 
would benefit. 

We looked at several collective bargaining agreements. In this 
particular instance, which comes from the plumbers' and pipe- 
fitters' local union, there is a specific portion of their contract, 
money to be withheld from employees' gross wages, a working as- 
sessment checkoff, which is a percentage of the gross wages — not 
a dollar amount, not so many cents per hour to go to a benefit, but 
a percentage. The obvious conclusion is that if you double the wage 
rate, you double the amount collected, based on a percentage. I 
want it to be very clear today that because I am using this particu- 
lar contract as an example, I am not accusing this specific union 
hall of any wrongdoing, I am simply using this as an illustration 
of what we have found as other possible beneficiaries, beyond the 
obvious. 

Once we concluded our initial investigation into the heavy con- 
struction survey, we became concerned that the building construc- 
tion survey, a much larger survey instrument, might be even more 
ripe for this type abuse because it covers a much wider category 
of employee classifications and amounts to a much more significant 
appropriation of tax dollars. 

With the cooperation of a couple of local contractors, we received 
copies of many more faxes that were sent from the U.S. Depart- 
ment of Labor in Washington to local contractors in an apparent 
attempt to confirm the accuracy of that wage data. This form 
shows Connelly Paving Company worked on the Internal Revenue 
Service office building in Oklahoma City, ostensibly to pave a park- 
ing lot. You will notice on this form it indicates that among other 
things, there were seven asphalt laydown machine operators, seven 
roller finishers, seven backend men who would work in conjunction 
with that equipment. The wage rate here for asphalt laydown ma- 



41 

chine is $14.65 per hour, that is what is Hsted. Mr. Connelly indi- 
cated to us that that seemed awfully high. You will note that it is 
paid according to a union contract, according to whoever submitted 
this form, and it was also submitted in December of 1992. 

Mr. Marshall. Mr. Chairman, if you would note again, number 
7; and the importance is that number would establish that classi- 
fication with regards to an asphalt laydown machine operator, a 
roller fmisher, as well as the backend men. So if only this form it- 
self was submitted and received by the U.S. Department of Labor, 
those three classifications would be enough to establish a prevail- 
ing wage rate. 

Mr. Lester. Because in a prevailing wage project, the workers 
would be paid the higher of two rates, they would either be paid 
the higher of the union rate, as indicated here, or the federally 
mandated rate, whichever is higher. We wanted to know what was 
the prevailing wage rate required by the government at that time. 
We found out that in the case of the asphalt laydown machine op- 
erator, the rate was $8 per hour with no fringe benefits, versus 
$14.65 per hour plus $3.73 per hour in fringe benefits — $8. 

So we assumed that the union contract must call for $14.65 per 
hour. We received a copy of that collective bargaining agreement. 
We went to the page with the wage rates, found the asphalt 
laydown machine operator — lo and behold, $10.50 per hour. Then 
we became concerned about the fringe benefits listed. You will note 
that of that $3.73 that is listed, $2.30 was earmarked for health 
and welfare, $1.25 per hour to the pension fund. Again, we looked 
at the union contract and we found $1.80 per hour for health and 
welfare, 25 cents per hour for pension. If the union actually col- 
lected $1.25 per hour for pension, we would like to know what they 
did with that extra dollar. 

Now I want to talk to you about another pattern that became 
very obvious — the handwriting. And I will preface this by saying I 
am not a handwriting expert. The Federal Government has access 
to those through the Justice Department and other areas and I 
think you may be encouraged to look into this. Lake Hefner water 
treatment plant high lift, Lake Hefner water treatment plant 
chemical building — again, we know those are not accurate. Internal 
Revenue Service office building — and by the way, they indicated 
seven asphalt laydown machine operators, the parking lot had 
spaces for 30 automobiles and it is a concrete parking lot. There 
is no asphalt. We continued to compare the handwriting — Okla- 
homa County, Oklahoma County. Here is one for a Circuit City 
Superstore at Penn Square. Penn Square is a mall located on Penn- 
sylvania Avenue in Oklahoma City. You will note that it again is 
a union contract that claims Connelly Paving used, among other 
things, seven asphalt laydown machines to pave the parking lot. 
There is no Circuit City store at Penn Square Mall. There is a Cir- 
cuit City store two miles away on Northwest Expressway at the 
corner of Northwest Expressway and Portland, for those of you who 
are local. However, if the person who signed this form had actual 
knowledge of the job, actual knowledge to the point that they could 
accurately report who worked, when they worked and what they 
were paid, it would only seem reasonable that they would know 
whether or not the thing was built at Penn Square Mall or in fact 



42 

was built two miles away on Northwest Expressway. And by the 
way, you may notice that this one came through the USDOL fax 
machine with a signature. Assuming that this is an authentic sig- 
nature, the individual whose name appears here is an official with 
the Operating Engineers Union, Local 627, in Oklahoma City. 

All in all, Mr. Connelly provided us with nearly 40 forms that 
had bad information, 40 forms falsely attributed to him. He is the 
victim in this. Altogether on those forms, they indicated he worked 
on 21 projects just during the month of June, 1992. And during the 
course of that time used a cumulative 658 union employees. In re- 
ality, Mr. Connelly used seven union employees. And to confirm 
that to us, he provided us with a copy of his employer monthly re- 
mittance report which he turned in for the month of June, 1992, 
turned in to his union, the Operating Engineers, Local 627. You 
will note here that we have blocked out the name and social secu- 
rity numbers. But of those seven employees, none of them worked 
more than a 50 or 60 hour week. Hard to imagine that they could 
have spread themselves out and done the work of nearly 700 people 
on 21 projects. 

To add to that, we will show you another example from the stack 
provided by Mr. Connelly. University of Oklahoma football sta- 
dium. This facility obviously has not moved to a new location two 
miles from its original point. This claims a $20 million stadium 
renovation project. University officials in both their architectural 
and engineering services office that handled their bids and in the 
athletic department confirmed to me that during the summer of 
1991, the summer of 1992 and the summer of 1993, there was no 
major construction of any sort at the football stadium. 

This one claims the use of seven asphalt lay down machines. All 
the parking lots around the football stadium are concrete that was 
poured in the mid-1980s. 

This is a U.S. Department of Labor wage summary report on 
that project, which indicates that the U.S. Department of Labor 
identified the project, accepted the data and calculated it into the 
Federal wage rates. 

Mr. Marshall. Mr. Chairman, there is more than one victim. 
The taxpayers of Oklahoma, they have been victimized by this 
process; Mr. Connelly has been victimized by this process, and the 
good name of Connelly has been victimized by this process. 

Mr. Lester. Now I want to show you the really sad part of all 
this, sad because we believe it is information that indicates this 
could have all been prevented. Here is a June 2, 1995 memo from 
Maria Echaveste, the Administrator of the Federal Wage and Hour 
Division in Washington, DC. I want to point to the first couple of 
sentences. "Incorrect information submitted by third parties has 
been found in several surveys. Therefore, strategies to deal with 
the verification of data submitted by other than someone in actual 
possession of project payrolls is being considered." Congressmen, it 
is about time. 

Mr. HOEKSTRA. I have got a question. Is that in reference only 
to Oklahoma surveys or is that a broad statement on what they 
found around the country? 

Mr. Lester. We are unclear, I really do not know. And that is 
a question I would beg you folks to ask Ms. Echaveste. 



43 

What is really troubling about this is the General Accounting Of- 
fice information that was presented to Congress in February of 
1994, on page 6 of that report, a discussion of data quality, which 
says the U.S. Department of Labor does not perform a response 
bias analysis to determine whether there are a disproportionate 
number of responses from certain types of employers, such as em- 
ployers with a unionized work force, or data from much larger em- 
ployers. The response bias analysis, we are told, would prevent a 
single local contractor of substantial size or a single local union 
hall of substantial size from being able to dominate the process. 
Additionally, they say that without the response bias it could result 
in survey results that differ significantly from the actual wage pre- 
vailing in the area. Again, this is a Federal General Accounting Of- 
fice document. It goes on to say the U.S. Department of Labor does 
not verify the accuracy of the data received. We think that has be- 
come painfully apparent. 

And now I would like to discuss with you on my final couple of 
slides, how bad is this; specifically, how bad is this for Oklahoma's 
taxpayers. 

I am pointing here to an October 26 article which appeared in 
the "Tulsa World" in the subhead, it is talking about the construc- 
tion of a major treatment plant in Tulsa and it says, "The bids are 
about $10 million under the city's cost estimate. The death of the 
State prevailing wage law may be the cause." There is a line in 
here that says the savings may actually eliminate the need for fu- 
ture utility rate increases in Tulsa. It indicates that the city's engi- 
neers had estimated the project prior to the overturning of the 
State Davis-Bacon law, they had estimated the cost at $40.2 mil- 
lion. The bids went out shortly after the State's little Davis-Bacon 
Act was thrown out. Based on free market rates, the bids came in 
ranging from $28.8 million to $31.1 million, which would seem to 
indicate that based on Davis-Bacon, the original estimates were in- 
flated by approximately 30 percent, or $10 million on what other- 
wise would have been a $30 million project. 

You might ask yourself how could wage rates have that much of 
an efi"ect on a single project. The evidence is clear, in a side-by-side 
comparison comparing the wage rates for heavy construction not 
including water, sewer or treatment plants — heavy construction in 
Oklahoma City, rates in effect in July of 1994 versus the new in- 
flated rates which were issued in November of 1994. An asphalt 
laydown machine operator went from $8.30 per hour to $20.25 per 
hour, an increase of 144 percent. And as you can see, of the several 
examples we included, they range up to 162 percent on a particular 
category of crane operator. 

It is very clear that this has negatively impacted the taxpayers 
of Oklahoma, all of whom contribute to the cost of public construc- 
tion projects, and most of whom are the work force that makes the 
wheels of Oklahoma's economy turn every day. 

With that, I conclude my slide presentation and of course the 
three of us would all entertain your questions. 

[The prepared statement of Mr. Lester follows:] 



44 



Testimony of: Jeff Lester 

Chairmen Ballenger and Hoekstra, members of the Committee, members of the Oklahoma 
delegation and other guests ... thank you for taking time to learn about a great injustice forced 
upon the hard-working citizens and taxpayers of Oklahoma. I am Jeff Lester, deputy 
commissioner of labor for the state of Oklahoma. I was lead investigator in the Oklahoma 
Department of Labor investigation into the federal Davis-Bacon wage survey process. 

Today, I will show you documented examples of bogus survey data submitted to the federal 
govemment during the federal Davis-Bacon wage survey process — bogus information 
submitted by individuals who apparently had no direct knowledge of the projects for which 
they submitted data. 

I will show you U.S. Department of Labor documents which confirm that phantom projects 
and ghost workers were the basis of actual wage rates issued by the federal govemment. I 
will show you U.S. Department of Labor findings which confirm that bogus data was 
submitted by officials from within the hierarchy of organized labor. 

I will show you examples from a growing pool of evidence — evidence that illustrates the 
depth of this serious problem and showcases the U.S. Department of Labor's apparent 
mismanagement of the wage survey process. 

Sadly, I will show you that the federal government knew about the poor quality of data prior to 
the time that the fraudulently inflated wage rates were forced upon the taxpayers of 
Oklahoma. And finally, I will show you the actual financial impact on Oklahoma's taxpayers 
— a documented impact of up to 30 percent of the total cost of construction on a multi-million 
dollar project. 

In the interest of time, I encourage you to ask questions at the conclusion of this presentation. 
Experience tells me I will answer most of your questions as I discuss the exhibits. 



45 



niitline of thP overhead transparency presentatiqn by yleff Lester 

• The survey process — a quick overview of the survey instrument and data collection 
methodology. 

• Bogus information example #1 — contractor didn't work on project. 

• Bogus information example #2 — project was never constructed. 

. Bogus information example #3 — project was never constructed, yet this single bogus 
project, by itself, established federally mandated wage rates for two classifications of 
workers. 

• Bogus information, additional examples — multiple examples of "inaccurate" data 
discovered by the U.S. Department of Labor. 

• Who benefits from inflated wage data? 

Bogus information, additional examples — more examples including inflated wage rates, 
numerous workers who were never employed, equipment that was never used, work that 



never occurred — all of this falsely attributed to a local contractor 

Federal documents illustrating that the fedi 
prior to issuing inflated wage rates in Oklal 

What is the cost to Oklahoma's taxpayers? 



Federal documents illustrating that the federal government knew about poor data quality 
prior to issuing inflated wage rates in Oklahoma. 



46 



t of Construction Contractor's 
■ W>Qe Rites 

•Mk Tha turn n mmO 



U.S. Department of Labor 

Employmtni Sondvdt Admlnistrction 



^ 



I by tm U.S 0»p«rtm«rt ct 



I a»»»nT*» tfw locally pnvalling wtg* r 

I but i« volmvy. TN< l> tr option*! 

. MttpondMiu may un an il»m*i* torm K all 

• maximum 




EXHIBIT 



!_L 



I of pmi ■mil pfwralllng wag* rata* wri*aa aaak IX w aM in i* 



47. 



Mport'orcmtktftkntoitneki^ jtf- P«P§rtrrnnt of Ubo r 



wu.Ommip» 








EffKtl 

Suppleaent«l 



IM) an lacfMse of S0« to Naal 
■a4 2J» tacrraM to >^tai. 



!> 



48 



CONCHO CO. 

■ IC*V*TieM ailASIM* 



■>r ». 1995 



hoMA Labor DeparOMnC 
4001 Borcb Lincoln Boulevard 
City, OK 73105-5212 



Attn: Kr. Jla Harshall 



t Plant - Hl^ Lift 
t Plant - ChcBlcal 



The above rafcr«MC«4 /attached Joba were not projccta awarded The Concho Company. 



Sincerely, 

The Concho CoHpany 

B. Seth Wood 



EXHIBIT 



■ l» ■»»l n — — — ■i r lnTi K ii n 9mm l uia — »— — n an il Ctrr. mm T»l»7 



49 



CONCHO CO. 



n, 1*95 



Bay 9, 1995, Paa Lee from US Department of Labor called asking questions 
re: Lake Befner Treatment Plant. 

lie could Bot follow her questions regarding the Job. She said she would 
fax US coiples that would allow us to see what ahe was talking about. 
After rccelTlng the enclosed fax we knew these were not our jobs. 

I laBfrdiately called Ms. Lee and told her it was laportant that we know 
■ho filled out the bogus forms and signed for our Coapany. Mb. Lee said 
because of the privacy act she could not tell us. 

The Departaent of Labor refused to tell us who signed the WDIOS 



Sincerely, 

Dorothy Hawlons 
The Concho Co. 



EXHIBIT 



50 



Cl>IM VOOCMCR NO 8 (FINAL) 



City of Oklahoma City 

. CMCOiEERING. ftANMMC 0« CONSTIUCTION 

CLAIM VOUCHER 

n 




51 




UM oa ; 



ui.t: 'U.oo lOAti I 



BJM M>.i> 



I 6 



) 



52 




The City of 

OKLAHOBiA CITY 

WATER » WASTEWATER mUITIES DCTARTMEKr 



REVISED 



lMe29,199S 

JtaB Marshall 
Ctoef of Staff 
IXefiartment of Labor 
4001 N. Lincoln Blvd. 
Ckiaboraa City, OK 73105-5212 



IE: High Lif^ Stat ion Co ns mictioo in 1993 
Dor Mr. Marshall: 



TlBS is to revise our June 21, 1995 letter to you. In 199i^^intoJncjMiistnictcdahighliftpump 
for the City of Oklahoma City Water & Wastewater UWiQes Department. Our records 
that Concho, Inc. was not used as a sub-contractor oo this project.^ 



Wcjjp not know of any gdwrhig hlift jump statio ns constructed in excess of $600,000 over the past 
Swto five years. ' 

feel fire to call ■c at 297-3tl 1 if you have additional questions. 



fMick J. y«AM!^E. 
EngiMehBg MaMger 



RECEIVED 



EXHIBIT 



4X> Wcat MML ShAc 900 • OklahoBM Oy. OK 73102 • 406/297-2422 



53 




The aty of 

OKLAHOMA CITT 




RECEIVF^ 

FUN I UU, INC 



Flintoo, Inc. 
PO Box 889 
Ofckboma Qty, Oklahoma 73143 



RE: Contracts and Bonds for Water Project WC-OlSl; Contract No. 3 and 4 toHefncr^ 
Treatment Plant i n the vicinity of 4000 NW 108th Street (Heftier Road and Portfand 

Gentlemen: 

Attadied for your files is a copy of die above mentioned contrap and bonds executed by the 
Trust on April 6. 1993. ' 




veiy truly, 

Supply and Distribution Engineer 
JGM/DKS/lb 
Attadtment 
cc American Home Assurance Company 



EXHIBIT 



I 8 






Oty. 



73102 •405/297^2422 



54 



Project N'o. WC-0151 




CONTRACT 



D AGREEMENT, made and efltered into this 4^ day 

, 19^ by and between the OKLAHOMA CITY WATER 

party of the firjt part, hereinafter termed "Trust" and Fllntco 




party o( the second part, hereinafter termed "Contractor* 




rCACi lln OrjJUIOtIA m* »AIEK UmjriES trust has caused to be prepared 
in accordance with law, certain specifications, and other bidding documents far the work 
kereirafter described and has ap y ro yed and adopted all of said bidding documents, and has 
caused Solicitation for Bids to ke (iven and advertise<) as required by law, and has received 
sealed proposals for the fumishinc «( all lator and materials for: 



Vactr rrolect WC-0151 


CoBTrm^r m^ ^ 








Air 










ca^/ir 


Hant, 4000 NW 108th Street, Its* tU 


and 


Alternates 


1 ,7 


1.4 


5.6.10 


17 


n 




M, 





as outlined and set out in the bidding documents and in 
provisions of said contract; and, 



with the terms and 



WHEREAS, Contractor, in response to said Solicitation for Bids, p»iblished in the Daily 

Law 3oumal Record, February 10th and 17th. 1993 . I*** submitted to Trust in the 

■lanner and at the time specified, a sealed proposal in accordance with the terms of this 
and. 



VHEREAS, the Trust in the manner provided by law, has publicly opened, examined, and— 
canvassed the proposals submitted and has determined and declared the above named 
Contractor to be the lowest responsible bidder on the above described project, and has duly 
I Contractor ior the sum named in the proposal, to wit: 

k-»«,-^ ■<»..rT-n1n> rhm.«anrt. n<n.. h.mHr.^ ^gcPOLLARS 

>. 

tion of the mutual agreemenu and covenants 
have agreed and hereby agree as follows: 

1. The Contractor shall, at a f*^ *"^ (irst-dass, workmanlike manner, at his own 
oast and mpecMe, iumish all tabor, aMterials, toots, and equipment required to perform and 
oompiete satd w«r* in strict accordance with this contract and the plans adopted and approved 
by the OKLAHO*IA CTFY WATER imLTriES TRUST, all of which documents are on file in the 
Office «f ihe City Oerk of the City of Oklahoma Oty and are made a part of this conirjct as 
fully as if the aaxae were herein set out at length, with the following additions end/or 
exceptions: (if none, *o state) none 




2. The Trust i«>atl nuke paymei 
about the first day of «*cS inoiun, 
^iccurato e'.rlmatci ai the caJuc 



El 



the following manner: On or 
a;)p«opriati; person, u:ll lak-; 
of work dono ami :; ;:.-i2.'S 



55 



t of Oonitn^tton ContnctOr t 






UADapirtrntnt of Labor 



CX)n-{^ 




erf«m«« iww I. m3 m lacroae et VX 






56 




The aty of 

OKLAHOMA CITY 

WATER ft WASTEWATER imLniES OOARTWEfrr 



Jm 30,1995 

Jim Marshall 
Chief of Staff 
Dqaartment of Labor 
4001 N. Lincoln Blvd. 
GkWiomaCity,OK 73105-5212 

IE: Chemical Building at Hefiier Wa 

Dfcar Mr. Marshall: 



Plant 



L^cmical building was constructed at the Lake Hefiier water I 



expansion project. 



t plant as a part of our plant 



The diemical building was listed as an 'add ahemate" in die Water Jk Wastewater Utilities 
Dqartnient's contract with Flintco, Inc. However, we did not select tbe chemical building option, 
, to construct the cheniical building aLsome date in the fiitige. 



feel free to call I 



297-381 1 if you have additional questions. 



P»ici J. SmAaCf, 



../. 



EXHIBIT 



J_JI 



RECEIVED 

JUL 5 ^^ 

OEPT.OFLABO*^ 



420 Wcat Main. ^atU 900 • OfcUMmn CKjr. OK 73102 • 406/297-2422 



57 



OK»«0«33 02/10/95 OK33 

rion miBiber OK550033 

•m 




wmurr cowstroctjcw moncrs i ao*» not include —fr 

y ^ ^,,.^^, .,... ^^fi^ 

■Bdlficmrtoti mi^bcx »Hl>lif»tia» BKt« 

«3A0/1MS 




MCOAZa •OTTMOITOHIS 

094T> 07/JC/1993 

aCBKSTOS/INSmATCft lUUSRS 17.15 4.58 

•OOPS OF WORK: 
Includes iq^plicMtioe of all I— laHrw antaciala, fretcctive 
ooveringn asd Clni^klaga t* all tfpmm mt — rtMiiwI •ystems. 



BICI0627Q ee/oi/]»»4 

MffiER BonzPMRifr cjfuuuua 

•ROUP Ir 
•ROUP 3i 
3: 



17. K 




17. tS 




IC.M 




ic.ie 




13.55 




12.55 





mAimmmi otskator classific%tiohs 



OKXIF Z - All erase type a^nli— nt tritli at laaat 100' at keo« 
and over (including jib> 



2 - All crane type aviiyaaBt «ltk at laaat 200' 
300' of bcxm (incU 

3 - All crane type agalyHBt vUck at laaat 100' and laaa 
too' of boom (incladiaa lib) aU ttMar eranaa - arane 
a^ipaent: (3 ou. yd*, and ai ai ) 

4 - All eranea aiUi laaa ftkn 100' s< kooa with lib and 
M (as ratad bf aCf.) laaa tban a an. yd., Ombaid 
nJl Type 



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EXHIBIT 1 



36-049 - 96 



62 



UK. OlOO 



an applicable Federal prevailing wage 
law and 29 CFR part 5. The wage rates 
and fringe benefits, notice of which is 
published herein, and which are 
contained In ihe Government Printing 
Office (GPO) document entitled 
"General Wage Determinations Issued 
Under The Davis-Bacon And Related 
Acts." shall be the minimum paid by 
contractors and subcontractors to 
laborers and mechanics. 

Any person, organization, or 
governmental agency having an Interest 
in the rates determined as prevailing is 
encouraged to submit wage rate and 
fringe benefit information for 
consideration by the Department. 
Further information and self- 
explanatory forms for the purpose of 
submitting this data may be obtained by 
writing to the U.S. Department of Labor. 
Employment Standards Administration. 
Wage and Hour Division. Division of 
Wage Determinations. 200 Constitution 
Avenue. NW.. Room S-3014. 



Withdrawn General Wagl 
Determination Decision 

nterested parties 



This is to adviseall 
that the D epart 

From 

Ti£C 



•T^^fiatEFngji^am^wfi^i 



/\gcn'~'*fs wim cunsuuciiuu jjiOjecis 
pending, to whidi this wage decision 
would have been applicable, should 
utilize the project determination 
procedure by submitting a SF-308. 
Contracts for which bids have bnen 
opened shall not be affected by this 
notice. Also, consistent with 29 CFR 
1.6(c)(2)(i)(A). when the opening of bids 
is less than ten (10) days from the date 
of this notice, this action shall be 
effective unless the agency finds that 
there is insufficient time to notify 
bidders of the change and the finding is 
documented in the contract file 



NY95UU^b ireo. lU. 1»»3J 
NY950076 (Feb. 10. t995) 

Volume II 

District of Columbia 
[X:950001 {Feb. 10. 1995) 

Maryland 

MD950017 (Feb. 10. 1995) 
MD950025 (Feb. 10. 1995)^ 
MD950034 (Feb. 10. 199j 
MD950035 (Feb. 10. 11 
MD950036 (Feb. lOJ^S) 
MD950048 (Feb. I|fl995) 
M#50053 (Feb^. 1995) 

Pcr^ylvania 

1950014(1^.10.1995) 

Vj^inia 

' A950Q#' (Feb. 1|^9.5) 

'A95#04 (Fji^. 1995) 

rVAVOloy^ib. 10. 1995) 



irolina 
^950023 (Feb. 10. 1995) 

Volume IV 

Illinois 

IL950018 (Feb. 10, 1995) 

Indiana 

IN950036 (Feb. 10. 1995) 
IN950041 (Feb. 10. 1995) 

Michigan 

M105002J (Feb. 10.1995) 
MI950026 (Fob. 10. 1995) 
Mi950027 (Feb. 10. 1995) 

Minnesota 
MN950008(Feb. 10. 1995) 

Volume V 

Iowa 

lA950005(Feb. 10. 1995) 

Oklahoma 

OK950027 (Feb. 10. 1995) 
OK950030 (Feb. 10. 1995) 
OK950032 (Feb. 10. 1995) 
OK950035 (Feb. 10. 1995) 

Volum^^^^^^^^^^ 

Colori 



CO' 



V«rO*« 24-MAYJ15 14 iS »tey » 'W5 JW 156997 POOO 



I' 



EXHIBIT 

17 



Bjtvn n-at-osa 



Mn: es/OT/w 



lOCATIOM: 

Mn « z ca»L. 



CKU. cin. 





aouuT 


RIMS 


m. WPL. 


870 TtUX M1VE*-DUI» 


S12.350 


tJ.700 


0.000 * 


OO NECNANIC 


t15.600 


83.700 


0.000 2 


snoiu* 


til. 850 


83.700 


0.000 s 


vaoouNt 


S16.350 


83.700 


0.000 5 


1010 FOCKLIFT 


812.850 


83.700 


0.000 2 


1610 e«««T Piam 


815. «00 


83.700 


0.000 s 


17S0 GUASn 


812.350 


83.700 


0.000 1 



USDOL has confirmed: 

Heavy ("Other" Heavy Survey) Project 030 (Oklahoma County) 
— Per call to contractor, contractor did not work on this 
project . 



EXHIBIT 



!_ll 



64 



MOJECT UASE UMMIT 
SWVET 93-Ot-007 



S70 LAKXER-CCWOI 
720 PIPEUTE* 



950 gULLOOZER 

980 CSANE 
1010 FOUaiFT 
1020 FRONT END LOUIER 
1030 GRADER 
10S0 SCRAPER 
1110 BOBCAT 
1120 UATER tMSON 
1610 CMERRT PICKER 
1750 CREASER 
1890 FLACCER 



LOCATION: 
DATE 0« t CONP 
PROJECT VAtUE: 



UNITARY SEWER 
OKU. CITY. OK 
08/28/92 
t586,S63 



HOURLY 


FRINGE 


NO. ENPL. 


16.500 


10.350 


0.000 1 


17.000 


10.350 


0.000 1 


B7.250 


10.750 


0.000 1 


B15.150 


13.700 


0.000 1 


t12.*00 


13.700 


0.000 1 


B9.000 


11.050 


0.000 1 


M.500 


10.850 


0.000 1 


$13,400 


13.700 


0.000 4 


«13.t00 


13.700 


0.000 4 


B15.150 


13.700 


0.000 2 


113.400 


13.700 


0.000 1 


113.400 


13.700 


0.000 2 


113.400 


13.700 


0.000 1 


113.400 


13.700 


0.000 2 


113.400 


13.700 


0.000 1 


113.400 


13.700 


0.000 1 


113.400 


13.700 


0.000 1 


113.400 


13.700 


0.000 1 


16.000 


10.300 


0.000 1 



USDOL has confirmed: 

Heavy (Heavy Water and Sewer Line Survey) Project 050 
(Oklahoma County) — Data from prime contractor indicates 
project is neither federal or state sanitary sewer project. Data 
submitted is union scale . Listed contractor is not a union 
contractor . 

DATA OMITTED AFTER SURVEY REVIEW. 




65 



MUECT MfiE SMtUT 

a«vET «3-cK-oa2 



MTE: tant/^ 



16 «OJECT 10: 05*-a 



UnTlW: 
MTt at XI 



TIMKEl An, K 

0B/01/TO 

S3,000,000 





KUU.T 


RIMGE 




•. BTL. 


870 mxx o»iva-Di»» 


$12,350 


S3.700 


0.000 




•80 HECMMIIC 


tl5.«00 


a.TDO 


0.000 




BKOlUt 


fii.asD 


O.7D0 


0.000 




«eo auNE 


S16.S50 


83.700 


0.000 




1010 raUCLIFT 


tu.sso 


83.700 


0.000 




U10 attii piozR 


tlS.600 


83.7D0 


0.000 




17S0 OtAStt 


812.350 


83.700 


0.000 





USDOL has confirmed: 

Heavy ("Other" Heavy Survey) Project 054 (Oklahoma County) 
— No Dodge Report information for this project. Informa- 
tion came directly from operating engineers local union. 
Per call to contractor, contractor did not work on this . 
project . 



I EXHIBIT I 



10.22. 


■Jtvn n-oK-ooB 




MTt: 


05/09/»t 


2 muta to: oo-ioG 


■MC: MUTE IMTBt TKATKin PIMI 
UXATin: UUKSTOI. K 

MTC at s am..: mmm 

musa VALUE: MTT.WO 




■UU.T niMGE 


n. B»L. 







J70 riKriTm 



tir.o 



K.OM 0.000 
0.0 



USDOL has confirmed: 

Heavy (Treatment Plant Survey) Project 003 (Logan County) 
— Plumber/pipe fitter data submitted by plumbers and pipe 
fitters local union . Per call to contractor, contractor was 
only a consultant and did not use plumbers . 



EXHIBPT 



67 



IB-22< 


tunrr ts-oc-ooe 




MTE: 


OS/W/M 


• MBJiCT »i 012-aa 


ucATiot: OKU. an, ac 
MTE 01 s ctm..t aa/3i/v2 
muca wkuc: tm.m 




MUU.T HIKE 


m. BVL. 







S70 FIKFITTBI 

SSS II 

S90 OILQ 
UM MU DIGCEt 
M10 CMEUr PtOXl 



sir.ooo 


u.tso 


0.000 


$17,000 


U.OM 


0.000 


•14.900 


U.420 


0.000 


til. ISO 


n.too 


0.000 


(U.OOO 


tS.MO 


0.000 


tU.900 


o.«oo 


0.000 



USDOL has confirmed: 

Heavy (Treatment Plant Survey) Project 012 (Oklahoma 
County) — Plumber/pipe fitter data submitted by plumbers 
and pipe fitters local union . Per call to contractor, con- 
tractor did not employ plumbers . 



EXHIBIT 




i_22. 



IB-22> 


utvn fs-<x-aae 




MTC: 


05/09/»» 


10 PIOJECT IDt 01S-CM 


MNE: y»rm«Ta mAncin mmi 
louTioM: u am, k 

MTt at S CDVL.: 12/01/93 
KOIta VAUX: SZ.SOO.OOO 




nju.T niuE 


m. am.. 







U.OW 0.000 



USDOL has confirmed: 

Heavy (Treatment Plant Survey) Project 015 (Oklahoma 
County) — Plumber/pipe fitter data submitted by plumbers 
and pipe fitters local union . Per call to contractor, con- 
tractor did not work on this project . 



! 23 



wrvn «3-0K- 



MTt: 05/09/M 



11 nOJECT U: 017-CM 



LOOtTiaH: 
MTC a XI 



UUMENT KUME TKATNUT riAMT 
OUiSCMT, K 
.: (B/01/93 



361 fUMma APMtEirTia 



M.eso 0.000 

K.OM 0.000 



USDOL has confirmed: 

Heavy (Treatment Plant Survey) Project 017 (Oklahoma 
County) — Plumber/pipe fitter data submitted by plumbers 
and pipe fitters local union . Per call to contractor, con- 
tractor did not work on this project . 



EXHIBIT 



i 2*/ 



70 



rnrnm ntK-oa 



oATit mmm 



M nojlCI ID: U^•PO 



UUTIOM: CMUSnu, 

Mn a t covL.: mm/n 

HOJOT VAUC: t51$,079 



K.OW 0.000 



USDOL has confirmed: 

Heavy ("Other" Heavy Survey) Project 111 (Pottawatomie 
County) — Plumber/pipe fitter data submitted by plumbers 
and pipe fitters local union . Per call to contractor, con- 
tractor did not work on this project . 



EXHIBIT 

25 



71 



IB -22. 




SmrtT 9J-0K-002 




0»TE: 


05/09/9i 




» PtOJtCI IB: 


W7-C* 












LOOtTICM: 

MT{ at t ctMP 

•aOJCCT VAtUi: 


UMOEtCtaW STOUCE Tmk 
•USTANC. OK 
.: 08/01/93 
U. 000, 000 










•X..T 


Miaa 




K. IMPl. 






3M PLUMBER 
jro PIf>£fltTE« 


r7.»c 
•n7.«o 




0.000 

«.aoo 


10 
10 







USDOL has confirmed: 

Heavy ("Other" Heavy Survey) Project 097 (Canadian County) 
— Plumber/pipe fitter data submitted by plumbers and pipe 
fitters local union . Per call to contractor, contractor did 
not work on this project . 




72 



MTI: e5/09/M 



mUECT ID: 001-03. 



LOCATION: 

OAH Oi XI 



uuTtuATa TiiAiiaT n.1. 

OKU. CITT, OK 
.t 06/01/W 



210 EiECniCIAII 

211 ELECTtlOM APMEMTta 
3«0 mMK* 

370 PIPeriTTBt 

530 IKMWOWEI-UIIiratCING 

«50 PAirm-sPUT 

880 MECMAMIC 



8V0 OILER 

900 HEAVY EOUIPHENT 

HO uaatx 



1010 FORKLin 

1020 FtONT E» LOADER 



1110 BOeUT 
1120 WATER WAGON 
1610 CMERRT PICKER 

1620 ASPHALT UTDOUN HACMIH 

1630 CURB NACMINE 

17S0 GREASER 

1860 TRUa DRIVER (LOUBOT) 



tU.300 
87.340 
817.000 
817.000 
SU.900 
813.SS0 
8U.900 
81S.600 
811.BS0 
8U.400 
8U.600 
8U.6S0 
8U.600 
8U.M0 



8U.650 
815. ISO 
8U.400 
8U.400 
813.400 
814.400 
814.900 
815.600 
814.650 
814.900 
812.S50 
812.550 



•4.0M 


0.000 


84.050 


0.000 


84.420 


0.000 


82.S30 


0.000 


O.730 


0.000 


83.700 


8.000 


83.700 


0.000 


83.730 


0.000 


83.400 


O.ODO 


83.730 


0.000 


83.400 


0.000 


83.400 


0.000 


83.700 


0.000 


83.700 


0.000 


83.400 


0.000 


83.730 


0.000 


83.730 


fr.-000 


83.400 


0.000 


83.730 


0.000 


83.730 


0.000 


83.730 


0.000 


83.400 


0.000 


83.700 


0.000 


83.730 


0.000 


83.730 


0.000 



USDOL has confirmed: 

Heavy (Treatment Plant Survey) Project 001 (Oklahoma 
County) — Contractor did not use cherry pickers, laydown 
machine or concrete machine. 



Plumber/pipe fitter data submitted by plumbers and pipe 
fitters local union . Per call to contractor, contractor did 
not employ plumbers . 



EXHIBIT 



73 




WIIO. 




JULY 1, 1993 

THRU 

JUNE 30, 1996 



MASTER 

UNION 

AGREEMENT 



OPEIU»38i Aa-CtO 



' 36-049 



EXHiBrr 



74 




3 >■ 



•5 ? 



2 ■* 

O c 

e» -a 

ii 

^ 5 



«• o 



75 



1 



U8^ 17^95 H 21 t>202 219 5T71 



USDOL WAGE HOUR 



@0eg 



««portofCon»truct5ooOomr»ctof'i u*o«pirtin«nt of Ubor ^ '\ 

Oi<Xi*ii«nin«MM»<AM.«>ii« iliii9no<«i«9>««ki an i|i > M k >•«««■ |.1Ma Man «mv<>i - - - 














Eff«ctl»» June 1, 199 jjn iacresM of 50« to Htalth C Welfare i 5< Increite to 
il Duel and JK lacrc««e to waias. 



SuMl« 



/:,'^ 



0(>iiW^^'''^^<-t 



' ;-l993 






EXHIBIT 

3Q 



\ 



76 



WACt OETERMINATIOfJ fO« 



Sum of Otiakaau 
Department of Labor 




POST IN PLAIN VIEW ON APPUCAtU iOB SITC 

BUILDING CONSTRUCTION 




FILE COPY 



1 i.kn^^'i'i Wfty 


>"' '*?'•>"•' 




_i.i 


-loi 11 




8.50 








15.68 


2. 3 






12.85 


J. 






11.50 


2. 3 






13.U 


.90 






V6.10 


?-^ 






13.95 


5.22- 














1 .65 


3.67 










L.ther, 




1 .95 


2.50 




T^,r. 




1.30 


















U. 










2.53 






w. 




lllj««r/Ht»tri 


. Incl. A/C 


S:?. 


3 15 




■oif.ATWS- 




1^= 










»^ luliaolfri 




h';?? 


•J>? ^^ 



i'«»t gpf^w 



rent End Lotdtr 



tcbc»t OPci-.tor 



fr'-W frw t ' 



C-m-W-yw' fry?" 



CrK^.lm ther 100' 



tyyint ^►'n } P 



t''f^1 WH W^f 



Soft floor Hvtr 





12.30 


,« 




17,70 


5 00 






13.42 








9.70 




Cr«i> 11 


f.'? 





/.iJtSlOS mitWEUT WOlXEliS: 
£ts». U - •""••I ' 



itoa or n)t, fr 



6X; «v»r S r"^. 



ut i.tL i».,LDiiK ntcTo« Kn.niow: 

l-.et»l luildms ErKt*rt ipptiM to pr»-«n»ii» 

hny portion of • art»l bwU4in0 othtr thm t1 
(,( thr Mtol building. 



t I/« and 1/2 ton plct-i(> tnckt. 



i^Z^ 



77 



AGREEMENT 



Ihis Agreeaent Bade this first day of June 1, 1991, by and between the 
uniersi^ned ECCAVAnOK, ASPHALT & PAVDC ODNIFACIDRS OF WESTERN OKLAHOMA, herein 
referred to as the OGMPANY and TmvRUATXrH Ai innrn ne nffPATT NT, FNf^TNFra-^ \nrAX 
627, AFL-QO. hereinafter ref erral Sais'li e' UWiUN. "UmillHl riTllinrfnil linni 

Ikw, therefore, in consideration of the covenants, premises and the outual 
agreeBent hereinafter contained, it is agreed as follows: 

ioniaEi 

Rarpose 

It is the general pacpose of this Ag;reenent to pronote the mutual interest 
oi the Goa|3any and its «HpLoy<ees and to provide for the operations of the 
Coi^xiny's busiJiess vider aethods vhich will further, to the fullest extent 
possible, the elii'naticn of watste, recognition of — yi»ii quantity and quality 
of output, protectioG of property, and araoidaoce of intccnq>tion to production, 
and tiie parties to this Agreeaent will cooperate fully to aacute the advancement 
and acfaieveacrrt of the above purpose. 

MUCLE n 

Recognition 

Ihe CoBpany recognizes the Union as the exclusive representative of all 
heavy eqidpaert operators «ho operate such equipment as lowboy, (noving- truck) 
motor patrol, hi-lift or loader, dozer, crane, gradall, asphalt lay aachine, 
Fordsoti tractor, ■otor grader, and roller, mechanics, oilers and greasemen 
working in eBploy>er's oanstruction division at Oklahoma City, Oklahoma for the 
purpose of collecti^re iMrgaimng with respect to rates of pay, wages, hours of 
eniplo^mt and otiner cooditiaas of eoploynent, ecluded are all other en^loyees, 
office and clerical o^lioirees, professional •i^>loyees, guzurds, watchmen, and 
s;jpervisors as dpfiia-d in tiae Act. It is agreed tlMt Chis Agreement applies to 
aJ I c^)eratiag f n g i i»» rs craft eort perf coed by the •^>loyer. 

JKHCLE TTT 

■w>Ioyent Hiring Hall 

(a) It is ai^eed that the anployer will ea;>loy only qualified Operating 
Rigineers aad Apprentices on work cosing within the jurisdiction of this craft. 



(b) All aapiLcjrees who are mmL\r 1 1 of the Ikiion on the effective date of this 
Agreeamt abell be required to rwwin mui\[ i. j of the Ubion as a condition of 
eaplojamt tsarisg Cbe term of this Agrecnent. lew caployees shall be required 
to becoae aod riiin Mobers of the Qhion as a condition of cn^loyment from and 
after the eii^itfa day (8th) following the date of their e^>loyment, or the 
effective date ef this Afreenent, whichever is later. 



-1- 




78 



AETIGLE XIV 

Wage Rates 

TYiC! foUok'iiig aie the BitumiB wage rates per hour which shall apply when 
tlic (aployees are working on sijch work as residential construction (sub- 
division). City and Cojity water lines, sewer lines, reservoirs and lagoons, 
Ccmrtercia'} f InAistrifl] or Building Tt-ades construction. 



Al) C»a»e Type Ecjuipraent with 200' of 

boca wid over (including jib) 
A3] OcKtC- 7ype Equipment with 150' to 

200' of boa» (including jib) 
Al) C>-»xe Type Equipment with 100' to 

JIX)' t>f bocra (including jib) 
A3.1 Slower Qraies, Guy Derricks, All 

Ci"»rK' 'jype Equipment of 3 cu.yd or 




■we (fts rated by Mfg) 


1 10.75 


Mc.t.c»- y»\ro'i (Blade) 


10.75 


Iteavy rxily Mec-h>an:c 


10.50 


We)tko 


10.50 


PjJedrivc) RneirK-^ei: 


10.50 


IVae'^'f 


10.50 


Shove) 


10.50 


Oamshfdl 


10.50 


BacklxK- 


10.50 


G»-ada)) 


10.50 


ARpha)l Laydcwi Madiine 


10.50 


Itoze) (d-i^ or Equivalent or Larger) 


10.50 


Jz«k;), Hi-J^ft 


10.50 


Scrajjf;)- 7y)X! EquJiaiieiit 


10.50 


Itwer iVJvca^i Hole Digger 


10.50 


7iejxJ.iiia }*xhixte 


10.50 


Vtieei TyiK'. TVactoi or like equipaent 




with Hoe or Ditcher 


10.50 


Air Ccxcpressor over 500 cu,ft, (1) 


10.50 


WincJ. TVuck with 'A' PraB»e 


P-]l 


Ito))«, A)) Types 


(iO.CT 


0>ricj-et.e Buster to Tanper 


10.10 


Aspha)! Laydown - Backend 


10.10 


FaiTii TV^^actor, Loader, Box Blade 




with or without attachreents 


10.10 


Qteasitr and/or FbeLnan 


10.10 


Mechftiiic & Welder Helpers 


10.10 


ftj) Ib.'il.rjbutor 


10.10 


hilvittiixer 


10.10 


T>)t Itf) TVaJlei C|erator 


10.50 


TrvcX Oane Osier t, Driver or Tiruck 




a«i.e Od ].sr 


9.20 



EXHIBIT 



79 



.; J!' *■;• 5.- T i^,: ^ • ^ '■.-«--• - ^/j- .-f. 



?- ^1 




CoimcllT Fivlai 0»., lac. 
P.O. »ei 7MS0 
OkU. at J. OK 73107 



R1 



. D 



\ 










I. 1993 M iacreas* of 50< U iMltk « Vklfans S« lncr( 
■•■ •»< 2X Ipcrease ta «•(*'• 



•isc «« / . ■« 



2B93 






EXHIBIT 




80 



J BE PAID » AiXirnON TO TIffi ABCVE MAGE SCHEDULE; 

Health 4 Appren- Supple- 

tfelfare Ptt isi on ticeship ■ental Dues 

^1^'*^ ^-25{^ $ .18? $ .40? 

in addition to the wages set out in the schedule to this agreoBent, 
enployer agrees to mU forty (40?) cents to the wages of each employee for each 
payroll hour. During the tern of this Agreement and continuing thereafter and 
in accordance with the terns cf an Individual and voluntary written 
authorization for of membership dues in form permitted by the provisions of 
Section 302(c) of the Labor Managewnt Act, as amended, the Employer shall 
deduct from the %rages of all cnployces covered by this Agreement forty (40?) 
cents per hour for each payroll hour as si^iplemental dues. 

Said SUK shall be resitted to the Local Union as supplemental dues and 
reporting of the sias shall be MKle in the sane Manner aid on the same fonn 
provided for the frngmmts •( fringe benefit p c xi gra m s required tsider the 

Bagineers for — r^riiWT aot listed under tliese cLasslf ications Aall receive 
the scale coaipairaJble to t IauiL. cLassificatioas. 

Tbe abovie rates afaail also apply on all bourly rantal i«>rk. 

It is agreed tiaac tJie parties to this contract will be bound by the State 
of Cklafcoma M^rtary and Beavy Agreevnt covering wages, hours and fringe 
benefits for all wxk perforaed on airport runways, aprons, taxiways and county 
road; Okl^oma State Department, Oklahoma lUmpike Authority and Unfted States 
Corps of fiogiiaeering projects. 



ABUCLEXV 

Ihe parties bereto sucagKivK that from time to time it may be necessary 
for an eaployve to eos^ikete die workday at a location other than the location 
v^here the c^loy-ee started vaA, and parked his car. In such event, the Company 
agrees to U«j4*a-t tiie aa^tilxtyve an Qxapany tiae back to his car. In the event 
the Company utilizes the servsioes of another csiployee to transport employees 
beck to their cars, SMch aa^Iioiree shall likewise be paid for such time as 
necessary to take the ^liij(iiiii to tfaeir cars. 



X7I 

frerogative 

■otMi* ia tkis Agreement tf»ll be deeoMd to limt or restrict the employer 
Id mtf wagr ia tiK caercise of the custoaary fmctions of ■anagwwnt the terms of 
this ^iBMBjut i«laftii:« to its operation as it shall deem advisable and the 
ri^ to kirc, to proaote to a hitter or better position, to discharge, demote, 
or disciplJane f«r pmst cause, to schedule work, and to sake ail changes 
essential to tflK efficient aperation of its operations, to establiA Mid enforce 
standards «f productiao and gpadta^^^^mmiit^ *rd the ri^t to lay off 



employees because «i lack af \ EXHIBIT !■«* raasoo. Such f»«ctioos 



are racogndiaed hf 
and prerogarti'v 



F 



the proper respoasibility 

the above anaKrations of 

other EuKtiflns Li iai m ly and 



81 



It., jrr i—nB^ii>iri UJS.O«pviment of Labor 



IMKTCMIWn k I 



CondM, Ik. 

p^. an 12506 

PWjuIm. Cltjr. Of 73157 






/6>t/-9i£/ ^ 




N 



K 






t-/ fi^ 



fivart of CmtJucOort Contractor's M.PopytiMntofUbo f ^x 




^ \ 



w^m»» (7?,^^. 001 



.OapwtrMntefUber 



iber ^^ 




Comallr Paviat G*., lac 
P.O. Boi 754S0 
OUa. CXt,j, OK 73M7 







83 



EMPLOYER MONTHLY REMITTANCE REPORT 

OKLAHOh 



HEALTH & WELFARE 

•CUSTRY AOVANCEM 



REMITTA>*C£ REPOBT-WOWTH Of 




^ 



JOft LOCATION nkli.hnr.1 yONF 2 




IMMEOTB^Ora 


■MTUU 
«M Mdt. 






/ M3 


•n> PiujTidT pRrvAty 




156 S 


? 115 




1« f 


5 ^ 




»3 V 


f^ .^ 




.^ > 


>- 




- V, • 


/ - 




t^ i 




'^;„ / 














-- -^ 
































V 




« 


/ 








/ 


J 


/i<1/ Af/\ /*>/.< 


I'fS / ««< 1 


..*/5 


^ 






I 


ir\tw\ t^i^ 


Ipj^lf 


'^^ 


) 




• ■ - 


' - 4 




f--i 


-T^? 












1 • 














EXHIBIT 

1 39- 

























































J 627 

'S^NSOMHbURS . :^.. 

MEAUH AND WELFARE HOURS 
APPREMTCESHIP HOURS 



SUPPLEieKW. OUES^ HOURS . . 

- i 

MCXISTRY MMWCEMENT HOURS 



TMI HourtJhl* Ptg*. 




HOURS SUBJECTTO CONTRIBinXIN. ... .'r'feifLJM 

- •■ ' '-■• — <*.>■■; f -f .,11" 



84 



^*:: x>^ 



'(■■■a.-'ji^^:-^:.}.. 



tapot erceramjcoon Oormdor't 



lU. Dtptrtnwnt of Liber 



OOI -^ 






ConnellT ParlM C«.. Uc. 

P.O. Box 75*» 
Okla. Cltr. OK 73107 



m^i 





$ TA^hu**^ AWfrM*^' 0< L7jl^ 



k:2L 




Roller/Finish j/^IC 



Backhoe '^?^. 




iij^ 



iV^ 



i7^ 



i'lfP 



4'/-y» 



hdJ^Ul 



Lili 



a, if.'jC 



hi^, !•! If>./.?tl / lH>i:|aJ5h^| 1/ 



/!iiSLi 



/v.fcT 



/i 



aS 



SS 



t± 



s 



21^ 



ZJk 



ZJS^ 



BJ&. 



J^ 



i^' 



tl 



m 



i£ 






U/l 



Hi') 



Effeculve >MW 1. 1*93 •■ incrMM of S0( to Health < Wclfart; X increase to / '" 
Supplemental tmn mt* 2S< increase ta wages. 



EXHIBIT 



1 3? 



I _ ri_ 



•L^i 



Iv-r-f^ 



85 



■■vrr f»-«:-«i2 



MTE: 01/1J/M 



SCBHPI..: l7/«1/ie ^ 

«ujjE: ta.mt.tm ^-^^ | 



9tJi MOCKOC 

net Hon {» uMMi 

IIOO OUBCB 

' nui ttoLUs 

■ nOO ASPHALT IWCNINE 
1110 BOBCAT 
1120 WATER UAGCM 

• 1420 ASPHALT LATDOa 



•U.6S0 
tU.6S0 
tIS.ISO 
tU.6SD 
SU.900 
(13.250 
SU.ASO 
SU.900 



•.000 


1 


•.000 


2 


•.000 


2 


• .000 


7< 


• .000 


7 



«.m •.000 




86 



GAO 



United States 

General Aeeoontinf OOIee 

WaehlBfton, D.C. 2064« 



Febroary 7. 1994 

The Honorable Larry E. Ciilg 
United States Senate 

The Honorable Oiarles W. Stenhoto 
House of Representatives 

The Honorable William F. Goodling 
House of Representatives 

The Honorable Tun Valentine 
House of Repiesenutives 

The Honorable Thomas E. Peui 
House of Representatives 

The Davis-Bacon Act. passed in 1931, requires that workers on federal construction 
projects be paid a wage at or above the level determiDed by the Department of Labor 
to be prevailing in the area. Since 1937, the prevailing wage provisions have been 
extended by many statutes to involve construction Hnanced in whole or in pan by the 
federal government. In a 1979 report, we expressed our concern about the accuracy of 
the wage deteirainations and its impact on federal cotutruction costs.' In addition, we 
said that the act appeared to be impractical to administer due to the magnitude of the 
task of producing an estimated 12.400 accurate and timely prevailing wage 
deteiminations. 

In response to your request that we describe the changes to Davis-Bacon regulations 
and administration since our 1979 report, we conducted interviews with officials in the 
Depaitmeni of Labor's Wage and Hour Division and reviewed the key literamre, the 
pertinent legislation, and Labor's written policies and procedures. AAer briefing your 
sta£r on the results of our woik. we agreed to provide the information to you in 
correspondence. 



■ The Davis-Baco n Act Should Be Renealed (GA(yHRD-79-18, Apr. 27. 1979). 

GAO/HEHS-94-95R Oavb-Bacon Act 




OSS9?'>//sc*7zr 



87 



B-2563U 



prohibition on expenditures, and Labor began imptemenution of the helper 
regulations.' However, tbe implemenution of the helper regulations was again 
suspended foUowing tite enactment of "The Department of Labor Appropriations Act, 
1994" 00 October 21, 1993, which prohibited expenditure of funds for such use in 
fiacal^Kar 1994. 

Tht qtudity of the data Labor uses in deteimiuiog die pievailiog wage remains a 
CMcera. Wage determinations are completed with response rates as low as 25 percent 
^ause Later must rely on tbe voluntary cooperation of contractors to re^>ood to 
it^/aests for wage and benefit data. Labor says that tbe response rates vary, with 
surveys for residential coostructioo (an industry group with many small flnns that are 
"itss Ucely to complete tbe qaestfoonaires) having response rates as low as 25 percent 
Respcttse rates for other types of constructioo are typkaDy higher-for example, often 
SO percent or more for highway coostructioo-because they have fewer. larger firms 
i:hat are more likely to respood to the questioooaire. ^||)Qy|gByggy]g{£gg]^^ 
response bias analys istj) d^mioe-jdiediegJhcaajne^ajliiPCMiQrtiQnaie nufnt^j ^ 
einDtov««..Midi as «iinlnv.>ry with a n,^^r.,^^7PA 
•that could resuk in nrvey results that differ 
ngnificantly from the actual wage prevailiiig ia the area. A lespoosible Labor official 
told us that be believed that response bias was a potential problem but that there was 
ao dau available on such characteristics as the size of contnctor or rate of 
unionization for all contractors in a given area which would be required to perform 
such an analysis. In addition. Labor does not vfrjfy t>^ flfffff^ fi^ \% H' ""^'^^ 
(for example, by comparing survey results to payroll records) even on a sample basis. 
Tbe Labor official also stated that there were insufficient resources to do such 
verification. In fact, with correst rcsounxs they are able to complete survejrs for oiUy 
about 200 areas a year As a result, ihe average age of a wage survey is more than 7 
years. 

TECHNOLOGICAL CHANGE 

Major iecfaook>glcai chasges have facilitated Labor's adainistralioa of die Davis* 
Eacofi wa^e detemiAacioQ process. Technological changes since our 1979 report have 
reyjied ia the amoautiofl of many aspects of the wage determination process. For 
axam(^, the maiHng of sorveys and the analysis of survey data are now largely 






'Labor told us that, as of September 1993, the use of helpers was found to be a 
prevailing practice in 23 of tbe 73 sorveys C32 percent) completed since tbe surveys 
^yftn started in April 1992. 

6 GAO/HEHS-94-9SR D«Tis.Bncon Act 




88 



U.S. Department of LatXH- 



Employment Standards Administration 
Wage and Hour Division 

Washington. DC 20210 




June 2, 1995 



J 



MeBoranduB Wo. 9 5-22 

KEHORANDUH FOR WAGE AKD HOUR REGIONAL AOHINISTRATORS 

FROM: 

SUBJECT: Verification of Data in Davis-Bacon Wage Surveys 




Incorrect information submitted by third parties has been found 
in several surveys. Therefore, strategies to deal with the 
verification of data submitted by other than some onelp actual 
possession of project payrolls are being considered, /^lyytstionk 
•bout verification procedorms Tvtm the Regional Office survey 
staff will be welcome and we are also consulting with the various 
interest groups in this regard. In the meantime, however, the 
importance of at least verifying by telephone some sample of any 
data presented without the signature of an official of the 
employing firm is of the utmost importance. 




Working for America's Workforce 



OWlahon t Press 
Cl.ppioQ Bureau 
3601 N Linccln 

TULS/ V.ORLO 



V^cSer Plant Bids 



Show Big Savings 




■ The bids are about 
$10 million under the 
city's cost estimate. 
The death of the state 
prevailing-wage law 
be the cause^^ 



City officials say they are 
"elated" that bids for construction 
on the new Mohawk Water Treat- 
ment Plant came in $10 million 
lower than expected, and the sav- 
ings may eliminate a need for fu- 
ture utility rale increases 

The savings could be the first 
major impact of the legal de- 
struction of the so-called "Little 
Davis-Bacon Act " 

Engineers had estimated it 
would cost $40.2 million to build 
the plant's process "train," which 
will remove silt and filter Impari- 
ties from citv water. Bids opened 
Wednesday by the Tulsa Metro- 
politan Utility Authority ran(cd 
from $28.8 miUion to $31.1 mil- 
lion. 
-^ Public Works Director Charles 



Hardt saM ht was pleasantly s«r- 
pnsed. Five compuoea, includiae 
Maakattaa Co«tstr«etioa Co. of 
Tulsa, h»< fcr tlK project Coo 

tracts win be 



r tte prp> 
«var4ed u 



"I tMak cteied i> ao appropri- 
ate descripOoa,' Hardt said. "You 
have a complete list of good con- 



tractors, and you have excellent 
bids. It obviously Is a desirable 
position to be in instead of having 
to figure out ways of coming up 
with nMre raouty.' 

TiK contract is the largest of 
seven contracts for construction 
on tbe $7S million plant. The 
plant, to be built near Harvard 
Aveni>e and Mohawk Boulevard, 
will replace the existing Mohawk 
plant built in 1924 

Tbe plant is expected to be op- 
erating by 1999 to treat an esti- 
mated 100 million gallons of wa- 
ter per day from Spavinaw, 
Eucha and Oologah lakes. 

Sandra Alexander, tbe a«tbori- 
ty's chairwoman, said she kad no 
explanation for tbe low bids oa 
tbe contract, one of tbe largest ia 
city history. Sbe said some bave 
speculated that a receat co«rt de- 
cision on prevailinc wafes woald 
5m Bids on Newt 3 



EXHIBIT 



l_itl- 



90 



I i 
5 o 



(0 ■" 

« £ 

CE g 

T3 2! 

o 



i 

1 
if 

M 

I » 

11 



1} 

H 

I ? 

i 1 

« i 




r I 



, i ^ 

1 1 1 



1 1 1 

! I I 
I I I 




EXHIBIT 



91 

Chairman Ballenger. While you are moving there, I would like 
to ask on that job, the last one you showed, the news story from 
Tulsa, was there no Federal money in that at all? 

Mr. Lester. I am not certain about that detail. 

Chairman Ballenger. In other words, what I am saying, even 
though you got clear of your Oklahoma Davis-Bacon, if there was 
Federal money in there, you still would be stuck with the Federal 
Davis-Bacon, right? 

Mr. Lester. That is a good assumption, yes. 

Would the Congressmen like us to stay here for the benefit of the 
media since we have already got mikes over here, or move back? 

Chairman Ballenger. I think it probably does make sense to 
stay there. Pete, fire away. 

Mr. HoEKSTRA. What kind of support have you gotten from the 
Labor Department as far as getting documents that you believe are 
necessary to do a thorough investigation? 

Mr. Lester. In early May of 1995, we submitted our first Free- 
dom of Information request. We got a very timely response within 
10 days that said we are working on it, you will hear from us later. 
We did not get any substantial response or hear any dialogue be- 
yond that until after we presented our initial findings to you folks 
and the committee on July 11. And in fact, the first substantial evi- 
dence we saw, evidence that we had asked for, was provided to 
your committee the following week after our visit to Washington, 
DC. 

Mr. Hoekstra. Do you have any degree of confidence that the 
Labor Department is perhaps vigorously pursuing the allegations 
on a broader basis, or not? 

Mr. Marshall. Mr. Chairman, we are not satisfied with the dia- 
logue or lack of dialogue that the U.S. Department of Labor has 
had with the Oklahoma Department of Labor with regard to our 
findings of fraud. 

Mr. Hoekstra. You had a number of slides there that talked 
about the Department of Labor had determined that these surveys 
were incorrect, inappropriate, fraudulent, whatever word you want 
to use. Is that not an indication that the Department is going out 
and doing their work, or where did these things come out in the 
process? 

Mr. Lester. Some of the Freedom of Information documents that 
we received indicate that they began to look at the heavy construc- 
tion survey around the beginning of May, at around the same time 
that we initiated our own investigation. And because of dates on 
memos and dates on faxes and so forth, it looks like once they 
withdrew the heavy construction wage rates at the end of May, 
that they began their own investigation sometime probably in July 
of last year into the building construction. However, in reviewing 
many of the FOIA documents we have received, there were some 
very disturbing things — inter-agency memos for example, between 
the national office and the Dallas regional office, where the top of 
the memo would have a date and it would be from and to regarding 
allegations from Oklahoma or whatever, and then it would say, 
"Gentlemen" below that and the entire rest of the memo would be 
blank. And we received numerous documents where there was obvi- 
ous dialogue at USDOL that was redacted. It concerns us because 



92 

we are another government agency, we're a sister agency in this. 
We are responsible for looking out for the integrity of the way — 
the government accountability integrity of the way — the govern- 
ment impacts the taxpayers of this State. We do not believe we re- 
ceived satisfactory treatment from the U.S. Department of Labor. 

Mr. HOEKSTRA. You tried to outline people that perhaps would 
benefit. Obviously there are significant dollars involved, not only in 
Oklahoma but around the country, there could be individuals work- 
ing on projects, it could be other groups that might benefit finan- 
cially. Have there been any ramifications to any of you personally 
for pursuing this type of effort as vigorously as what you have for 
the last 12 months? 

Mr. Marshall. Mr. Chairman, that is a very sensitive subject 
with us in that the Commissioner of Labor for Oklahoma has re- 
ceived death threats. We have been advised by the people counsel- 
ing us with regards to our internal security not to elaborate beyond 
certain facts, and the facts are she has been victimized in this proc- 
ess, the facts are we have taken appropriate measures based on 
consultation with law enforcement authorities, and the fact is this 
would not have happened had she not exposed what we believe to 
be fraud in the prevailing wage process. 

Mr. HOEKSTRA. Thank you. 

Chairman Ballenger. Ernest. 

Mr. ISTOOK. Thank you very much. 

When this process began, in one of your documents, you men- 
tioned that for a number of categories, there had been a survey — 
I think the correct terminology is a determination had been issued 
in July of 1992, I believe it was, and yet there was a resurvey sev- 
eral months later. With what frequency and with what regularity 
is there an effort made by the Labor Department to say well, it is 
time to go back in and resurvey things and change the old rates 
and see if there ought to be some new rates? 

Mr. Lester. We discussed that extensively with two folks from 
the U.S. Department of Labor. The Commissioner and I have vis- 
ited personally with Randy O'Neal, who is in charge of this activity 
at the Dallas regional office, and also with Joe Viareale, who is the 
regional administrator in the Dallas office. They tell us, as I indi- 
cated earlier, that the squeaky wheel gets the grease. So if any in- 
terests in a particular community feel that they have not been sur- 
veyed in a timely fashion, they squeak. And when they do, whoever 
is the squeakiest gets the attention from the U.S. Department of 
Labor. However, they also indicated to us that wage determina- 
tions, wage decisions like this are modified regularly, not because 
of a pattern of inaccuracy that they have dealt with in the past, 
but because in many instances the specific Federal wage rates have 
been established based on a majority which came from a union con- 
tract. And where a specific Federal wage rate is linked to a specific 
union pay scale at a specific union hall, each time that union hall 
negotiates a new contract, they notify the U.S. Department of 
Labor regional office and their modifications are immediately im- 
plemented for everyone else. That is a part of the way the process 
works. 

The most recent survey had been actually several years, but the 
most recent modifications had been within only months of the time 



that those new wage rates were issued in November. The long and 
short of it is those rates at $8 per hour, $9 per hour roughly speak- 
ing, were in effect from July all the way up to November when the 
new rates were issued. 

Mr. ISTOOK. So under this, rather than saying every year we are 
going to take a look to see if something has changed, they do it ba- 
sically — in some areas of the country, maybe there is substantial 
change but nobody requests a resurvey or even if somebody re- 
quests it, for whatever reason they do not pay attention to their re- 
quest, they can arbitrarily determine when we want to go resurvey 
things. I mean, does this not kind of play into any efforts at orches- 
tration? Of course, it also plays into if you have a regular estab- 
lished pattern, but when you have an irregular pattern, then those 
who are making the request can be those who are prepared to re- 
spond to the request, whereas everyone else does not know it is 
coming. 

Mr. Lester. Absolutely, you are totally correct. Congressman. 
And there is another factor here that is very troubling. We are told 
by the regional administrator that we are part of an 11-State re- 
gion that extends from Louisiana to Utah north to North Dakota 
and of course, as you pointed out earlier, they are responsible for 
surveying every county in every State in the country. So in this re- 
gion, that would be county-by-county all 77 counties in Oklahoma, 
which is the smallest of those States, and the other 10 States in 
the region. And in the Dallas regional office, there are two clerk- 
typists who are responsible for managing this entire process. 

Mr. ISTOOK. It is already expensive to try to have a process of 
determining prevailing wages on the scope you are talking about, 
but especially when you are trying to get a representative sam- 
pling. Just like a political pollster is supposed to go to households 
that actually are typical, there is a lot of work that is done sup- 
posedly to pick those and of course you can skew the results dra- 
matically if you do not pick a sample. Can you give us a compari- 
son of how many people had their wages determined by this survey 
compared to how many people were surveyed? In other words, were 
100 percent of the workers actually surveyed to establish the rates 
for everyone, was it half of 1 percent, was it 10 percent? What is 
the sampling size compared to the number of people affected? 

Mr. Lester. The best terms I can give you. Congressman, are 
some that were generated by the U.S. Department of Labor. They 
received back 259 I believe is the number, 259 total survey forms 
for the heavy construction survey. Those 259 forms are paid for by 
the roughly 1.2 million taxpayers in the Oklahoma City metropoli- 
tan area. 

Mr. Marshall. Congressman, if I may, if the prevailing wage 
law is going to provide for an accurate prevailing wage, I would 
suggest that the committee might entertain the notion that the 
only governmental entity that exists in America that can provide 
accurate data if a prevailing wage is going to be administered 
would be the Internal Revenue Service. They are the only entity 
that has access to the information on the individual workers. If the 
advocates of reform would like to broach that subject, I think as 
far as meaningful reform, I would suggest that the committee 
might entertain that notion. 



35-049 - 96 



94 

Mr. ISTOOK. So do you have any projection of what it would cost 
to say do it right, if you wanted accurate information that accu- 
rately reflected all the taxpayers of the prevailing income and pre- 
vailing wages, what level of bureaucracy would that require, and 
what expense? You know, I'm on the Appropriations Committee, so 
I would like to know. 

[Laughter.] 

Mr. Marshall. I am not sure of the billions of dollars it might 
cost to administer, but we do know that it is costing billions in 
fraud. 

Mr. ISTOOK. Thank you. 

Chairman Ballenger. Let me ask a question. I am not a lawyer 
but I know that we requested the Department of Justice to look 
into this situation here. Do you know if there is anybody from the 
Department of Justice investigating this? 

Mr. Marshall. I think the Commissioner should address that 
one. 

Ms. Reneau. Congressman, we respectfully wish to defer any 
questions relative to a Federal investigation to that Federal agen- 
cy. I feel hesitant to speak on their behalf. 

Chairman Ballenger. Okay, thank you. Any further questions? 

Mr. HOEKSTRA. We are not looking at expanding — I can tell you 
this committee will not look at expanding the responsibilities of the 
IRS. 

[Laughter.] 

Mr. HoEKSTRA. I would hate to have that be the story that comes 
out of here. We are looking for them to do fewer things, not more. 

But it does bring up a question, now that the original Oklahoma 
statute was ruled as being unconstitutional, as a Department of 
Labor, are you looking at establishing prevailing wages for State 
contracts in your 77 counties? 

Ms. Reneau. The Oklahoma Department of Labor is not cur- 
rently participating in any measures to re-enact Davis-Bacon; how- 
ever, we understand that those activities may be taking place at 
our State legislature. 

Mr. HOEKSTRA. So you have not taken a look at what the most 
effective process would be. We have got a suggestion — the IRS — but 
you have not taken a look at other ways or methods that you might 
have to use to actually determine prevailing wages in the State of 
Oklahoma? 

Ms. Reneau. No, sir, I am actually on record as being an advo- 
cate for the free market, so I have not spent time on developing 
what I believe to be a better way for the government to mandate 
wages in the marketplace. 

Mr. HOEKSTRA. That is a fairly revolutionary approach, but all 
right. I have no more questions. Thank you very much and thank 
you again for all the work that you have done. 

Mr. ISTOOK. Might I pose one question to the Commissioner on 
this? I realize that the Department of Justice has to speak for itself 
on what it can or cannot determine, but from your work on this 
and what you have seen that they have or have not done, do you 
believe that the Department of Justice is vigorously pursuing this? 

Ms. Reneau. Do I have to agree with vigorously? 

Mr. ISTOOK. Characterize it however you wish. 



95 

Ms. Reneau. I believe that the Justice Department is looking 
into the matter. We have not received satisfactory or comforting 
feedback as to where that investigation is and exactly what is 
going on. 

Mr. ISTOOK. So whatever the term to describe what they are 
doing might be, it would not be vigorous? 

Ms. Reneau. I would not use the word "vigorous," sir, that is cor- 
rect. 

Mr. ISTOOK. Thank you. 

Mr. Marshall. Congressman, there are two aspects to that ques- 
tion. One centers around what the FBI might be involved with ver- 
sus the U.S. Attorney's office. And that is where there is a dif- 
ference as to what we can tell. 

Ms. Reneau. We do have substantial feedback from industry in 
Oklahoma that the FBI is indeed active in the community and 
there is an investigation ongoing. However, we have no feedback 
from the U.S. Attorney's office. But I will respectfully refer you to 
the FBI or the U.S. Attorney's office. 

Mr. ISTOOK. Do you know whether the same people that you have 
interviewed, the different contractors, whether it be Concho or 
Connelly or Flintco and all these others, whether they have actu- 
ally been interviewed by representatives either of the FBI or the 
Justice Department or the U.S. Attorney's office. 

Ms. Reneau. I believe many of the same contractors that we 
have interviewed have also been interviewed by at least the FBI. 

Chairman Ballenger. Let me just ask another question, again 
not being a lawyer. Has not Oklahoma law been breached here — 
has somebody broken the law? I mean sending in fake stuff to the 
government, I do not know, does that send you to jail or what have 
you done? 

Ms. Reneau. Well, we turned our investigation over to State au- 
thorities at the same time we brought the information to Federal 
authorities, thinking possibly that perhaps State laws had been 
broken as well. The OSBI is just beginning an investigation per the 
request of the Governor of the State of Oklahoma, and the Attorney 
General for the State of Oklahoma has agreed that if wrongdoing 
is found that it will be prosecuted. 

Chairman Ballenger. Let me again thank you all, and Brenda, 
I know you are catching all kinds of heat back here, but for those 
of us in Washington, I would just like to say that the effort that 
we have put in to educate people about Davis-Bacon would have 
been completely wasted if you, as a group of people, had not come 
forward with the information that you have got. 

Ms. Reneau. We thank you. Congressman. 

Chairman Ballenger. Now, let me introduce the third panel of 
witnesses. First of all, Mr. Gary Matthews of Matthews Trenching 
Company; second, Mr. Jim Connelly of Connelly Paving Company; 
third, Mr. Jim Milner, Citizens for a Sound Economy; and fourth, 
Mr, Bill Estell of Quickway Excavating. Gentlemen, please have a 
chair. Okay, Mr. Bumpers, I did not have you on the front page 
here, Mr. Terry Bumpers, National Alliance for Fair Contracting. 
We will do the anonymous witnesses later and take a break at that 
time in preparation. 



96 

Gentlemen, we would appreciate it if you could be fairly concise 
in your statements, hold it to five minutes if you can. I do not know 
if you previously made any arrangements as to who goes first, but 
we can go from the left to the right. How about that? My left, shall 
we start with you? 

STATEMENT OF GARY MATTHEWS, MATTHEWS TRENCHING 
COMPANY 

Mr. Matthews. Gentlemen, my name is Gary Matthews and I 
appreciate being asked to participate in this hearing. I will just get 
right to the point of what I have personal knowledge of. 

I think you all have a copy of my written testimony and in that 
I include three exhibits. The first is a letter from the U.S. Depart- 
ment of Labor requesting that we participate in this survey. The 
second is the WD- 10 form which we actually submitted on this 
project. The third is a project wage summary, Form WD-22, that 
we obtained from the Department of Labor, which we believe cor- 
responds with this project. You can put the two forms together and 
see that they accurately reported the information that we provided, 
but then they also added 12 additional labor categories with in- 
flated wage rates. 

That is basically the crux of what I have. 

Chairman Ballenger. Thank you, sir. 

Mr. Connelly. I have got a written list now that we are supposed 
to go by. Would it be easier if we move the witnesses? Mr. Mat- 
thews, could you just swap chairs with him? That way we will not 
be chasing all those microphones around. 

[The prepared statement of Mr. Matthews follows:] 

Statement of Gary Matthews 

My name is Gary Matthews. I appreciate being asked to contribute to the Sub- 
committee's investigation. I am now and have been since 1971 in the utihties con- 
struction business, which includes instalUng underground electrical lines, sanitary 
sewers, storm sewers, water mains and similar type work, primarily in central 
Oklahoma. My father began the family business in 1947. 

I am here because, as a citizen and taxpayer, I am concerned that the wage and 
benefit information provided by my company, Matthews Trenching Company, Inc., 
to the U.S. Department of Labor has not been properly summarized and accurately 
used in establishing prevailing wage rates under the Davis-Bacon Act. 

I am most interested in the economic welfare of my company's employees, and 
want them to earn a reasonable wage. I do not know of any employer in this area 
of the country who does not feel the same. I would prefer, of course, that our em- 
ployees earn the maximum amount possible, yet retam the desire to continue being 
diligent, productive and loyal employees. Therefore, I am not here to minimize the 
value of construction company field employees who are subject to statutory wage 
rates. 

I am here because I became very concerned when the U.S. Department of Labor 
published its most recent wage determinations. The prescribed Davis-Bacon wage 
rates were, in most every instance, far greater than what contractors in central 
Oklahoma had been pa5dng and what most everyone considered to be the actual 
market rate. Most local contractors, including myself, found it difficult to believe 
that an accurate wage rate survey had been taken, and were of the opinion that 
something was seriously wrong. Several of us decided to spend some time and 
money attempting to determine why the U.S. Department of Labor determined wage 
rates were so much greater than what the market dictated. I want to re-emphasize 
that my objective is not to unjustly reduce the incomes of public project construction 
workers — I, too, was a "field hand before assuming management of my father's con- 
struction business. 

When wage rates on public projects become too great the quantity of work cor- 
respondingly decreases. It is as simple as that. Unlike the Federal Government, 



97 

State and local governments must operate on balanced budgets and have only so 
much money available for public improvements. For that reason, if no other, I firmly 
believe that laws designed to establish wage rates commensurate with the market- 
place should be properly administered. Many question the need for such laws, in- 
cluding myself. In an open market wage rates, like water, seek their own level ac- 
cording to the supply and demand. That system for establishing wages certainly 
works in the private sector. Over the years my observation is that Davis-Bacon 
wage rates have always been higher than those dictated by the marketplace, but 
not nearly as high as the recent wage rate determinations. That is what got every- 
one's attention. 

Having explained briefly why as a concerned citizen and small businessman I 
elected to spend the time and exert the effort necessary to contribute in some small 
manner to the investigation, I will proceed directly to the facts about which I have 
personal knowledge. 

My company received from the U.S. Department of Labor a December 16, 1992 
letter requestmg that we participate in a survey of wages and fringe benefits for 
Davis-Bacon Act purposes. The letter is attached as Esdiibit 1. The letter advises 
that the U.S. Department of Labor is conducting a survey on heavy construction 
projects which were active during the period of September 1, 1991 through August 
31, 1992, in several central Oklalioma counties, including Oklahoma County where 
my company performs most of its work. The letter enclosed one or more forms (Form 
WD-10) on which my company name and a project description had been typed, to- 
gether with some Department of Labor reference numbers. We were asked to fill in 
the blanks and return the Form WD-10, Rev. March 1991 to the Department of La- 
bor's Dallas office. We did so. A copy is attached as Exhibit 2. 

One of our initial investigative chores was to secure from the U.S. Department 
of Labor the wage summary report prepared on the basis of the project information 
we provided. The matching Department of Labor Form WD-22a, dated May 9, 1994, 
is attached as Exhibit 3. There is no question but that the form we completed and 
the one prepared by the U.S. Department of Labor reference the same construction 
project. 

A cursory comparison of the two documents (Exhibits 2 and 3) is most revealing. 
We reported four classes of employees, operators, pipelayers, laborers and flagmen. 
The Department of Labor summary has twelve (12) additional classifications. Be- 
cause the U.S. Department of Labor form was completed by my wife instead of by 
me, I took the precaution of reviewing the project payroll records to make certain 
the wage and benefit information was accurate. As is usuedly the case, she was ab- 
solutely correct. We may have erred in designating the true completion date on the 
form, but that was not the important information which was being requested. My 
wife does not recall for certain, but her best memory is that she designated August 
28, 1992 (a Friday) as the completion date because the wage survey period was only 
through August 31, 1992. The construction project was actually completed a few 
weeks later. 

I was absolutely appalled to discover that the U.S. Department of Labor summary 
(WD-22a) lists twelve (12) employee classifications which my company did not re- 
port, and which do not appear on our job pajToU records. The Form WD-10 com- 
pleted by us and returned to the U.S. Department of Labor on February 22, 1993 
lists only backhoe operators, pipelayers, laborers and flagmen. The U.S. Department 
of Labor Form WD-22a lists those same classifications, plus twelve (12) others! The 
Department of Labor report accurately restates the hourly rates and fringe benefits 
we reported for the four (4) classifications. The highest reported hourly rate was $9 
for an operator, plus fringe benefits totaling $1.05. The Department of Labor sum- 
mary lists additional hourly wage rates ranging from $12.40 to $15.15, plus fringe 
benefits of up to $3.70 per hour. I assure you that my company did not report those 
figures to the Department of Labor, nor have we actually paid hourly wages ap- 
proximating those amounts. 

I do not, of course, have personal knowledge of how the information provided by 
my company was translated into such grossly false data. It is no wonder that the 
most recent Davis-Bacon prevailing wage rates are so much higher than the true 
or actual market rates. The naggingly persistent question remains: Has the U.S. De- 
partment of Labor made a clerical error of gigantic proportions, or has someone in- 
tentionally prepared erroneous summaries in order to justify higher Davis-Bacon 
hourly wage rates? In either event the grossly erroneous summary is a disgrace. It 
seems highly unlikely that anyone, including the U.S. Department of Labor, could 
make such a massive transposition error. The information provided by my company 
is accurately restated in the Department of Labor summary. However, the problem, 
quite obviously, is that the Department of Labor summary (Form WD-22a) contains 
additional inaccurate information! The additional information must have been fab- 



98 

ricated. Assuming there is no "mole" in the Department of Labor's computer, the 
problem must be placed at its doorstep. We mailed the form directly to the Depart- 
ment of Labor's Dallas office, thereby eliminating the possibility of some outside 
person intercepting it and fabricating the additional classifications and wage rates. 

In summary, I am appalled that the U.S. Department of Labor would allow such 
blatant fabrications to occur, ordinary clerical errors are understandable, but not 
what appears to be intentional fabrication. Someone had to create the additional 
wage rates and employee classifications. 

We confess to making an oversight type clerical error. Initially we advised the 
Oklahoma Department of Labor that we had not prepared a Form WD- 10 for the 
construction project under consideration. However, during a subsequent record re- 
view we discovered that the form had been filed in our 1992 general business 
records instead of in the job file. Locating the Form WD- 10 made possible a com- 
parison of it and the U.S. Department of Labor summary which was supposed to 
contain the very same information. It would be equally appalling if someone had 
fabricated wage rates much lower than we paid and subsequently reported. It cer- 
tainly appears that something or someone is rotten. 

Thanks for your time and attention. 



99 



S. DEPARTMENT OF LABOR E.Toiovnien: itancar^s ACT:i:-ist 

Uage ana Hour Division 

525 GriTfin Street, 5oom £30 

Oallas, Texas 75202-5007 



December 16, 1992 



Dear Sir or Madam: 

The Davis-Bacon and related prevailing wage statutes specify that 
laborers and mechanics on construction projects subject to the 
Davis-Bacon requirements may not be paid less than the wages 
prevailing in the area on projects of a similar character. The 
Secretary of Labor is required to determine what these prevailing 
wage rates and fringe benefits are. For this purpose we are 
conducting a survey of wages and fringe benefits paid on heavy 
construction projects that were active during the period September 
1, 1991 through August 31, 1992 in Canadian, Cleveland, Logan, 
McClain, Oklahoma and Pottawatomie Counties, Oklahoma. This office 
began collecting wage payment information for this survey on 
November 20, 1992. 

It is our understanding that your firm is or recently has been 
engaged in the construction of the project (s) described on the 
enclosed form(s). The wages paid by your firm on the project(s) 
(regardless of whether it is Federal or non-Federal) affect the 
prevailing wage scale in the locality. If your company has been 
employed on any other project (s) meeting the criteria of the survey 
we would appreciate it if information for that project is also 
provided. Blanks forms are enclosed for this purpose. - Wage data 
from these projects will be considered in determining the 
prevailing wage rates and fringe benefit payments for future 
construction in this area. A self-addressed envelope which 
requires no postage is enclosed. Data must be postmarked by March 
31, 1993 to be included in this survey. 

For your convenience we have listed on the attached sheet mechanic 
and labor occupations common to heavy construction. When 
practical, please utilize these classifications in reporting. 
However, other classifications may be written in if necessary. If 
you are a general or prime contractor, it would be appreciated if 
you include a list of subcontractor names and addresses as 
requested on the enclosed form by January 20, 1993 so they maybe 
contacted. 



EXHIBIT 






100 



Page 2 

In addition, we are asking that you report the number of helpers, 
trainees and apprentices employed in each craft, if any, and the 
wage and benefits paid to any helpers. It is iaportant that both 
union and non-union contractors supply this type of information as 
it is used in deciding whether helper classes and wage rates will 
be issued on resulting wage schedules applicable to covered 
construction projects. Enclosed you will find definitions for 
helpers, trainees and apprentices. These definitions should be 
followed when such data are provided. 

All information provided by respondents will be kept confidential. 
If you submit information for this survey, you will receive an 
acknowledgement from this office that the material you sxibmitted 
was received. If you do not receive an acknowledgement within 10 
days after forwarding your material, you should contact this 
office. Any questions concerning this survey or relevant 
information on construction wage rates should be directed to 
Deborah Hollins, Wage Analyst, at the above address or telephone 
214-767-6884. 



/^ 



Thank you for your cooperation. 



RANDALL G. O'NEAL 
Regional Wage Specialist 



ENCLOSURES 



101 



MECHANIC AND LABOR CLASSIFICATIONS FOR BUILDING, 
HIGHWAY AND HEAVY CONSTRUCTION 



RESIDENTIAL, 



1. 


Heat and Frost Insulators 


Power 




2. 


Boileraakers 






3. 


Bricklayers 


31. 


Air Compressors 


4. 


Carpenters 


32. 


Bac3choes 


5. 


Cement Masons 


33. 


Bulldozers 


6. 


Drywall Finishers 


34. 


Cranes, Derricks, 


7. 


Dryvall Hangers 




Draglines 


8. 


Electricians 


35. 


Concrete Finishing 


9. 


Glaziers 




Machines 


10. 


Heating, A/C Mechanics 


36. 


Graders 


11. 


Insulators, Batt, Blown, Other 


37. 


Hoists 


12. 


Ironworkers, structural 


38. 


Loaders, Front End 


13. 


Ironworkers, reinforcing 


39. 


Mechanics 






40. 


Mixers 


14. 


Laborers, unskilled 


41. 


Oilers 


15. 


Airtool Operators 


42. 


Piledrivers 


16. 


Drillers, wagon drill 


43. 


Pumps 


17. 


Landscape Workers 


44. 


Rollers 


18. 


Mason Tenders 


45. 


Scrapers 


19. 


Mortar Mixers 


46. 


Shovels 


20. 


Pipelayers 


47. 


Tractors 


21. 


Plasterers' Tenders 


48. 


Trenching Machines 


22. 


Lathers 


49. 


Roofers 


23. 


Marble Setters 


50. 


Sheetmetal Workers 


24. 


Painters, brush 


51. 


Softfloor (carpet) 


25. 


Painters, steel 




Layers 


26. 


Paperhangers 


52. 


Stonemasons 


27. 


Piledrivermen 


53. 


Terrazzo Workers 


23. 


Pipefitters 


54. 


Tilesetters 


29. 


Plasterers 


55. 


Truck Drivers 


30. 


Plumbers 


56. 


Waterproof ers 






57. 


Welders 



102 



.o. utsparunen; oi '.auor 



Repcrt of Constr'jctlon Ccr.-actcr's 
Wac9 Rates 








E. 


-sioymont Stancarcs Aommi 
age ana Hour Division 


iraiion 








«^ 


Not.: -h,t lorm .s usea 3y tne U.S. Cac:arvr,»r, ol Lacorjoj:ai:-""in« me locaily Br«v.„,ns wb?9 ra.es uncer ina 
Oavis-aacon ana Helaioa Ac-.s. Th» suomus.Qn or wags oaia is encouragod Oul is voluntanr. THis is an oononal 
form proviaaa lo ensure consistency in suom.sa.on ol waqe aaia. Resoonaenij may use an allemalo lorm ,f all 
Ihe Inlormailon roquestod is mciuoea. The laoniiry o( mo Basponflent will be kepi coniiaentlal lo tne maximum . 
extent possible unoer exlsiinj law. 

lae aee Instnictlona on rev.rae aide. 


CM8N0. 12i;<C46 
Expiraa: 07/31/93 


Contractor Name. Aaoreas. Toiepnone 
93-OK-007 2 
MATTHEWS TRENCHING 
919 S. FAIRMONT 
OKLAHOMA CITY, OK 7 3129 

405-677-4525, 


2. Proieci Name. Description, ana Location (mci^ude Coijiry) 
3 "'050-0 

SANITARY SEWER 

REHAB 

VICNITY OF NE lOTH TO NE 23RD 

OKLA. CITY, OK 

OKLAHOMA county 


3. Contract Type XjC Genera^Prim. 

. SuO 
l( General. Attacn SuBcontr actor List 


i. Approximate Value ot 
Pro,ac, I 586,563. 


5. SlaningDaie 

12-11-1991 


6. Completion Date 
8-28-1992 


7. Type o( Constfucuon . . ^, „ 

D Building D Highway 
Qj^eavy 


Storloa 
tJniti 


8. Project iaSubiact to: 
Q Stan wage Oetermlnatlo 


□"■Feaeral (Dayla-e«(»n) 
Wage DeierminaUon 

n }C3 Neither 






9. ClassiKcation o( Employees 
(I.e.. Carpemors. Electricians. 
Laborers. Carpenters' Helpers. 
Apprentice Electricians. Etc.) 


10. Is Contractor 
Pany lo a Coll- 
ecuve Bargaln- 
ngAflroomont 
Under Which 
Workers Were ■ 
Paid? 


11. workweek 
Ending Date 
For Peak Num- 
ber Employed 


Employees 


Hourly 
Rate 


Percentage of Basic Hourly Rales or OUier 
Amounts) . . - „« 


Health 
and 


Pension 


Holiday 

and 

VaiMilon 


APP. 
Training 




Yes 


NO 




Backhoe Operator 




X 


D6/13/92 




$9.00 


$.60 


SEE i 


^f^m 


s 


3ackhoe Operator " 




X 


D6/13/92 




8.50 


.45 




.40 




Pipe Layer 




X . 


36/13/92 




. 7.25 


.45 




.35 




Pipe Layer 




X 


36/13/92 




7.00 






.35 




Laborer 




X 


36/13/92 




6.50 




- 


.35 




FlaR Man 




X 


36/13/92 




6.00 






,30 












' 1- 


















; -- 















15. Remarks 
One week paid vacation with 1-3 years 8ervice-2 weeks after 3 years and 
six (6) paid holidays per year. 



EXHIBIT 

I 2. 



Wig* rates ptid cannot b* conaiderad In tha datarmlnatlon ol Davis-Bacon pravalllng wag* rataa unlsani 
provldad aa requaaf d abov. 



16. Submitted By 



M.J. MATTHEWS SECRY/TREA S 

Signature 



I ana Title (Please Print) 



inature » Teiei 



1 7. Date Repon Submmea 



d-33-l'^f3 



103 



DATE: 05/09/94 



20 PROJECT 10: 050-O 



LOCATION: 

DATE OR X COMPL. 

PROJECT VALUE: 



SANITARY SEUER 
OKLA. CITY, OK 
08/28/92 
S586,563 






570 LABORER -COMMON 


S6.500 


SO. 350 


0.000 


720 PIPELATER 


J7.250 


to. 750 


0.000 




S7.000 


SO. 350 


0.000 


880 MECHANIC 


115.150 


S3. 700 


0.000 


890 OILER 


S12.4C0 


S3. 700 


0.000 


940 BACKHOE 


S13.400 


S3. 700 


0.000 




sa.soo 


SO. 850 


0.000 




S9.000 


$1,050 


0.000 


950 BULLDOZER 


t13.400 


13.700 


0.000 


980 CRANE 


S15.150 


S3. 700 


0.000 


1010 fORKLIfT 


S13.400 


$3,700 


0.000 


1020 FRONT END LOADER 


S13.400 


$3,700 


0.000 


1030 GRADER 


il3.400 


$3,700 


0.000 


1050 SCRAPER 


$13,400 


. $3,700 


0.000 


mo BOBCAT 


113.400 


$3,700 


0.000 


1120 UATER UACON 


S13.400 


$3,700 


0.000- 


1610 CHERRY PICKER 


S13.400 


$3,700 


0.000 


1750 GREASER 


il3.400 


$3,700 


0.000 


1890 FLACGER 


J6.000 


$0,300 


0.000 



[ 



EXHIBIT 

3 



104 

STATEMENT OF JIM CONNELLY, CONNELLY PAVING COMPANY 

Mr. Connelly. Members of the committee, I would like to intro- 
duce myself. I am Jim Connelly, Sr., Vice President of Connelly 
Paving Company, it is a company started by my great uncles in 
1907, the year of statehood. And I have been 45 years in the busi- 
ness. 

On August 17, 1995, our company received a fax from the U.S. 
Department of Labor requesting verification of data for 1993 build- 
ing construction surveys in the Oklahoma City area. This fax con- 
tained WD-10 forms on 21 projects and we were asked the follow- 
ing questions: 

Did we work on the project? 

Are the classifications listed as used on the project correct? 
Are the number of workers correct for each type of equip- 
ment? 
Are the wage rates and fringe benefits correct? 
I would like to clear the fact that none of these WD-10 forms 
that were sent in in the name of Connelly Paving Company were 
sent by Connelly Paving Company, owners or employees. And I 
would like to also state that our company had no previous knowl- 
edge of these reports prior to receiving the fax on 8/17/95. 

I received the reports and sent a reply to the U.S. Department 
of Labor answering the questions on each project. All 21 reports 
were wrong and I so stated. Without going into each, I submit the 
following examples. Now some you have seen previously so I will 
skip those: 

The Oklahoma University Memorial football stadium. We did 
no such job. 

They listed a First Baptist Church in Moore, showing again 
the seven motor patrol, the seven asphalt laydown machines, 
loader operators, et cetera. We did no such job for the church 
in 1992. We did a job there in 1990, but it was all concrete 
paving, no asphalt. 

You heard the Internal Revenue office right here local, show- 
ing the same thing, seven asphalt, et cetera. All concrete pav- 
ing, no asphalt. 

We did a small concrete job at the Greens Country Club lo- 
cated in northwest Oklahoma City, and I say small concrete 
job. Again, all these equipment operators were listed. It is a 
small concrete job, no asphalt. 

Guaranty Bank, and this would not even be a Davis-Bacon, 
was listed again, all those seven asphalt, seven rollers, loader 
operators, backhoe operators, water wagon operators. Concrete 
paving, not asphalt. 

And I should mention that concrete paving projects use a lot 
less operators than asphalt. 

Without going into listing the number of operators, these 21 
reports showed Myriad Gardens in downtown Oklahoma City 
as asphalt, it is all concrete; Deaconess Hospital in Oklahoma 
City, all concrete, not asphalt. 

All the forms on the 21 projects showed a lot more operators, 
and you have seen that on the screen. 



105 

They also listed the Guthrie School job that we did in 1990, 
again with all the number of operators for asphalt that was 
shown, we did none. 

On August 18, I received from the Department of Labor an addi- 
tional nine more WD- 10 forms, all were wrong and we faxed that 
information back to the Department of Labor. To mention three — 
Tinker Business Park, a private project, was concrete, not asphalt; 
Oklahoma City University Law School, concrete, not asphalt; 
Epperly Heights School in Dell City, concrete, not asphalt. 

In conclusion, all 30 reports were wrong and I do not believe that 
any other organization but our company should have been able to 
file these reports, and I resent that our company was named and 
used in this manner. 

I want to thank you for allowing me this time. 

Chairman Ballenger. Thank you, Mr. Connelly. Can you switch 
with Mr. Milner now? 

[The prepared statement of Mr. Connelly follows:] 

Statement of J. A. Connelly Sr., Vice President, Connelly Paving Company 

First, to introduce myself, I am Jim Connelly, Sr., Vice President of Connelly Pav- 
ing Company, a company started in 1907 in Oklahoma and I have been 45 years 
in the business. 

On August 17, 1995 our company received a fax from the U.S. Department of 
Labor requesting verification of data for 1993 building construction survey in the 
Oklahoma City area. This fax contained WD- 10 forms on 21 projects and the ques- 
tions that were asked were: 

1. Did we work on the project? 

2. Are the classifications Listed as used on the project correct? 

3. Are the number of workers correct for each type of equipment? 

4. Are the wage rates and fringe benefits correct? 

Let me first state that none of these WD- 10 forms that were sent in the name 
of Connelly Paving Company were sent by Connelly Paving owners or employees 
and let me also state that our company had no previous knowledge of these reports 
prior to receiving the fax on 8/17/95. 

I received the reports and sent a reply to the U.S. Department of Labor answering 
the questions on each project. All 21 reports were wrong and I so stated. Without 
going into each I submit the following examples: 

A. Oklahoma University Memorial Football Stadium, Norman, Oklahoma 
showed 2 motor patrol operators, 7 asphalt lay down machine operators, 2 loader 
operators, 7 back end men, 1 bobcat operator, 7 roller operators, 1 backhoe oper- 
ator, and 1 water wagon operator. Our company did no such job. 

B. First Baptist Church, Moore, Oklahoma showed 7 motor patrol operators, 
7 asphalt laydown machine operators, 2 loader operators, 7 back end men, 2 
bobcat operators, 4 roller operators, 2 backhoe operators, and 2 water wagon op- 
erators. We did one job for this church before 1992 but it was all concrete pav- 
ing, not asphalt paving. 

C. Internal Revenue Office, Oklahoma City showed 2 motor patrol operators, 
7 asphalt laydown machine operators, 2 loader operators, 7 back end men, 1 
bobcat operator, 7 roller operators, 2 backhoe operators, and 1 water wagon op- 
erator. Again, this was all concrete paving and there was no asphalt paving on 
the project. 

D. Greens Country Club, Oklahoma City showed 4 motor patrol operators, 7 
asphalt laydown machine operators, 4 loader operators, 7 back end men, 2 bob- 
cat operators, 7 roller operators, 2 backhoe operators, and 1 water wagon opera- 
tor. This was a small concrete job. No asphalt equipment on the job. 

E. Guaranty Bank Branch, Oklahoma City showed 3 motor patrol operators, 
7 asphalt laydown machine operators, 2 loader operators, 7 back end men, 1 
bobcat operator, 7 roller operators, 1 backhoe operator, and 1 water wagon oper- 
ator. Again, this was concrete paving, not asphalt paving. 

I should mention that concrete paving jobs have a lot less operators than asphalt 
jobs. 

Without going into listing the number of operators, the following jobs were also 
concrete, not asphalt: 



106 

Myriad Gardens, Oklahoma City. 
Deaconess Hospital, Oklahoma City. 
All of the WD-10 forms on the 21 projects showed many more operators than we 
would have had on a job. Our average number of operators on the payroll at any 
one time is ten. Most of these reports showed between 30 and 40 operators. 

To mention one more project, one report Usted the Guthrie School job being done 
in 1992. This job was done in 1990. The report showed 7 motor patrol operators; 
we have only 4 motor patrols. 7 asphalt laydown machine operators; we have only 
1 asphalt machine. 4 loader operators; we have 3. 7 roller operators; we have 3. 3 
backjioe operators; we have 1. This WD-10 report showed 40 operators as the peak 
number. To repeat, we do not have anything like the number of machines it would 
take to employ this number of operators. 

All of the 21 reports showed the work done between the months of June, 1992 
through September, 1992, which would have been impossible. 

On 8/18/95, we received another fax from the U.S. Department of Labor with addi- 
tional WD-10 forms on 9 more projects. Again, all 9 were wrong and we faxed this 
information back to the Department of Labor. Examples: 
Tinker Business Park — Concrete, not asphalt. 
Oklahoma City University Law School— Concrete, not asphalt. 
Epperly Heights School — Concrete, not asphalt. 
In conclusion, all 30 reports were wrong. I do not believe any other organization 
but our company should have been able to file these reports and I resent that our 
company name was used in this manner. 
Thank you for allowing me this time. 

STATEMENT OF JAMES MILNER, DIRECTOR, OKLAHOMA 
CITIZENS FOR A SOUND ECONOMY 

Mr. MiLNER. Mr. Hoekstra, Mr. Ballenger, Mr. Istook, I appre- 
ciate the invitation to appear before you today to talk about an 
issue that is of great concern to our organization. Many of you may 
be familiar with our parent organization, Citizens for a Sound 
Economy, I am the Director for Oklahoma Citizens for a Sound 
Economy, 7,000 members here in the State, and like our parent or- 
ganization, our free market philosophies center on less government 
regulation, less government taxation and less government spend- 
ing. It is the issue of government spending that brings us here 
today. 

As Mr. Hoekstra stated earlier, we are not here to discuss the 
issue of Davis-Bacon as a whole, which is unfortunate in a sense, 
in that this is a debate that needs to happen in times when we are 
looking at constraints, in times when we are looking at reducing 
the size of government and the philosophical debate that is going 
on in Washington, DC. When you look at numbers, and maybe 
where you come from $2 billion is not a lot of money, but it is a 
lot of money to me and it is a lot of money to most people that I 
know, $28 million in the State that we are doing here in Okla- 
homa, is the figure that we could save, to a State that has the 
highest threshold, $600,000, in the Nation. And yet, estimates that 
we have been able to conclude from our study, which we will re- 
lease sometime in February, shows that at least a savings from $20 
million to $28 million to the State of Oklahoma. 

When this first broke out, the Commissioner had appeared before 
the committee, the House Labor and Commerce Committee, they 
were putting the presentation on, and today we saw some more 
revelations of the fraud that continues to bubble up as the inves- 
tigation gets deeper. One of the representatives there asked the 
Deputy Commissioner of Labor what definition of fraud the depart- 
ment was using to evaluate the wage surveys. And just to avoid 



107 

that confusion, I will refer to the definition found in "Barron's Law 
Dictionary, Second Edition." That legal definition of fraud is "Inten- 
tional deception resulting in injury to another." 

Clearly, we have seen by the evidence presented today that this 
evidence was intentional. It is more than coincidence that these 
forms, these contractors are here today, they have not even worked 
on jobs. It goes beyond the explanation of accident or coincidence. 

It also is demonstrated to be intentional because two union mem- 
bers who have told the media that they were instructed by building 
trade officials to fill out the forms falsely — that the Federal Depart- 
ment of Labor would never discover it. These members stated that 
they will testify under oath to that fact. The injury of course is un- 
questionable. These individuals who have violated the law have in- 
jured their union members, they have injured the contractors who 
appear before you today and they have injured the taxpayers of 
this State. 

The definition continues that "Elements of fraud are a false and 
material misrepresentation made by one who either knows it is a 
falsity or is ignorant of the truth." 

Based on the Department of Labor's investigative report which 
you saw, 294 facts, 41 exhibits were presented covering three dis- 
tinct cases — a sanitary sewer project in Oklahoma City that was 
reported to the U.S. Department of Labor in greatly exaggerated 
form; a $2 million underground storage tank in Mustang that was 
reported to the U.S. Department of Labor but does not exist; and 
two phases of the Lake Hefner water treatment plant in Oklahoma 
City that were reported to the U.S. Department of Labor, one in 
exaggerated form and the other that did not exist — and both falsely 
attributed to a contractor who was not involved in either project. 

The definition continues that one of the elements of fraud is "the 
maker's intent that the representation be relied on by the person 
and in a manner reasonably contemplated; the person's ignorance 
of the falsity of the representation; the person's rightful or justified 
reliance; and proximate injury to the person." 

Those who filled out those forms fraudulently or orchestrated the 
fraudulent completion of the forms knew that the U.S. Department 
of Labor would use the fraudulent information on the form in the 
computation of the prevailing wage for corresponding occupations 
in the construction industry. 

The interesting thing is that no matter what dictionary you use 
in the definition of fraud, what has been brought before you today 
is clearly that — fraud. 

This fraud costs the taxpayers more money. It costs the tax- 
payers more money through the inflated wages they paid that were 
established on fraudulent data. It is costing the taxpayers more 
money in the investigation of the case by Federal and State agen- 
cies. It is costing the taxpayers more money in the prosecution of 
those found to be the perpetrators of the fraud. It cost the tax- 
payers more money in the incarceration of the perpetrators once 
found guilty by a jury of their peers. But do not misinterpret this 
statement as a plea for leniency for those who perpetrated the 
fraud because of the costs borne by the Oklahoma taxpayer. 

In fact, I and other members of Citizens against Prevailing 
Waste, a State coalition to repeal Oklahoma's little Davis-Bacon 



108 

Act, recommend the converse. The FBI should leave no stone 
unturned in their investigation for violations of Federal crimes as 
the Oklahoma State Bureau of Investigation should do in their in- 
vestigation for violations of State crimes. The U.S. Attorney should 
prosecute every individual found to have violated Federal law as 
the Oklahoma State Attorney General should do in his prosecution 
of every individual found to be in violation of State law. The Fed- 
eral and State judges assigned to the case should give each per- 
petrator, upon his conviction, the maximum sentence, showing no 
leniency. After all, the taxpayers deserve justice. This fraud com- 
mitted by a few, injuring many, has brought this investigation 
about. 

My statement illustrating the cost taxpayers will bear as a result 
of this fraud is to call attention to the system in which the fraud 
was committed. In testimony by the Comptroller General of the 
General Accounting Office before a Congressional Oversight Com- 
mittee examining the Davis-Bacon issue, Comptroller General 
Elmer Staats stated, "After all these years, the Department of 
Labor has not developed an effective program to issue and main- 
tain current wage determinations." Further into his testimony, he 
said that "in many instances the wage rates were not accurately 
determined. About one-half of the area and project determinations 
reviewed were not based on surveys of wages paid to workers on 
private projects in the locality. Inaccurate wage rates are still being 
issued. In our opinion, the Department of Labor's procedure for de- 
veloping and issuing wage rate determinations provide no assur- 
ances that the rates stipulated actually prevail for corresponding 
classes of workers on similar private construction projects in the lo- 
cality." He concluded by saying "For many years, we concentrated 
on trying to get the quality of the administration by the U.S. De- 
partment of Labor improved. We finally reached the conclusion, 
having done a lot more surveys ourselves with the costs involved 
and the difficulties of collecting the information and making the de- 
termination, that to concentrate on improving the administration is 
not the answer. The Act is just not administrable in any effective 
or practical way." 

Oklahoma Citizens for a Sound Economy, the members of Okla- 
homa Citizens Against Prevailing Waste and the taxpayers of this 
State concur. The fraud uncovered in the submission of wage sur- 
veys is not contained within the boundaries of this State. It is not 
contained within the boundaries of this region. Nor, is it contained 
within the boundaries of this Nation. The fraud is contained in the 
boundaries of the system. 

Investigate the U.S. Department of Labor's wage surveys from 
across the country and I am sure that you will find fraud. Inves- 
tigate those submitting the surveys across the country and I am 
sure that you will find fraud. Prosecute them, incarcerate them. 
But that will take time and money — taxpayers' money. Would it 
not be more accountable and more responsible to the taxpayers to 
simply repeal the Davis-Bacon law allowing for the market to de- 
termine the prevailing wage? After all, that is what the GAO rec- 
ommended. And that was 15 years ago. 



109 

Mr. Chairman, Members of the committee, I appreciate your in- 
terest in this issue and what we have said regarding the issue, and 
your consideration of the information presented. 

Chairman Ballenger. Thank you. Now if you will switch with 
Mr. Estell. 

[The prepared statement of Mr. Milner follows:] 

Statement of James Milner, Director, Oklahoma Citizens for a Sound 
Economy 

Mr. Chairman, members of the Committee, 

Thank you for the invitation to appear before you today to present our members 
views on the issue before this committee today. My name is James Milner, Director 
of Oklahoma Citizens for a Sound Economy. Many of you may vaguely be with our 
parent organization in Washington, D.C., Citizens for a Sound Economy. Here in 
Oklahoma, we have over 7,000 members who support our free market philoso- 
phies — less government regulation, less government taxation and less government 
spending. It is government spending that orings us here today. 

Unfortunately it is not in the context that we at Oklahoma Citizens for a Sound 
Economy would prefer. We, as many others in this state, as well as this nation, 
would welcome the opportunity to appear before you to address the issue of Davis- 
Bacon. We would welcome the opportunity to discuss the savings of approximately 
two billion dollars annually to the federal government and $28 million annually to 
Oklahoma state government if Davis-Bacon were repealed. More importantly, we 
would welcome the opportunity to have any of the proponents provide a sound eco- 
nomic answer to the question: Why does the taxpayer, the developer of public 
projects, have to pay 15 percent to 20 percent more for labor costs in the construc- 
tion of a public building than a private developer would pay for the construction of 
the same Duilding? 

But we are not here to talk about those numbers. We are here to talk about other 
numbers. Numbers that when checked by the Oklahoma Department of Labor 
turned out to be false. The false numbers ranged from the number of workers on 
a project to the numbers in the address of projects. We are here to talk about num- 
bers that when added equal FRAUD. 

At an interim hearing of the Oklahoma House Commerce, Industry and Labor 
Committee, a state representative asked the state Deputy Commissioner of Labor 
what definition of fraud that the department was using in evaluating the wage sur- 
veys. To avoid any confusion today, I refer to the definition of fraud found in Bar- 
ton's Law Dictionary, Second Edition. 

That legal definition of fraud is intentional deception resulting in injury to an- 
other. 

• We know it to be intentional because two union members have told the media 
that they were instructed by a building trades official to fill out the forms false- 
ly as the federal "Department of Labor would never discover it." These members 
stated that they will testify under oath to that fact. The injury to another is 
unquestionable. These individuals who have violated the law have injured their 
union members, the contractors who have appeeired before this committee today 
and the taxpayers of Oklahoma. 

It continues: Elements of fraud are: a false and material misrepresentation made 
by one who either knows it is falsity or is ignorant of the truth; 

• Based on the Oklahoma Department of Labor's Investigative report dated July 
11, 1995 294 facts and 41 exhibits were presented covering three distinct 
cases — a sanitary sewer project in Oklahoma City, OK that was reported to the 
U.S. Department of Labor in greatly exaggerated form; a $2 million under- 
ground storage tank in Mustang, OK that was reported to the U.S. Department 
of Labor but doesn't exist; and two phases of the Lake Hefner Water Treatment 
Plant in Oklahoma City, OK that were reported to the U.S. Department of 
Labor — one in exaggerated form the other that did not exist, and both falsely 
attributed to a contractor who was not involved in either project. 

Continuing, the maker's intent that the representation be relied on by the person 
and in a manner reasonably contemplated, the person's ignorance of the falsity of the 
representation; the person's rightful or justified reliance; and proximate injury to the 
person. 

• Those who filled out the forms fraudulently, or orchestrated the fraudulent 
completion of the forms, knew that the U.S. Department of Labor would use the 
fraudulent information on the form in the computation of the prevailing wage 
for corresponding occupations in the construction industry. 



110 

Interestingly enough, if you were to use the definition provided by Webster or by 
Funk and Wagnall to evaluate the information contained in the Oklahoma Depart- 
ment of Labor's report, the act committed by those that submitted the information 
is still definable as FRAUD. 

This fraud cost the taxpayers more money. It cost the taxpayers more money 
through the inflated wages they paid that were established on fraudulent data. It 
is costing the taxpayers more money in the investigation of the case by federal and 
state agencies. It is costing the taxpayers more money in the prosecution of those 
found to be the perpetrators of the fraud. It cost the taxpayers more money in the 
incarceration of the perpetrators once found guilty by a jury of their peers. Do not 
misinterpret this statement to be plea of leniency for those who perpetrated the 
fraud because of the costs home by the Oklahoma taxpayer. 

In fact, I and the other members of Citizens Against Prevailing Waste — a state 
coalition to repeal Oklahoma's Little Davis-Bacon Act — recommend the converse. 
The FBI should leave no stone unturned in their investigation for violations of fed- 
eral crimes as the Oklahoma State Bureau of Investigation should do in their inves- 
tigation for violations of state crimes. The U.S. Attorney should prosecute every in- 
dividual found to have violated federal law as the Oklahoma State Attorney General 
should do in his prosecution of every individual found to be in violation of state law. 
The federal and state judge assigned to the case should give each perpetrator, upon 
his conviction, the maximum sentence showing no leniency. After all, the taxpayers 
deserve justice. This fraud committed by few, injuring many, has brought this inves- 
tigation about. 

My statement illustrating the cost taxpayers will bear as a result of this fraud 
is to call attention to the system in which the fraud was committed. In testimony 
by the Comptroller General of the General Accounting Office (GAO) before a Con- 
cessional Oversight Committee examining the Davis-Bacon issue. Comptroller 
General Elmer Staats stated "After all these years, the Department of Labor has not 
developed an effective program to issue and maintain current wage determinations 
..." Further into his testimony he said "that in many instances the wage rates were 
not accurately determined About one-half of the area and project determination re- 
viewed were not based on surveys of wages paid to workers on private projects in the 
locality. Inaccurate wage rates are still being issued In our opinion, the Department 
of Labor's procedure for developing and issuing wage rate determinations provide no 
assurances that the rates stipulated actually prevail for corresponding classes of 
workers on similar private construction projects in the locality." He concluded by say- 
ing "For many years we concentrated on trying to get the quality of the administra- 
tion (by the U.S. Department of Labor) improved ...we finally reached the conclu- 
sion, having done a lot more surveys ourselves with the costs involved and the dif- 
ficulties of collecting the information and making the determination, that to con- 
centrate on improving administration is not the answer. The act is just not 
adminstrable (sic) in any effective or practical way. " 

Oklahoma Citizens for a Sound Economy, the members of Oklahoma Citizens 
Against Prevailing Waste and the taxpayers of this state who understand the issue 
concur. The fraud uncovered in the submission of wage surveys is not contained 
within the boundaries of this state. It is not contained in the boundaries of this re- 
gion. Nor, is it contained within the boundaries of this nation. It is contained in the 
boundaries of the system. 

Investigate the U.S. Department of Labor's wage surveys from across the country 
and I am sure that you will find fraud. Investigate those submitting the surveys 
across the country and I am sure that you will find fraud. Prosecute them. Incarcer- 
ate them. But that will take time and money. Taxpayers money. Would it not be 
more accountable and more responsible to the taxpayers to simply repeal the Davis- 
Bacon Law allowing for the market to determine the prevaihng wage. After all, that 
is what the GAO recommended. And that was fifteen yeairs ago. 

Mr. Chairman, members of the committee, I appreciate your interest in this issue, 
in what we have said regarding the issue and your consideration of the information 
presented. 

STATEMENT OF BILL ESTELL, QUICKWAY EXCAVATING 

Mr. ESTELL. Mr. Chairman, distinguished Members of the com- 
mittee, my name is Bill Estell. I am the Secretary-Treasurer of 
Quickway Excavating Company, Inc. We are an excavation firm 
here in Oklahoma City. 



Ill 

Ever since the Oklahoma Department of Labor uncovered the 
fraud in the Davis-Bacon surveys, some groups have attempted to 
shift focus away from the findings. This issue is not about wages, 
this issue is about Ues, fraud and the theft of taxpayers' money. 

Some selfish interest groups would lead you to believe that the 
demise of Davis-Bacon means contractors will be sticking money in 
their pockets at the expense of the working people. Those people 
are either ignorant or attempting to cover up for the lawbreakers. 
Under Davis-Bacon, whether the wage is $20 an hour or $200 an 
hour, the cost is borne by the taxpayers. Whenever you hear the 
argument that this is about wages, you know you are about to hear 
an outrageous lie. 

I am here today as a victim of the fraud surrounding Davis- 
Bacon. As an honest businessman, my company was the victim of 
those who would steal from the taxpayers. Last summer, I was con- 
tacted by the U.S. Department of Labor. A Ms. Lee asked me to 
verify information contained in wage surveys regarding jobs my 
company had worked on. The information turned in on those sur- 
veys was false. Our company did not turn these certain wage forms 
in ourselves, the ones she was asking about. 

I was quite frankly shocked by the revelations of the USDOL. I 
asked Ms. Lee who turned in the false information and her reply 
was "the union." I was outraged as a business owner and a tax- 
payer. I wanted to know specifically which individuals had sent in 
the false data. Sadly and regrettably, I was told that the USDOL 
would not reveal the names of these culprits. 

The forms I hold in my hands today show a pattern of blatant 
disregard of the law and the tsixpayers. My community has been 
victimized, my children's education has been compromised and my 
State has been penalized. It is even worse when you consider the 
fact that Robert Reich's people know who the lawbreakers are and 
continue to cover it up. 

These forms show jobs never worked on, inflated work forces, 
equipment that was never used, incorrect dates of work periods or 
they show no dates at all. 

For example — and these are included in my testimony — on form 
number one that was turned in on our company on Midwest City 
Regional Hospital. The forms show we had three scrapers on this 
project. In fact, we had none. The date of the work week ending 
shows the whole month of June of 1992, not just one peak week 
as called for by the form. The form shows up to 14 people working 
for the peak week. We had no more than four. 

On my form number two that she was asking about, Oklahoma 
City Zoo's Great Escape. This form also shows three scrapers. We 
had none. Again, the date of the work week ending incorrectly 
shows all of July, 1992. The form shows up to 15 people working 
for the peak week. Only two people actually worked during this 
time period. 

On my form number three, Edmond North High School. This 
form was not completely filled out, yet it was still used by USDOL. 
The form shows no starting date, no completion date, no work week 
ending date. Therefore, we cannot confirm this information. It was 
still used. 



112 

On our form number four, Moore South Elementary School. The 
form shows three scrapers, we had one. It also shows up to nine 
people on this job during the week ending 7/1/92. We had no more 
than two. 

Form number five, Roosevelt Elementary in Norman. Again, no 
work ending date was listed, so I could not verify this information. 
The forms shows three scrapers on this project, we never had a 
scraper on this project. One water wagon was listed, we never had 
a water wagon on this project. It also shows up to 10 employees 
for the peak week, we never had more than four. 

Number six shows that we worked on Mustang School Commons 
Building High School. We did not do this project. 

Form number seven, a metro area vocational technical school, we 
did not do this project. 

Mr. Chairman and Members of the committee, this is not a par- 
tisan issue. Any rational individual knows this is not about wages. 
This is about stealing from taxpayers. These forms show a total 
lack of respect for the law and the taxpayers. I ask that you ignore 
those who would attempt to get the focus off the criminals by ex- 
ploiting the emotions of working people. 

From these wage surveys, common sense tells us that the indi- 
viduals who falsely filled out these forms knew this information 
was corrupted, yet it was submitted with the purpose of fraudu- 
lently increasing the prevailing wage. 

Mr. Chairman, I ask your committee to do whatever is possible 
to prosecute and punish those who have stolen from the taxpayers 
in Oklahoma. And again, I appreciate being asked to be here today. 

Chairman Ballenger. Mr. Bumpers, I understand that we are 
going to have our anonymous witnesses and then you get to finish. 
Is that okay? 

Mr. Bumpers. Obviously. 

Chairman Ballenger. I think we will change our mind and you 
can slip in there, Mr, Bumpers. 

If all the witnesses will stay, we will ask questions when we get 
a little better organized here. 

[The prepared statement of Mr. Estell follows:] 



113 



Testimony of Bill Esteil, 

Secretary-Treasurer ofQuickway Excavating, Oklahoma City, OK 

The Subcommittee on Workforce Protections, The Honorable Cass Ballenger, Chairman 
The Subcommittee on Oversight and Investigations, The Honorable Pete Hoekstra, Chairman 



Mr. Chairman, Distinguished Members of the Committee, 

Ever since the Oklahoma Department of Labor uncovered the fraud in the Davis-Bacon surveys, 
some groups have attempted to shift focus away from the findings 

This issue is not about wages, this issue is about lies, fraud and the theft of taxpayers' money 

Some selfish special interest groups would lead you to believe that the demise of Davis-Bacon 
means contractors will be sticking money in their pockets at the expense of working people. 
Those people are either ignorant or attempting to cover-up for the lawbreakers Under Davis- 
Bacon, whether the wage is twenty dollars an hour or two hundred dollars an hour, the cost is 
borne by the taxpayers Whenever you hear the argument that this is about wages, you know you 
are about to hear an outrageous lie 

I'm here today as a victim of the fraud surrounding Davis-Bacon As an honest businessman, my 
company was the victim of those who would steal from the taxpayers Last summer, I was con- 
tacted by the US Department of Labor A Ms Lee asked me to verify information contained in 
wage surveys regarding jobs my company had worked on The information turned in on those sur- 
vey was false 



114 



I was, quite frankly, shocked by the revelations of the US DOL I asked Ms Lee who turned in 
the false information Her reply was "the union " 

I was outraged as a business owner and a taxpayer. I wanted to know specifically which individu- 
als had sent in false data Sadly and regrettably, I was told that the US DOL would not reveal 
the names of these culprits 

The forms I hold in my hands today show a pattern of blatant disregard of the law and the taxpay- 
ers. My community has been victimized, my children's education has been compromised, and my 
state has been penalized It is even worse when you consider the fact that the Roben Reich's peo- 
ple know who the lawbreakers are and continue to cover it up. 

These forms show jobs never worked on, inflated work forces, equipment that was never used, in- 
correct dates of work periods or they showed no dates at all. For example: 

Form #1 Midwest City Regional Hospital The forms show we had three scrapers In fact, we 
had none. The date of the work week ending shows the whole month of June of 1992, not just 
one peak week as called for by the form The form shows up to fourteen people working for the 
peek week We had no more than four 

Form #2. Oklahoma City Zoo's Great EscApe This form also shows three scrapers We had 
none Again the date of the work week ending incorrectly shows all of July in 1992 The form 
shows up to fifteen people working for the peek week Only two people actually worked during 
this time period. 



115 



Form #3 Edmond North High School This form was not completely filled, yet was still used by 

USDOL The form shows no starting date, no completion date, and no work week ending date. 

Therefore we cannot confirm the information 

Form #4 Moore South Elementary School The form shows three scrapers We had one. It 

also shows up to nine people on this job during the work week ending 7-1-92 We had no more 

than four 

Form #5. Roosevelt Elementary in Norman Again, no work week ending date was listed, so I 

could not verify this information The form shows three scrapers on this project. We never had a 

scraper on this project One water wagon was listed, we never had a water wagon on this project. 

It also shows up to ten employees for the peak week, we never had more than four 

Form #6 Mustang School Commons Building HS We did not do this project. 

Form #7. Metro-area vocational technical school We did not do this project 

Mr Chairman and members of the committee, this is not a panisan issue Any rational individual 
knows this is not about wages This is about stealing from the taxpayers These forms show a to- 
tal lack of respect for the law and the taxpayers I ask that you ignore those who would attempt to 
get the focus off the criminals by exploiting the emotions of working people 

From these wage surveys, common sense tells us that the individuals who falsely filled out these 
forms knew this information was corrupted, yet it was submitted with the purpose of fraudulently 
increasing the prevailing wage Mr Chairman, I ask your committee to do what ever is possible 
to prosecute and punish those who have stolen from the taxpayers of Oklahoma. 



116 



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123 

STATEMENT OF TERRY BUMPERS, DIRECTOR, NATIONAL 
ALLIANCE FOR FAIR CONTRACTING 

Mr. Bumpers. Mr. Chairman, Members of the subcommittee, my 
name is Terry Bumpers and I am the Director of the National Alli- 
ance for Fair Contracting, and I may be the only one in this room 
or maybe in the State of Oklahoma that appears before you today 
to testify on behalf of the Davis-Bacon Act. 

I come here today to represent 21,000 contractors, not labor 
unions, that are members of our coalition that we have built since 
January, since H.R. 500 was introduced to repeal the Davis-Bacon 
Act. And I would like to take exception, if I could, our organization 
back then I think numbered about 14,000 contractors and we re- 
quested your office. Congressman Ballenger, to testify before that 
subcommittee in that hearing back in February and we were de- 
nied that right. And it appears — and we were denied the right ap- 
parently on the basis of the fact that we were not for repealing 
Davis-Bacon Act, but were in fact for reforming the Davis-Bacon 
Act. And it appears to me today that this hearing is much like the 
one that was conducted in February, there has been a long list of 
witnesses that have talked about the evils of the Davis-Bacon Act 
and I appear before you today as the Lone Ranger, so to speak, 
with regard to being for reform of the Act. 

The information presented here today, in my opinion, is nothing 
more than a rehash of the old information for those of us that have 
read the Oklahoma investigation. More importantly, I do not be- 
lieve that anyone has substantiated anything different, other than 
those three cases that are sitting up there as we see them today 
and that there has not been any additional evidence, to my knowl- 
edge, that wrongdoing has been done. And if so, you know, I would 
suggest that the Justice Department, the U.S. Department of Labor 
get on with their obligation to make sure that anyone that has 
committed fraud, perjury, whatever in the course of submitting 
WD-10 forms, that they should be prosecuted as well. 

Finally, I would like to question why you indicated that the hear- 
ing today is not about the Davis-Bacon Act. Oh, but it is about the 
Davis-Bacon Act — it is really about the Davis-Bacon Act. We ques- 
tion why the leadership of the subcommittee and the leadership of 
the House of Representatives will not allow the full Congress to 
vote on our efforts to reform the Davis-Bacon Act, especially since 
it appears obvious to us that the full Economic and Educational 
Opportunities Committee would pass H.R. 2472, which I am sure 
you are familiar with, and refer it to the House floor. 

I would like to call your attention to the fact that three Repub- 
licans on the full Committee have cosponsored H.R. 2472 and as- 
suming we had all the Democrats to support the Act as well, then 
this Act would be submitted to the floor, and at that time we be- 
lieve that we would have actual reform of the Davis-Bacon Act. 

The fact is that Speaker Gingrich and the Republican leadership 
killed repeal as part of the current budget reconciliation legislation 
because a significant number of Republicans, as well as a majority 
of the House and Senate, support reform of the Davis-Bacon Act. 
These hearings today, in my opinion again, are nothing more than 
an effort on your part to jump start a dying campaign to repeal the 
Davis-Bacon Act. 



124 

I realize it is not about Davis-Bacon, but I would like to submit 
for the record H.R. 2472, as well as a list of the 87 cosponsors in 
the House of Representatives of H.R. 2472, which includes 35 Re- 
publicans. So it is a bipartisan effort to reform the Davis-Bacon 
Act. 

I think we all know the simple answer to these questions that 
have been raised here today. There is no doubt this is a politically 
motivated hearing by individual Congressmen such as yourself, 
who know that the Oklahoma case is not really the tip of the ice- 
berg as they claim. That their repeal efforts, as I indicated, have 
been stalled because of the fact that our 21,000 union and non- 
union contractors support reforming the Davis-Bacon Act and not 
repealing it. 

To prove that Davis-Bacon repeal is on your agenda, I quote 
from the Republican budget. In addition to a modification, there 
has been a lot said about the Labor Department and I am not here 
to defend the Labor Department by any stretch of the imagination, 
but there has been a lot said about the Labor Department's lack 
of resources in going after people that have committed this alleged 
fraud in Oklahoma. One of the reasons for that is Members of Con- 
gress continually reduce their budget and I want to read to you 
from the current budget that reduction of 25 percent has been 
made for enforcement activities under the Davis-Bacon Act and the 
Service Contract Act. And I quote, "This begins a phase-out of the 
enforcement staff in anticipation of these Acts being repealed." So 
there is little doubt in my mind what the objective of these hear- 
ings today is, and that is to gain momentum for your repeal cam- 
paign. 

Needless to say, as a person who does not lobby Congress, at 
least on a regular basis as an occupation, 1995 certainly has been 
an educational process. Our 21,000 member Contractors Coalition 
for Davis-Bacon was created as a result of the introduction of H.R, 
500 and we spent the better part of the year trying to refute lies 
and distortions regarding the Davis-Bacon Act. After 22 separate 
attempts in Congress during 1995, the 104th Congress, to repeal 
the Davis-Bacon Act, fewer Members of Congress support repeal 
today than at the beginning of the 104th Congress. As an American 
citizen, I am dismayed and saddened by the fact that the majority 
of Congress and the will of the American people are being thwarted 
by a few repeal crusaders in Congress Vvho are blocking passage of 
Davis-Bacon reform. Here are just a few of these distortions. 

(1) Davis-Bacon inflates costs. And here today in the hear- 
ings, we have heard numerous costs, none of which I believe 
are defended. Especially in light of the fact of the statements 
made here today — that it is one billion dollars a year, that it 
is 30 percent added to the construction cost, that it is billions 
and billions of dollars. I have been hearing that since we start- 
ed this campaign to reform the Davis-Bacon Act. 

(2) The Davis-Bacon Act is racist. I am sure you have heard 
these charges leveled against the Act itself And it seems 
strange to me that approximately 37 members of the Black 
Caucus have written a letter to a producer at 20/20 relative to 
their support of the Davis-Bacon Act. Moreover, the NAACP, 



125 

which I do not beUeve is a racist organization, has passed a 
resolution in support of the Davis-Bacon Act. 

(3) Davis-Bacon means union rates. Your good friend, Mr. 
Faircloth from North CaroUna — I think every time he says the 
word Davis-Bacon, it is followed by "mieans union rates." He 
knows it is not right, you know it is not right. As a matter of 
fact, 21 percent of the rates issued by the U.S. Department of 
Labor are based on union collective bargaining agreements. 

(4) Davis-Bacon bars non-union employers from working on 
most government projects. All I have to do is look around me 
here, you guys are working on Davis-Bacon projects. I do not 
really think you are union, but I would not know that. 

(5) Honest business men are denied Federal contracts. I do 
not understand that statement at all, but it was made by Con- 
gressman Mark Souder, freshman from Indiana. 

(6) Davis-Bacon is corrupt. It might appear on the surface 
that there might be some improprieties here in Oklahoma. 

(7) Davis-Bacon is rife with political favoritism. I do not 
have knowledge of where that came from or what is meant by 
that. 

But again, we have heard the cost. Time after time after time the 
cost of Davis-Bacon Act, and often times you refer to the CBO 
study as the reference to the cost of the Davis Bacon Act. The prob- 
lem with that is you have not read the CBO study. If you did, you 
would know that the CBO study says that while productivity was 
not factored into our calculations, the cost of the Davis-Bacon Act 
is really truly not obtainable, by anyone in the economic commu- 
nity. 

Now after these distortions and outright lies that I have just 
mentioned have failed to persuade a majority of Congress, here we 
are in Oklahoma with Brenda Reneau, Congressman Ballenger, 
Congressman Hoekstra, Congressman Istook, with another angle — 
fraud. It is so rife with fraud that we cannot possibly salvage the 
Davis-Bacon Act. It cannot be administered — I can hear you now 
when you get back to Washington. It cannot be administered and 
therefore must be repealed. If these allegations are proven, some- 
thing that is yet to occur, we would urge the Federal Government 
to deal appropriately with all these violations. 

Before discussing the specifics of the Oklahoma alleged fraud 
case, let us not forget, as indicated here today, that the case is still 
under investigation by the Justice Department, and as such, in my 
opinion, this hearing should not be held at all until they render a 
conclusion in that investigation. I believe this hearing has tried 
and convicted individuals and the Davis-Bacon Act without a prop- 
er hearing. 

In order to understand the repealers' motivation, we must first 
look at Oklahoma as it relates to the administration of the Davis- 
Bacon Act on a nationwide basis. I believe you indicated there is 
$48 billion worth of construction work that falls under the purview 
of the Davis-Bacon Act. I thought it was more like 60, but it is a 
substantial amount of money at any rate and I certainly would not 
quibble with the $48 billion. What we have got to look at here is 
this case involves less than $10 million worth of construction work. 
Now I realize to the people in Oklahoma, this is near and dear to 



36-049 - 96 



126 

their hearts and rightfully so. But if you are talking about $10 mil- 
lion worth of construction and $60 billion nationwide in a Federal 
construction market, only three of the projects are involved among 
the thousands of projects requiring prevailing wage rates. State- 
ments made in the investigative report that Oklahoma is just the 
tip of the iceberg and I have heard you, Congressman, Ballenger, 
use that phrase as well, which has been repeated time and time 
again, as I indicated, are simply not true. If it is true, then where 
is your evidence? According to the U.S. Department of Labor, this 
is the first time since 1964 that fraud has been alleged in the sur- 
vey process. Would one not think that with all the controversy, the 
negative publicity surrounding the Davis-Bacon Act, that more 
fraud cases would have surfaced before now? I certainly think they 
would. 

If you desire to hold hearings on Davis-Bacon violations, which 
I encourage you to do — I am not objecting to that — I suggest that 
you look into the unscrupulous contractors who fraudulently 
misclassify their workers to obtain low bids on Federal projects. 
That is where the real fraud occurs. In fact, the National Alliance 
for Fair Contracting, the organization I represent, our members 
spend well over $15 million annually in private money — not public 
money — in order to catch these violators. More emphasis on en- 
forcement of the Davis-Bacon Act may help you balance the budget 
and save millions of dollars instead of repealing, as you have ex- 
pressed in your opinion. 

Anyone familiar with the wage survey process is fully aware that 
in many instances projects and information are used that should 
not be included in the survey. And I think that is evidenced by this 
particular survey. These challenges, however, are generally made 
through the normal process of dealing with the Labor Department. 
If you feel that an improper survey has been conducted and 
projects have been used that do not properly belong in that particu- 
lar survey, there are legitimate challenges, short of going to court 
and putting on a hearing such as this nature, that possibly could 
have changed the outcome of that survey. 

In fact, the U.S. Department of Labor, upon review of the allega- 
tions in this case, deleted 67 of the 145 WD-10 form submissions 
that were made by contractors. Did these 67 form submissions con- 
tain fraudulent information, or were they honest mistakes made by 
contractors who voluntarily submitted the data? Giving everyone 
the benefit of the doubt, we believe most WD-10 submissions are 
made in good faith, and not to fraudulently inflate wage rates. 

Take the case of North Carolina, Chairman Ballenger's home 
State. For highway construction in numerous counties, the prevail- 
ing wage, which is part of your District, Congressman — here are 
the prevailing rates that have been issued by the U.S. Department 
of Labor: 

Carpenters — $7.71 an hour, no fringe benefits. 
Laborers — $5.62 an hour, no fringe benefits. 
Bulldozer operator — $6 an hour, no fringe benefits. 
Grade checker — $4.99 an hour, no fringe benefits. 

Surely, Chairman Ballenger does not suggest that fraud has been 
committed to inflate these rates, because if they did they did really 
a poor job of doing it. If this is part of the tip of the iceberg, then 



127 

something is wrong with the process certainly. Maybe your con- 
stituents, however, would be better served if an investigation were 
conducted to find out why these rates are so low and if in fact a 
construction worker would actually work for $4.99 an hour with 
zero fringe benefits. 

As I indicated, our purpose in appearing today is not to defend 
the Labor Department and the entire process. Is there room for im- 
proved administration of the Act? Obviously, yes. Is there room for 
improvement of the survey process? Again, yes. Is there room for 
better enforcement of the Act? I have indicated to you I would pre- 
fer to see better enforcement of the Act. 

Improvement in these areas is virtually impossible when Mem- 
bers of this subcommittee continually slash the budget of the U.S. 
Department of Labor and refuse to allow a bipartisan reform pro- 
posal which would eliminate two-thirds of the number of projects 
covered by the Act, to come to the House floor for a vote. 

It appears to me that if Members of this subcommittee were lis- 
tening to the entire Congress, you would be holding hearings on 
H.R. 2472, which would include the survey process, instead of hold- 
ing hearings on the survey process itself. 

Our coalition is for improving the administration of the Act, im- 
proving the survey process and enhancing enforcement, which is 
part of our reform proposal. 

The irony is many of your objectives expressed here today will 
not be forthcoming unless you move to enact Davis-Bacon reform, 
which is awaiting action upon your return to Washington, if you 
can get back. 

That is the end of my statement. Thank you very much for the 
time. 

Chairman Ballenger. We are going to move the cameras now. 
Let us take a break so you can move the cameras and get set up — 
five minute break. 

[Recess.] 

Chairman Ballenger. Okay. Witness A, you will be on my left. 

[The prepared statement of Mr. Bumpers follows:] 

Statement of Terry G. Bumpers 

Mr. Chairman, members of the Subcommittee, my name is Terry Bumpers. I am 
the Director of the National AlHance for Fair Contracting. Before I begin my testi- 
mony on behalf of the Contractors Coailition for Davis-Bacon ("Reform Yes-Repeal 
No"), the 21,000 members of the Contractors Coalition would like to thank the mi- 
nority members of this Subcommittee for allowing us to testify on the Davis-Bacon 
Act. We thank them because one year ago Chairman Ballenger denied us, or any 
other business witness critical of repeal of the Davis-Bacon Act, the privilege of tes- 
tifying on H.R. 500. Subcommittee staff screened witnesses to assure a one-sided 
hearing and our request to testify orally was denied after it was learned that our 
testimony would be for reforming not for repealing the Act. 

Without objection, I would like to submit H.R. 2472 for the record and the list 
of 87 cosponsor which includes 35 Republicans. 

Also, we must question why these hearings are being held here in Oklahoma in- 
stead of Washington, D.C., where the jurisdiction for Davis-Bacon fraud examina- 
tion exists. Further, what is the additional cost of these hearings to a Congress cur- 
rently trying to find ways to balance the budget, while the issue of the Oklahoma 
fraud case, while noteworthy, amounts to nothing more than a few cases involving 
less than $10 million worth of construction out of more than $60 billion annually 
spent on federal construction. 

Finally, we must question why the leadership of this Subcommittee and the lead- 
ership of the House of Representatives will not allow the full Congress to vote on 



128 

our efforts to reform the Davis-Bacon Act, especially since it appears obvious that 
the full Economic and Educational Opportunities Committee would pass H.R. 2472 
and refer it to the House floor. (Note: 3 Republican full Committee members are al- 
ready cosponsors of H.R. 2472.) The fact is that Speaker Gingrich and the Repub- 
lican leadership killed repeal as part of the current budget reconciliation legislation 
because a significant number of Republicans, as well as a majority of the House and 
Senate, support reform of the Davis-Bacon Act. The argument favoring repeal has 
already been debated and defeated in the 104th Congress. 

The answer to all of these questions is simple. There is no doubt that these hear- 
ings are poHtically motivated by individual Congressmen who know that the Okla- 
homa case is not the "tip of the iceberg" as they claim and that their repeal efforts 
have been stalled because of the fact that our 21,000 member union and non-union 
Contractor Coalition for Davis-Bacon has effectively refuted every extremist claim 
made about the so-called evils of Davis-Bacon. These hearings are nothing more 
than an effort on the part of these Congressmen to "jump-start ' an otherwise failed 
crusade to repeal Davis-Bacon by making false statements that there is wide spread 
fraud in the wage survey process based upon unique and limited survey allegations 
in Oklahoma. 

Needless to say, for a person who does not lobby Congress as an occupation, 1995 
certainly has been an educational process. Our 21,000 member Contractors' Coalition 
for Davis-Bacon was created as a result of the introduction of H.R. 500 and has 
spent the better part of a year attempting to refute the lies and distortions that re- 
peal zealots have spread about the Davis-Bacon Act. After 22 separate attempts in 
Congress during 1995 to repeal the Davis-Bacon Act fewer members of Congress 
support repeal today than at the beginning of the 104th Congress. As an American 
citizen, I am dismayed and saddened by the fact that the majority of the Congress 
and the will of the American people are being thwarted by a few repeal crusaders 
in Congress who are blocking passage of Davis-Bacon reform. Here are just a few 
of these distortions: (1) Davis-Bacon inflates costs, (2) Davis-Bacon is racist; (3) 
Davis-Bacon means union rates; (4) Davis-Bacon bars non-union employers from 
working on most government projects; (5) honest businessmen are denied federal 
contracts; (6) Davis-Bacon is corrupt; (7) Davis-Bacon is rife with political favor- 
itism; and on and on and on. 

Now, after these distortions and outright Lies have failed to persuade a majority 
of Congress, along come Oklahoma Labor Commissioner Brenda Reneau, Congress- 
man Cass Ballenger, and Congressman Peter Hoekstra with another angle, which 
is: There is so much "possible" or "potential" fraud in the survey process that Davis- 
Bacon cannot be administered and therefore, must be repealed. If these allegations 
are proven — something that has yet to occur — we would urge the federal govern- 
ment to deal appropriately with anv and all violations. 

Before discussing the specifics of the Oklahoma alleged fraud case, let us not for- 
get that the case is still under investigation by the Justice Department and as such 
this hearing should not be held until such time as they render a decision on the 
case. 

In order to understand the repealers motivation, we must first look at Oklahoma 
as it relates to the administration of the Davis-Bacon Act on a nationwide basis. 
The case involves less than $10 million worth of construction in a $60 biUion annual 
federal construction market and involves only three projects of the thousands re- 

2uiring prevailing wage rates. Statements made in the investigative report that 
>klahoma is just the tip of the iceberg", which have been repeated time and time 
again by Congressman Ballenger, are simply not true. If it is true, then where is 
your evidence? According to the U.S. Department of Labor, this is the first time 
since 1964 that fraud has been alleged in the survey process. Wouldn't one think 
that with all of the controversy and negative attacks on Davis-Bacon, that more 
fraud cases would have surfacea before now? 

If you desire to hold hearings on Davis-Bacon violations, I suggest you look into 
unscrupulous contractors who fraudulently misclassify their workers to obtain low 
bids on federal projects. That is where the real fraud occurs. In fact the National 
Alliance For Fair Contracting members spend over $15 million annually in private 
funds to catch these violators. More emphasis on enforcement on the Davis-Bacon 
Act may help you balance the budget and save millions of dollars. 

Anyone familiar with the wage survey process is fully aware that in many in- 
stances projects and information are used that should not be included in the survey. 
When this occurs any interested party can challenge the use of these projects 
through the U.S. Department of Labor without going through the court system. 
These challenges are generallv made prior to the issuance of prevailing rates from 
a survey. Perhaps if this had been done and there were legitimate challenges to the 



129 

survey, this expenditure of government funds for these charges could have been 
avoided. 

In fact, the U.S. Department of Labor, upon review of these allegations, deleted 
67 of the 145 WD- 10 form submissions that were made by contractors. Did these 
67 form submissions contain fraudulent information, or were they honest mistakes 
made by contractors who voluntarily submitted the data? Giving everyone the bene- 
fit of the doubt, we believe most WD-10 submissions are made in good faith, and 
not to fraudulently inflate wage rates. 

Take the case of North Carolina, Chairman Ballenger's home state. For highway 
construction in numerous counties the prevailing rates are: 

Carpenters $7.71 No Fringe Benefits 

Laborer $5.62 No Fringe Benefits 

Bulldozer Operator $6.00 No Fringe Benefits 

Grade Checker $4.99 No Fringe Benefits 

Surely Chairman Ballenger does not suggest that fraud has been committed to 
inflate these rates, because if this is part of the "tip of the iceberg" then it is indeed 
a poor job. Maybe Chairman Ballenger's constituents would be better served if an 
investigation were conducted to find out why these rates are so low if, in fact, a con- 
struction worker wovild actually work for $4.99/hr with zero fringe benefits. 

Our purpose in appearing before this subcommittee is not to defend the U.S. De- 
partment of Labor. Is there room for improved administration of the Act? Obviously 
yes. Is there room for improvement in the survey process? Again, yes. Is there room 
for better enforcement of the Act? Most certainly. 

Improvement in these areas is virtually impossible when members of this Sub- 
committee continually slash the budget of the U.S. Department of Labor, and refuse 
to allow a bipartisan reform proposal, which would eliminate two-thirds of the num- 
ber of projects currently covered by the Act, to come to the House floor for a vote. 

It appears to me that if the members of this Subcommittee were listening to the 
entire Congress, you would be holding hearings on H.R. 2472, which could include 
the survey process, instead of holding hearings on the survey process itself 

Our coalition is for improving the administration of the Act, improving the survey 
process, and enhancing enforcement which is part of our reform proposal. 

The irony is many of your objectives expressed here today will not be forthcoming 
unless you move to enact Davis-Bacon reform which is awaiting action upon your 
return to Washington. 

STATEMENT OF WITNESS A 

Witness A. Per your request, the following is a statement con- 
cerning the above-referenced subject. 

Our company has been asked to supply a statement concerning 
the WD-lOs that were requested by the U.S. Department of Labor. 
As you probably already know, the WD-10 is issued by the U.S. 
Department of Labor to determine the locally prevailing wage rates 
under the Davis-Bacon and related Acts. The submission of wage 
data is encouraged but is voluntary and the identity of the respond- 
ers will be held in confidence. 

Our company has been in business since 1963 and has elected 
not to report on the WD- 10s for various reasons. The more reason 
we were surprised when contacted by Pamela Lee of the U.S. De- 
partment of Labor to verify data that had been supplied for us for 
the 1993 building construction survey. She faxed some 24 pages of 
data containing copies of the WD- 10s for 24 jobs we supposedly 
did. Of all the data she sent, there was only one job we had worked 
on, the Federal Transfer Center at Will Rogers Airport. The wage 
rates did appear to be correct, but the fringe benefits were incor- 
rect. 

Ms. Lee also requested and received a copy of our union agree- 
ment for that period of time showing rates considerably less than 
wages being paid on wage rate jobs. 



130 

A few months back, we were contacted by the Oklahoma Operat- 
ing Engineers. They requested that we fill out the WD-lOs and 
kindly offered to do them for us if we would just sign them. 

Chairman Ballenger. Witness B. 

Witness B. The contact would be exactly the same. 

Chairman BALLENGER. Okay. So we will now open for questions, 
I guess. 

[The prepared statement of Witness A follows:] 

Statement of Witness A 

Dear Sir; 

Per your request, the following is a statement concerning the above referenced 
subject: 

Our company has been asked to supply a statement concerning the WD-lO's that 
were requested by the U.S. Department of Labor. As you probably already know, 
the WD-10 is used by the U.S. Department of Labor to determine the locally pre- 
vaiHng wage rates under the Davis-Bacon and related Acts. The submission of wage 
data is encouraged but is voluntary and the identity of the responders will be held 
in confidence. 

Our companv has been in business since 1963 and has elected NOT to report on 
the WD-lO's for various reasons. The more reason we were surprised when con- 
tacted by Pamela Lee, of the U.S. Department of Labor to verify data that had been 
supphed for us for the 1993 Building Construction Survey, She faxed some twenty 
four pages of data containing copies of the WD-lO's for twenty four jobs we sup- 
pose(fiy did, of all the data she sent there was only one job we had worked on, the 
Federal Transfer Center at Will Rogers Airport, the wage rates did appear to be cor- 
rect, but the fringe benefits were incorrect, 

Ms. Lee also requested and received a copy of our Union Agreement for that pe- 
riod of time showing rates considerably less than wages being paid on wage rate 
jobs. 

A few months back we were contacted by the Oklahoma Operating Engineers, 
they requested that we fill out the WD-lO's and kindly offered to do them for us, 
if we would just sign them. 

Mr. HOEKSTRA. Why do you think it is necessary to have ano- 
nymity? 

Witness A. Repeat that? 

Mr. HoEKSTRA. Why do you think it is necessary for your testi- 
mony to be given anonymously? 

Witness A. Just precautionary measures from past dealings with 
certain unions. 

Mr. HoEKSTRA. What have you experienced? 

Witness A. Nothing of any proof, but things happen that you 
know, but you really do not know. 

Mr. HOEKSTRA. Can you expand a little bit on your last state- 
ment, "A few months back we were contacted by the Oklahoma Op- 
erating Engineers," that they would fill out the WD-lOs for you as 
long as you would just sign them. Is that something new or 

Witness A. I will let her answer that. 

Witness B. Yes, that is something new that they had never asked 
us to do before. They said they offered it as a favor. 

Mr. HoEKSTRA. And what was your response? 

Witness B. I said no, I do not think so. 

Mr. HOEKSTRA. Okay. And when did they start asking you to do 
this? 

Witness B. Just this summer. 

Mr. HOEKSTRA. Just this summer. 

Witness B. This past summer. 

Mr. HOEKSTRA. How many — did they ask you to do one or two? 



131 

Witness B. Not specific. 

Mr. HOEKSTRA. How many projects are you working on at any 
given time? 

Witness B. Fifteen or 20. 

Mr. HoEKSTRA. That lasted what, how long? 

Witness B. It depends, some are long, some short. 

Mr. HOEKSTRA. Do you consistently do WD- 10s, or not? 

Witness B. Never. 

Mr. HoEKSTRA. You do not. 

Chairman Ballenger. Is it basically — if you had to make a judg- 
ment as to why you do not do the WD- 10s, I mean he has got 
21,000 people that must be doing it, is there a basic reason that 
you just do not want to be involved in government paperwork? 

Witness B. It is a lot of paperwork, but basically, I cannot see 
where it is to our advantage to do it. 

Chairman Ballenger. Ernest. 

Mr. ISTOOK. Yes, thank you. You mentioned someone offering to 
fill out the information for you if you would just sign it. Of course, 
I am an attorney myself, we have got other attorneys in the room, 
we have got business people who are usually very hesitant to sign 
any sort of blank form. I can only imagine your hesitancy again. 
How did this come up, in what sort of context, that someone offers 
to fill out a form for you to report to the government how much 
you happen to be paying people? That seems like an unusual offer. 
Can you expand upon the circumstances, what was said and how 
that came about? 

Witness B. It was a telephone conversation and thev wanted us 
to do them, and we just told them that we did not do that. And 
he said well I can help you do it, because we need them done. And 
I did not want to do it, but he said well, if you will just sign them, 
I will do it. 

Mr. ISTOOK. You say of course you made it known to them that 
you chose not to do the forms because of the hassle factor. 

Witness B. Right. 

Mr. ISTOOK. The work involved. And they said we want you to 
do it, or we want the information, I forget exactly how you phrased 
that 

Witness B. They needed it. 

Mr. ISTOOK. They needed it. Was there elaboration on why it was 
that they had a need? 

Witness B. No. 

Mr. ISTOOK. And was that a call that you had initiated or they 
had initiated? 

Witness B. They had initiated. 

Mr. ISTOOK. Was it a call just for that purpose? 

Witness B. Exactly. 

Mr. ISTOOK. Okay. And is there any — what is the time frame? 
You mentioned also a conversation with the Department of Labor 
with someone trying to verify information with 24 jobs reported for 
your company, only one of which you had actually done. Any cor- 
relation between those calls, one came before the other? 

Witness B. It was all about the same time. 

Mr. ISTOOK. About the same time. Do you recall, was it before 
or after they said they needed you to send in forms and for you to 



132 

sign blank forms, before or after that that the Labor Department 
asked you about these 23 jobs that they had been told you worked 
on that you did not work on? 

Witness B. The Labor Department contacted us first. 

Mr. ISTOOK. Okay. 

Witness B. And wanted us to verify data. 

Mr. ISTOOK. All right. Had you ever been contacted previously by 
the Labor Department for verification like that? 

Witness B. No. 

Mr. ISTOOK. Okay. And what did you do, when they faxed you 
24 pages of data for 24 jobs, only one of which you had actually 
done, what did you do when it became known to you that somebody 
was making false claims about what your company was doing? 

Witness B. After I got over the surprise, I just replied back to 
them that we had never filled any out. 

Mr. ISTOOK. Did they indicate what they were going to do about 
that, the fact that somebody had submitted false information on 23 
cases? 

Witness B. Well, they were going to do something, I do not know 
what. 

Mr. HOEKSTRA. Excuse me. Were the wage rates for the 23 other 
jobs— did you even compare the numbers on those jobs to your sal- 
ary rates, or not? 

Witness B. Considerably higher. 

Mr. HOEKSTRA. They were considerably higher. 

Witness B. Definitely. 

Mr. HOEKSTRA. The same work roles that you had and they just 
inflated them. 

Witness B. Exactly. 

Mr. HOEKSTRA. Overstating — like some of the other reports we 
have had today, just significantly overstating the number of work- 
ers that might be on a job and those types of things? 

Witness B. Yes. 

Mr. HOEKSTRA. Have you provided or been asked by law enforce- 
ment who was the individual that asked you to sign the blank 
forms for them? Have you given that to law enforcement? 

Witness B. No. 

Mr. HOEKSTRA. Have they asked you about it? 

Witness B. No. 

Mr. HOEKSTRA. So no investigator with the Department of Labor 
or the FBI or the U.S. Attorney's Office has asked you about that? 

Witness B. Not actually who it was, they did not ask that. 

Mr. HOEKSTRA. You have talked with them but not on that par- 
ticular point. 

Witness B. Yes. 

Mr. ISTOOK. Can you tell me, was there any common denomina- 
tor for these 23 false forms? Can you recall, was there anything 
that you recall that showed, whether it is jobs that existed or did 
not exist, whether the wage rates were actually in line with what 
you were actually paying? Have you done any analysis of that at 
this time? 

Witness B. The job rates were all the same on all the jobs and 
they were jobs that were done in town, we just were not the suc- 
cessful bidder. 



133 

Mr. ISTOOK. So you do not know if the wage rates matched the 
accurate wage rates or not. 

Witness B. No. 

Mr. ISTOOK. And do you have any idea who sent in those 23 false 
forms, plus the one that was correct, even though you did not send 
it in? 

Witness B. I think so. 

Mr. ISTOOK. Who is it that you believe did so, and why do you 
believe that? 

Witness B. Well, one of them actually had a signature on it that 
came through. 

Mr. ISTOOK. Okay. 

Witness B. From the union. 

Mr. ISTOOK. From which union? 

Witness B. From Operating Engineers. 

Mr. ISTOOK. And that was a signature on the one that was accu- 
rate or on one of the ones that was inaccurate? 

Witness B. I do not remember. I just know there was one that 
had a signature. The rest of them, the signature had been blocked. 

Mr. ISTOOK. Had been? 

Witness B. Blocked out. 

Mr. ISTOOK. Thank you. 

Chairman Ballenger. Thank you very much. 

We will go ahead and put on our C witness and then we will ask 
everybody questions. I have got a couple that I really would love 
to have you answer. Turn about is fair play. 

Mr. Bumpers. Okay. 

Chairman Ballenger. I do not know how long it will take for 
him to get here — or her — I do not know which it is. 

But Mr. Matthews, could I ask you, have you ever filled out WD- 
10 forms? 

Mr. Matthews. Not previous to this, I believe it was 1992. 

Chairman Ballenger. Was the specific reason that you did not 
want to get into government red tape or 

Mr. Matthews. To my knowledge, we have never been asked to 
participate before. 

Chairman Ballenger. Well, Mr. Bumpers, your group obviously 
would be involved in sending in theirs, would they not? 

Mr. Bumpers. Well, you know, it is catch as catch can with re- 
gard to where the information goes out. But I would like to call 
your attention to the fact that the U.S. Department of Labor ac- 
cepts other forms of information such as certified payrolls and a 
WD-10 is not necessarily required to be filled out in every case. 

Chairman Ballenger. No, it is strictly voluntary. But if I were 
in the contracting business and wanted to make sure that my com- 
petitors had the same wage rates that I did, it would make good 
sense for everybody to send in their WD- 10s and then you would 
have a real honest group of contractors that would know what each 
other paid their workers. 

Mr. Bumpers. I would think so, but that is the very reason that 
WD-lOs were not released in the first place, because in the non- 
union construction market, I am sure these gentlemen do not want 
to release information or have that information released to their 
competitors so that they know exactly the number of employees 



134 

they have and the amount of pay that they are paying them. You 
know, if I were actually a contractor, which I am not, I would be 
the first to admit, I would not want that information being out ei- 
ther because that way if they know exactly what you are paying 
in the non-union market, then they can undercut your bid or what- 
ever with regard to the rates of pay. 

Chairman Ballenger. I think Mr. Estell, who is listening to 
what you said 

Mr. Estell. Well, you know, he keeps looking at me saying non- 
union, non-union. At the time these were filled out, I was union, 
Connelly Paving is union. 

Mr. Bumpers. I was not looking at you. 

Mr. Estell. Okay. 

Chairman Ballenger. Witness C is here. Go ahead, sir. 

STATEMENT OF WITNESS C 

Witness C. Gentlemen, it is an honor to appear before this sub- 
committee investigating fraud and abuse of prevailing wage deter- 
minations made under the Davis-Bacon Act. 

I have been associated with this company since its inception in 
1961, doing business in utilities, excavation, grading and demoli- 
tion. 

Flawed wage determinations were first noticed when the City of 
Bethany advertised for bids on a sanitary sewer project. They were 
asked at that time to check on the wage determination to see if it 
was accurate. 

The City of Oklahoma City Engineering Department was also no- 
tified regarding these flawed wage determinations because of the 
unrealistically high wages published by the U.S. Department of 
Labor. 

Copies of wage reports, WD-lOs, were obtained pertaining to this 
wage determination, and upon close inspection, it was determined 
that they were mostly fraudulent. Seventeen were related to our 
company. 

We filled out new and accurate wage reports on the proper forms 
and presented them to the Oklahoma Department of Labor, mem- 
bers of the Oklahoma Congressional delegation and to Oklahoma 
City officials. 

During this time. May, 1995, a woman from the U.S. Department 
of Wage and Hour Division, called about two particular jobs sup- 
posedly done by this company. She faxed us copies and we deter- 
mined that we did not do the work described. She asked for a con- 
firmation or to make necessary changes. We could not do either, or 
make any changes simply because we did not do the work. At this 
point, we demanded to know who was signing for our company. She 
said she could not tell us that because of the Privacy Act. We coun- 
tered, under the Freedom of Information Act we felt we should be 
told, but she refused. We also sent her 17 corrected wage reports 
we had found fraudulent. 

We were then visited by the FBI agent and gave him copies of 
our corrected wage reports. We asked him who signed the reports. 
He too would not reveal any names. Why is this name so secret? 



135 

Fraud and deception has been done in our name, yet we are un- 
able to get the name of the person who signed for our company. We 
ask why? Can it be that our government is protecting a crimmal? 

Members of this committee, your efforts to seek legal action 
against the culprits responsible for this fraudulent wage scandal 
would be appreciated. 

Thank you. 

[The prepared statement of Witness C follows:] 



136 



xi IS «Q honor to appear before iMb gub-committcc invc^^ttmg buni tni sbtvw of 



prevailing wage dctcnuituitiotu m^de 



I have \Kcn associated with this c^Hnpany since its inception in 1961 doing 
utilities, excavation, grading and 



dem coition. 



Flawed wage determinations wen 
bids on a Sanitary Scwor project. Tl cy 
determination and see if it is accurate 



flawed wage detoninations because 
E>epartment of Labor. 



Copies «jf wage reports, WD-lOs, 



under the Davis Bacon Act 



first noticed when the City of Bethany acvertised for 
were asked at t2>at time to check on the wage 



The City of OJklahotna City Engtn eering Department was also notified regarding these 



of the unrealisticaDy hi^ wages published by tbe US 



were obtained pertainii^ to this wage (tetcmunatic 
and upon close inq;>ecti<», it was det nnined they were mostly frattduknt. SJcY^teen (17) 
were related to our conqiany. 



We fiDed out new and accurate wkge reports on the proper fmns and presepted tiiem 
to the Oklahoma State Department ofLabor and members of CMdahoma Coog|resfflonal 
Delegation, and to Oklahoma City officials. I 



During this time period (May 1 
Wage and Hour Division, called 
ctwnpaoy. She faxed us copies and 
asked for a oonfimatiQn or to cuike 
changes, acapfy because we did not 
v/ba was signing for our company, 
countered, under the Freedom of M< 
refused. We also sent to her 
fraudulent 



) a woman firom die US Depailmait of i^bor, 
two particular jobs supposedly done bjy this 
e detoTnined we did not do the woilc described. She 

changes. We could not coofrim or make 
the work. At this point, we donandqd to be told 
said she couldn'^ because of the Pnwy.^ct We 

Act we felt we should be told and she 
(17) corrected w^e reports we had fotmd 



Wc were then visited by an FBI s gent and gave him copies of our cocrcded wage 
reports. Wc asked him who signed the reports. He too, would not reveal the p»sons 



Why is this name such a secret? 



Fraud and deception has been dor e in our name, yet we are unable to get! thje name of 
the person who signed for our compa ly. Wcaskwty? j 

Meroben of the committee, your ( fforts to seek 1^ action against the ciilpnts 
rc^oQsible f<» this fraudulent prevailing wi^ scandal would be appreciated. I 



Thank you. 



137 

Chairman Ballenger. Thank you. 

Let me just ask — this was asked of the earlier group because you 
would like to remain anonymous — is there a reason in your mind 
why you want to be anonymous? 

Witness C. Yes. At my age, I only have a few good years left and 
I want to keep them happy, simple and not complicated. I do not 
look forward to wearing a bullet-proof vest or anything like that, 
or having to look over my shoulder all the time. 

Chairman Ballenger. Do you think there is actually that sort 
of danger? 

Witness C. I understand from other people here that that is accu- 
rate. 

Mr. HOEKSTRA. Thank you very much for testifying today. I do 
not really have a lot of comments, I just want to respond to a few 
of the words you said. This is not brain surgery, is it? 

Witness C. No. 

Mr. HOEKSTRA. I mean, this is just basically some people submit- 
ting fraudulent forms with inaccurate data, they signed them, and 
this is not something that Cass and Ernest and I are a little frus- 
trated at. People with the Justice Department and the Department 
of Labor, and you are frustrated you cannot get a name, I think 
we are at this point a little frustrated that we cannot at least — we 
cannot even get what we are perceiving as much movement out of 
the Department of Justice. This is about as basic as it gets. These 
are — and a number of you have talked about this, that it infuriates 
you that your name, your company's name is being used and sub- 
mitted on fraudulent forms. The information is there, it is not very 
hard to go out on a site and find a building that supposedly was 
built, at least according to the paper, going out there and seeing 
nothing more than dirt and grass and barbed wire and that there 
is no building. This is about as basic as it gets in terms of fraud 
and stealing from the government, stealing from the taxpayer. And 
I think that is — I am assuming that is why you are here today, you 
want a name and you would like to see that identified somewhere 
in the near future, who actually submitted forms using your com- 
pany's name, perhaps using your personal name, and saying you 
did these things with these kind of wage rates, and you never did 
them. 

Witness C. That is right, that is what I am looking for — who is 
signing on our behalf. That is not right, they were not given per- 
mission. I want to know who. 

Mr. HOEKSTRA. And then beyond that, you recognize that this is 
costing you and a bunch of other people in Oklahoma — and we will 
talk with Mr. Bumpers later about how much it is actually costing 
them, whether it is costing them a lot of money or no money — ^but 
my guess is you are not interpreting that this kind of behavior is 
saving the taxpayers of Oklahoma any money. 

Witness C. None whatsoever. 

Mr. HOEKSTRA. Thank you. 

Mr. ISTOOK. I appreciate you coming forward. Let me ask a cou- 
ple of things. You mentioned of course when you were contacted by 
the Wage and Hour Division of the Labor Department and asked 
about some particular jobs, they faxed you a number of forms and 



36-049 - 96 



138 

there were 17 fraudulent submissions related to your company. 
Were all of those for the same general time frame? 

Witness C. Yes. 

Mr. ISTOOK. And you said ultimately you sent to the Department 
of Labor 17 corrected wage reports to replace the fraudulent ones 
that someone else had sent in your name? 

Witness C. That is right. 

Mr. ISTOOK. Now you have been in business with that company 
since sometime in the 1960s. Was this a common practice, that you 
would commonly send in these WD- 10 forms? 

Witness C. When we were asked, we tried to respond when we 
could, yes. 

Mr. ISTOOK. So you had done it many other times. 

Witness C. Yes. 

Mr, ISTOOK. Okay. And had there been any other occasions when 
the Department of Labor called to verify the accuracy of what had 
been submitted in your name, all through these 30 some odd years? 

Witness C. There has been no contact made by the Labor Depart- 
ment previous to the contact made in May of 1995. 

Mr. ISTOOK. Which was during the time, of course, after the 
State Labor Commissioner in Oklahoma, of course, had gotten peo- 
ple interested in checking into the fraud. During all these prior 30 
odd years when you submitted all these other forms, they never 
called to check the accuracy of them, so for that matter, I mean, 
forms could have been submitted in your company's name all 
through these years but you were not aware of it. They could have 
had somebody signing your name or somebody else's name on be- 
half of the company, they might have signed Mickey Mouse or Bugs 
Bunny. 

Witness C. That is right. 

Mr. ISTOOK. But no matter what, they never bothered to check, 
all during these 30 years until the Oklahoma Department of Labor 
began mentioning that there was a problem with the whole system. 

Witness C. That is right. 

Mr. ISTOOK. So even if they gave you the names, we do not know 
if whoever filled in these fraudulent forms used their correct name 
or used some sort of anonymous name themselves, and if they had 
done it just this one time or if they had been doing it for 30 years, 
maybe even using your company's name for 30 years — we just do 
not know because of the flawed system or lack of system in the De- 
partment of Labor. 

Witness C. That is right. 

Mr. ISTOOK. What should we do about that? 

Witness C. I would first propose whoever has these particular 
WD-lOs that are signed on behalf of this company, to tell me im- 
mediately who it is. 

Mr. ISTOOK. Okay. I know when I sign my tax return each year, 
I am doing that under penalty of law, under penalty of perjury, and 
if I do not accurately report my financial earnings, there is a major 
penalty. And there are many people that have gone to prison for 
violating that. How about someone that gives inaccurate reports 
here that also can take money away from the taxpayers because it 
escalates the cost of public works projects 

Witness C. Very much so. 



139 

Mr. ISTOOK. I thank you very much, sir, for coming forward. 

Chairman Ballenger. Thank you, sir. 

Witness C. Thank you. 

Chairman Ballenger. Now we will get back to our group here. 
Do you want to go first, Pete? 

Mr. HOEKSTRA. Sure. 

Chairman Ballenger. Thank you all for waiting. Flying out of 
here today is going to be rough anyway, so if you have got to fly 
back, maybe we will be on the same plane. 

Mr. HOEKSTRA. Just a few comments. There is a disagreement on 
the panel about whether this is the tip of the iceberg or whether 
this is an isolated event. Just to reiterate some of the points that 
have been made earlier today, this is not a new issue, Mr. Bump- 
ers. This was first brought up in 1979. I do not know if Cass was 
in Congress then. 

Chairman Ballenger. No. 

Mr. HOEKSTRA. But I can tell you I sure was not. I was working 
for a company that was struggling to get to be a billion dollar com- 
pany. A billion dollars is a lot of money, as is $28 million, and so 
I think we know what it is. But GAO somewhere in this testimony 
identified the problems way back there. "After all these years, the 
Department of Labor has not developed an effective program to 
issue and maintain current wage determinations." That kind of 
work by the GAO is the kind of work that had led Cass and myself 
to take more than a look at reforming Davis-Bacon and consider 
whether a more complete overhaul or even a repeal, like Ernest 
talked about this morning, is what is needed. 

When you go through this, the wage survey determination is the 
guts of this process. If it is flawed, if it is full of fraud, not as what 
these people in Oklahoma have said today, but as what the GAO 
said, the potential exists, we have to take a look at it. So the GAO 
has talked about this since 1979. 

When we look at the pure statistics of what we are trying to ac- 
complish here, wage rates for 100 plus job categories in 3,100 coun- 
ties around the country, that is a potential of over 300,000 wage 
rates — not only job categories, but specific job descriptions — 
300,000 plus wage rates. The Department of Labor does 200 sur- 
veys per year. The average age of the surveys around the country, 
average age, and this is not Cass and I saying it, this is what we 
got from Maria Echaveste when we met with her — the average age 
of a survey is seven years old. Now when we take a look at that, 
intuitively we are saying tracking that many wage rates around 
the country appears to be a problem, having the average age being 
seven years appears to create some concern for us, and this issue 
has been around since 1979 by the GAO creating some concern for 
us. So I think it is more than just a few people coming out and say- 
ing wow, here is a new avenue to go out and attack Davis-Bacon, 
let us say it is full of fraud and abuse. This charge was made long 
before Cass and I got there. We have got to go through this process 
now and determine that before we talk about any kind of reform. 

The other thing I would like to just point out is that I find it in- 
teresting that this has been around since 1979 and all of a sudden 
we start taking a look at this issue and now all of a sudden we 
have got to do it in 12 months and we have got to do it your way 



140 

or no way, or we are not doing our job. There has been a broad con- 
sensus of the people that probably are on your side of the issue 
that have had majority control of that Congress for a long period 
of time and they have let that fraud and abuse go on, and we are 
not going to. Do you know why we come out here in the hinter- 
lands, in mainstream America? Because you guys can tell us what 
is going on a whole lot better than some of the experts in Washing- 
ton. Bill said it best, the issue is about stealing from the taxpayers. 
And what we are not going to allow to happen is we are not going 
to reform Davis-Bacon so that only on large projects people can 
steal from the taxpayers. We are going to get rid of the small 
projects, we are not going to let them steal on small projects any 
more, we are only going to let them steal on big projects. That is 
not what we are about. So we are going to go through it and end 
up properly. 

The question I have for you, there is disagreement on this panel 
about whether this is the tip of the iceberg. What are you willing 
to do to help us go through this process? Are you willing to go, are 
your 21,000 contractors willing to participate with us in a process 
and to work with your union and non-union workers to go into spe- 
cific regions around the country and provide this committee the 
files of all the WD- 10s that they have provided, that your contrac- 
tors have provided, that your union people have provided, and that 
other ancillary groups have provided? Are you willing to participate 
in that process and give us that documentation and have it verified 
on a nationwide basis? Are you willing to do that with us? 

Mr. Bumpers. Well, first of all, you raised several issues here. 

Mr. HOEKSTRA. No, I asked a question. All I need from you is an 
answer to that question. 

Mr. Bumpers. You asked one question but you made a whole lot 
of statements. 

Mr. HoEKSTRA. You are right. You had an opportunity to make 
a statement. Are you willing to participate with us through this 
process and give us WD- 10s over the last four or five years that 
your contractors have supplied, that the unions that you work with 
have supplied, so that we can go back and actually find out wheth- 
er this is the tip of the iceberg or not? Or, do we have to struggle 
through this process, which is what we are doing with the Depart- 
ment of Labor? Or, are you willing to aggressively go through this 
process with us? 

Mr. Bumpers. I am willing, and our contractors, I said in my 
statement to you, that we were willing to look at the entire survey 
process with regard to how it is done today and attempt to work 
with the Congress of the United States or anyone else in an effort 
to improve that survey process. 

You are asking me to take these 21,000 contractors and all of a 
sudden wave a magic wand that they have access to WD- 10s. In 
many cases, they may have access to their own WD-lOs, but 
whether they are willing to provide that to the world, I do not 
know. 

The Labor Department, once the WD- 10s are submitted, they 
are in the purview of the Labor Department. I do not have any au- 
thority over the Labor Department with regard to doing that. 

What I am saying to you is though, sir 



141 

Mr. HOEKSTRA. No, that 

Mr. Bumpers. Well, let me answer the question. If you are will- 
ing to look at the Davis-Bacon Act and try to reform it or are you 
going to every region of this country to try to uncover fraud. Is that 
something that your committee has got time to do? I do not know. 

Mr. HOEKSTRA. Absolutely. I mean 

Mr. Bumpers. You have got time to do that? 

Mr. HOEKSTRA. If the survey process 

Mr. Bumpers. Maybe that is what you should do then. 

Mr. HOEKSTRA. The survey process is the core of this issue. If we 
cannot get accurate information from around the country, there is 
absolutely no value in having Davis-Bacon because then we are 
going to be working off the wrong assumption. If there is fraud, 
waste and abuse in the system, it comes out of a survey process 
and only until we get the survey process right can we do other 
things. 

I am asking you whether your contractors are willing to provide 
us with WD-10 forms that they have submitted, all of them that 
they have submitted, in a sample, and whether they would go to 
their unions and ask their unions that they work with to give us 
the WD- 10s that they have provided, so that we can determine 
whether the survey process is slightly flawed in certain areas or 
what the GAO leads us to believe, is rotten to the core. That is the 
question. 

Mr. Bumpers. I would be very happy to communicate with the 
21,000 contractors that I represent on the Davis-Bacon reform 
issue to ascertain whether or not they are interested and what rec- 
ommendations they might have about making the survey process 
more effective and more accurate and more verifiable — ^yes, I would 
be happy to do that. But to ask them 

Chairman Ballenger. I would like to see you do it. 

Mr. Bumpers. But to ask them to provide WD-10 forms, these 
contractors are not going to go through their files and I do not 
know how many of them have even submitted WD-lOs. The indica- 
tion here today is that a lot of these people have not even submit- 
ted them. The reason is because they do not want to be bothered 
with it. 

Mr. HOEKSTRA. What I am saying is 

Mr. Bumpers. The 21,000, first of all, they are not all union con- 
tractors. You talk about this as if this is some union contractor 
group here. This is not a union contractor group. It is union and 
non-union contractors. And I do not understand why you are sug- 
gesting that these are all union contractors. 

Mr. HOEKSTRA. I am not. I asked you if we could go on a sample 
basis to a certain select number of counties around the country and 
ask your contractors for copies of the WD- 10s that they have sub- 
mitted, the ones that unions, non-union and other interested third 
parties have submitted, and to go through a systematic survey of 
determining whether there is additional fraud or abuse, or whether 
Cass and I have to go through this process more extensively with 
the Department of Labor. 

Mr. Bumpers. Would not the Congress and the construction in- 
dustry in the United States be better served to sit down as rational 
people and talk about how the survey process might be improved? 



142 

What you are trying to do here is go through a process that appar- 
ently has got some problems. GAO admits they have got some prob- 
lems. The GAO report, however, talked about the deficiency in the 
survey process. 

Chairman Ballenger. Why do you need the process? 

Mr. Bumpers. Pardon me? 

Chairman Ballenger. Why do you need the process? 

Mr, Bumpers. Why do you need the process? 

Chairman Ballenger. Yes. 

Mr. Bumpers. Oh, we are back to this, to repeal Davis-Bacon. 

Mr. HOEKSTRA. Let us ask the question. You are saying let these 
regional people sit down and figure out the process. Well, I will tell 
you, one of the things for me that would make a whole lot of sense 
if we are going to design a new process, an improved process, 
okay — I really would like to know how badly flawed the old process 
is. If I read your testimony correctly, there is really not much rea- 
son to reform the process because what has gone on with this testi- 
mony and these individuals is not the tip of the iceberg. 

Mr. Bumpers. I did not say that. 

Mr. HOEKSTRA. That Cass and I and Ernest are on a wild goose 
chase here because there is one little isolated event where we are 
having a problem, but overall, we see in North Carolina the survey 
appears to be working fairly well. 

Mr, Bumpers. Four dollars and ninety nine cents an hour, 

Mr, HOEKSTRA, Yeah, $4,99 an hour, so maybe it is working okay 
in North Carolina, 

Chairman BALLENGER, They fill out their forms there, 

Mr. HOEKSTRA. Yeah. And so you know 

Mr. Bumpers. But if you are going to quote me. Congressman, 
I wish you would do it correctly. You just said that I said I was 
against changing the survey process. I never said any such thing. 
As a matter of fact, I said just the opposite. Does the administra- 
tion of the Davis-Bacon Act have flaws? Certainly it does. Can the 
survey process have flaws? Obviously. Are we for improving the 
Davis-Bacon Act? Yes. Are we for improving the survey process? 
Yes. And we would be happy to sit down with you or anyone else 
that is of a like mind, to go through that survey process and get 
some input from the construction industry for a change — from the 
construction industry, the people in this coalition that really go out 
there and bid these jobs day in and day out, and work within this 
system. We would be happy to do that, certainly we would. 

Mr. HoEKSTRA. But what I want to do before we improve the 
process 

Mr, Bumpers. You want to build a case to repeal the Davis- 
Bacon Act, is that not true? Is that not what this is about? Is that 
not what this regional thing is about? Rather than improve the 
process, you want to prove how wrong it is? Is that not what it is 
about? 

Mr. HOEKSTRA. It may or may not be, we may or may not end 
up there — we may or may not end up there, but the real question 
here is do you want us to take the reform process and get to that 
after this thing has been there for a whole bunch of years and we 
have not taken a look at it. We are not going to rush through a 



143 

reform process that does not identify what the core problem in this 
system is. 

Mr. Bumpers. I will bet not. 

Mr. HOEKSTRA. We are not going to fix this system by just saying 
we are going to have it apply to different projects. 

Mr. Bumpers. You know what I believe? I believe you are not 
going to rush through anything, I believe you are going to go 
around the country and you are going to hold these hearings and 
you are going to try to prove that the Davis-Bacon Act is the evil 
of all government, and that you are never going to allow the Amer- 
ican people to have their will on this issue. And you know damned 
well that there are 220 Congressmen in the United States Congress 
that are for reforming the Davis-Bacon Act, which could include 
the survey process. Now why will you not let that happen? 

Chairman Ballenger. Let me step in the debate with you two 
guys. I would like to ask Mr. Matthews or Mr. Milner or Mr. Estell, 
any one of the three of you, if you have ever read the Davis-Bacon 
reform, 2472, H.R. 2472 bill that he has got, that he says he has 
got all these cosponsors for. 

Let me give you just a little teeny background. What it does 

Mr. Bumpers. I have got it here if you want it. 

Chairman Ballenger. What it does, it increases — instead of 
$2,000 being your starting point, I think it goes up to what, 
$600,000-$700,000. 

Mr. Bumpers. It goes to $100,000 for new construction. 

Chairman Ballenger. Okay. But what it does, if you are a con- 
tractor, road contractor and so forth, right now if you bid on it, the 
only person that is involved in Davis-Bacon wages is you, you are 
the contractor. This bill, this reform effort, would then go back and 
say well what about the people supplying the gravel that they use, 
and tar that they use, and all the truckers that haul the stuff 
around. Then everybody that you can touch involved in that job 
would then have to pay Davis-Bacon wages. That is the reform he 
is talking about. 

Mr. Bumpers. That is not true, Mr. Ballenger, you know that is 
not true. 

Chairman Ballenger. Sure it is. 

Mr. Bumpers. It is not true. Are we going to argue the Davis- 
Bacon Act? I thought you were down here about the survey prob- 
lems. 

Chairman Ballenger. Let us let them answer a question. Would 
you be for something like that? 

Mr. Bumpers. You misquoted the Act. 

Chairman Ballenger. It expands the coverage, is what it does. 

Mr. Milner. Mr. Chairman, I am somewhat confused. I thought 
he said earlier in his testimony that he had 89 sponsors on the bill, 
now he is saying 220? 

Mr. Bumpers. I said 87. 

Mr. Milner. Eighty seven, okay. 

Mr. Bumpers. Where did the 220 come from? 

Mr. Milner. You just said 220 people were in favor of reform. 

Mr. Bumpers. Two hundred and twenty Congressmen. 

Mr. Milner. Well, you only have 89 sponsors. 



144 

Mr. Bumpers. Well, so what. I mean, do you think everybody co- 
sponsors every bill that goes through the United States Congress? 

Mr. ISTOOK. Let us have the Labor Department take a survey. 

[Laughter.] 

Chairman Ballenger. I will tell you, folks, I have got to go catch 
a plane, let us stop this debate. 

Mr. MiLNER. To that point, Mr. Chairman 

Mr, Bumpers. He is not a contractor, by the way. Do you rep- 
resent the construction industry here? 

Chairman Ballenger. Well, you are not a contractor either, so 
he 

Mr, Bumpers, No, but lam representing 21,000 contractors. Who 
is he representing? 

Mr. MiLNER. I represent about 7,000 taxpayers in the State, sir. 

Chairman Ballenger. Let get on with the questions. 

Mr. MiLNER. Taxpayers are not important, obviously to you. 

Mr. Bumpers. They are very important, 

Mr. MiLNER. No, they are not, because you have failed to ac- 
knowledge the point, you have sat here and denied and denied and 
then made counter-allegations, Mr. Bumpers. 

Chairman Ballenger. You are dealing with a professional here 
who knows how to do this stuff. 

So let us hit the gavel and ask the other guys some questions. 

Mr. MiLNER. Anyway, to your point, Mr. Chairman, I do not 
think — if you look at the GAO report, that was done in a Demo- 
cratic Administration with a Democratic President, and the bottom 
line from that GAO report back in 1979 was it is not administrable 
the way the Act is and the Act should be repealed. If you are going 
to look at prevailing wage rates, let the free market set the rate. 
That is what it is about. 

I represent 7,000 taxpayers, our organization has 250,000 to 
300,000 people in this State, Davis-Bacon is not, by any means, 
the most evil of the government. But in these times, the taxpayers 
have said, have spoken through the change in the way the makeup 
is, they are tired of paying for government waste. No one, Mr. 
Bumpers or anybody in this State, has answered the question, why 
does the taxpayer have to pay more money in the construction of 
a public building than a private developer does. I do not even care 
if it is 1 percent, why do I have to pay more? I should not have 
to. 

And second of all, what sense does it make to spend more tax- 
payer dollars in giving the Department of Labor more money to ad- 
ministrate a program that is systemically flawed? No matter how 
many people you put in place, no matter how much money you put 
in place, they can continue to put in fraudulent information be- 
cause the fact of the process is, as Mr. Marshall and Mr. Lester 
stated, there is no step in there for verifying the accuracy of the 
reports. 

So the cheapest way, for me it would seem, would be to repeal 
it and let us get on with it. If the contractors want to go out and 
bid head-on, union contractors, let them bid in the free market. 
That is what this country was founded on, this is a protectionist 
program, it subsidizes union, as Milton Freeman, the economist, 
said, pure and simple. There is no other reason for it. 



145 

Chairman Ballenger. Mr. Matthews, let me ask you a question, 
is your basic business doing government work? 

Mr. Matthews. No, sir, mostly in the private sector. 

Chairman BALLENGER. Mostly private. 

Mr. Matthews. Well, we do a lot of municipality work for the 
City of Oklahoma City. 

Chairman Ballenger. How do you work the situation — I am a 
manufacturer myself, I was wondering how you work the situation 
where you have got workers that work for you on government con- 
tracts with this prevailing wage situation, I am sure those wages 
are higher than you pay the same person who is working on a pri- 
vate job. How do you work around that situation? 

Mr. Matthews. Well basically we tend not to bid federally fund- 
ed projects. It tends to destroy a crew. I can advise them to take 
this as a bonus, take this extra money as a bonus, put it back, but 
when we go back to the real world and I have to compete, we can- 
not pay these wages. Subsequently, usually when the job is over, 
the employees leave, trying to find another federally funded job. 

Chairman Ballenger. Mr. Estell, is that about the way you 
work it, or how does it go? 

Mr. Estell. It is about the same, we do about 50/50 government 
work, paying prevailing wage. I pay my operators pretty good on 
the private market. 

Chairman Ballenger. How do you do it? If I had — of course, I 
am stable because I have got a plant and I have got people running 
it, and so I do not have to worry about going out to different places 
with different people, but I do not see how you could possibly man- 
age your workers with the idea that you are going to have two sep- 
arate wage scales. 

Mr. Estell. It is very hard. We try to minimize it to a 40-hour 
work week to keep the overtime down. On private work, we would 
not have to worry about that as much. 

Chairman Ballenger. Right. 

Mr. Estell. And if you do get operators making $20 an hour ver- 
sus somebody making $15 an hour, they work that job for a year 
or two. Once you get off that job, they are discouraged because they 
have set their wage for that last year, they are living off of that. 
It is like getting a cut in pay. But myself, I do not have a choice 
either, but to pay what the market is in that private sector. 

Chairman Ballenger. Right. 

Mr. Estell. If we want to stay in business and those workers 
want to keep, you know, food on the table. 

Chairman Ballenger. Have you been contacted by the Depart- 
ment of Labor? 

Mr. Estell. Yes, I have. 

Chairman Ballenger. I mean before Oklahoma found out what 
was going on? 

Mr. Estell. No. 

Chairman Ballenger. And now you have been contacted by 
them. 

Mr. Estell. Yes, this past summer. 

Chairman Ballenger. Do you have friends in neighboring 
States, since the main office for Davis-Bacon that regulates you all 
comes out of Texas, do you do any business in Texas? 



146 

Mr. ESTELL. No. 

Chairman Ballenger. Do you? 

Mr. Matthews. No. 

Chairman Ballenger. I just wondered if you had friends some- 
where that run into stuff like you are hearing here now, as far as 
construction costs are concerned. Do you know? 

Mr. ESTELL. No. 

Mr. Matthews. No. 

Mr. HOEKSTRA. When you take a look at — do you both typically 
pay more or you are required to pay more under prevailing wage 
than contracts in the private jobs that you do? 

Mr. ISTOOK. Yes. 

Mr. Matthews. Prior to this last survey, it was fairly close, a lit- 
tle bit higher on the non-building scale, it was fairly close to the 
actual prevailing wage. This last survey that came out was just so 
astronomically high, it was brought to everyone's attention that 
there had got to be a problem here. 

Mr. HOEKSTRA. I mean, when you saw the new prevailing wage 
come out — I am assuming when you hear the term prevailing wage, 
that is what is generally paid in the marketplace and this time it 
came out — you kind of wondered how these numbers are gen- 
erated? 

Mr. Matthews. Right, and how we went from $10-$ 11 an hour 
to $20 an hour and no one in our marketplace is paying that kind 
of wage — where did we get the numbers to support this. 

Mr. HOEKSTRA. Mr. Matthews and Mr. Estell, you have been in 
business for how long, respectively, how many years? 

Mr. Matthews. My father started our business in 1947, I have 
been active in it since 1971. 

Mr. HOEKSTRA. Mr. Estell. 

Mr. Estell. My father started in 1963. 

Mr. HOEKSTRA. And until this recent survey in the last couple of 
years, had you ever seen a major discrepancy between what you 
felt was actually basically your prevailing wage on the job and 
what was being certified by the Department of Labor as the pre- 
vailing wage? 

Mr. Estell. Not that I have personally seen until this survey 
came out. 

Mr. HOEKSTRA. Mr. Matthews. 

Mr. Matthews. We deal with two different rates, we have a non- 
building rate which generally governs our type of work which is 
utility construction, and then they have a building rate and the 
building rate has always been quite a bit higher than the 

Mr. HOEKSTRA. Oh, so it always has been, in your experience, on 
the building rate. 

Mr. Matthews. Correct. 

Mr. HOEKSTRA. A significant difference there. Have you ever, 
until this time, had you ever thought to check whether the rates 
being reported, I guess it is on the form WD-22, corresponded with 
what you had been sending in on your WD-lOs? 

Mr. Matthews. No. 

Mr. HOEKSTRA. To your knowledge, has that ever been a common 
practice among any contractors, to need to check whether the infor- 
mation that is being reported in your name, in the name of your 



147 

company, is actually accurate when it comes back from the Depart- 
ment of Labor? Do you know of anyone that ever went to the trou- 
ble of checking that before, even during the times when, as you 
say, Mr. Matthews, the building rate was not commensurate with 
the actual prevailing wage? 

Mr. Matthews. No. Before this, before we got into this investiga- 
tion trying to find out the particulars of this, I did not even know 
what a WD-22 was. 

Mr. HOEKSTRA. Sure. 

Mr. Matthews. We have never been contacted by the Depart- 
ment of Labor to verify any rate. 

Mr. HOEKSTRA. The knowledge that there have been submissions 
in your company's name, as you both experienced, as other people 
have experienced, we have seen testimony, copies of documents, the 
knowledge that there is a problem, whether it be with information 
you send in or maybe that some other company may send in and 
it has major repercussions upon your payroll and upon the public 
purse — does that mean that now you are changing the way you are 
handling things, are you having to do extra work or now you have 
got to go back and check the accuracy of the government reports? 
Is it generating any difference in the way that you do business or 
in the way that you handle the information that is reported back 
from the Department of Labor? 

Mr. Matthews. Well, not really, we have not been asked before 
or since to participate in any surveys. 

Mr. HOEKSTRA. I am asking though, you know, for example, in 
the future when new surveys are taken and they issue the new 
prevailing wage rates, do you feel the need to go back and check 
the accuracy of everything that has been sent in your name to see 
if maybe there is a problem in the future too? Is that extra work 
for you? 

Mr. Matthews. From here on out if any more surveys are done, 
I would certainly personally want to see those forms, all the forms 
that are turned in on our company, either by us or other sectors. 
Where before, it was never brought to my knowledge. So for me, 
it would create more work. 

Mr. HOEKSTRA. Just something else you have got to check on. 

Mr. Matthews. Yes. 

Mr. HOEKSTRA. On top of everything else you have got to do. 

Mr. Matthews. Right. 

Mr. HOEKSTRA. I thank you. 

Chairman Ballenger. It is a constructive thing that we are try- 
ing to do. I must tell you he has got 89 members on his bill and 
my bill that died, I had 180 something. 

Mr. Bumpers. Last count you had 116, some of those are now on 
ours. 

Chairman Ballenger. That is better than nothing. 

Thank everybody for being here. We thank the news media and 
without further ado, we are adjourned. 

[Whereupon, at 1:19 p.m., the subcommittee was adjourned.] 

[Additional material submitted for the record follows.] 



148 

Statement of Hon. George Miller, a Representative in Congress from the 
State of California 

Mr. Chairman, as you know I was unable to attend the January 18th hearing of 
the Subcommittee on Workforce Protections in Oklahoma City. I appreciate the op- 
portunity to enter a statement into the record. 

Certainly, oiu- Subcommittee must take seriously the charge by Brenda Reneau, 
Commissioner of the Oklahoma Department of Labor, that fraudulent responses 
may have been made in as many as three cases in connection with a U.S. Depart- 
ment of Labor ("DOL") wage data survey for Oklahoma City. But I am disturbed 
by what seems to be the political nature of those charges and of the response by 
some in Congress. 

Commissioner Reneau claims, in her investigative report, that one of the its aims 
is to prove that prevailing wage rates required under the Davis-Bacon Act are 
grossly inflated across this nation because of wide-spread fraud. But Reneau cannot 
truly expect that an investigation of isolated cases in one city could fulfill that pur- 
pose. By its very nature, the investigation of the Oklahoma City wage rate survey 
can only address the question of fraud in that survey, which may or may not indi- 
cate a more widespread problem. 

Similarly, arguments by Members of Congress that the case of Oklahoma City 
represents only the "tip of the iceberg" are very premature and grossly misleading. 
Not only does Reneau s report provide incomplete evidence of fraud in Oklahoma 
City, but it does not, and could not, address the existence of fraud in wage surveys 
conducted for any other region of the country. Moreover, when DOL conducted a sec- 
ond wage survey of Oklahoma City after Reneau's charges were made, the result 
was not a dramatic reduction in the wage rate that Reneau has implicitly argued 
would occur when the questionable information was excluded from the survey. In- 
stead, some of the wages were increased, others were lowered, and still other wage 
rates remained the same. 

Although the wage survey process may not be perfect, to date there is no hard 
evidence that it is subject to fraud. Since the Davis-Bacon Act became law in 1931, 
there have been only nine cases of fraud related to the Act and this is the first time 
since 1964 that fraud has even been alleged. This record hardly supports a conclu- 
sion that wage rates nationwide are grossly inflated. 

The prevailing wage requirements of the Davis-Bacon Act are too important to 
the lives of over 500,000 workers and their families to be the subject of a misin- 
formation campaign. Construction workers, who rely on the benefits and security 
that Davis-Bacon provides, are some of the most economically stressed workers in 
this country. On average, they earn only $28,000 a year and work only a few 
months at a time. While their work and pay checks may be seasonal, their bills and 
living expenses come due every day. These workers are endlessly struggling to make 
ends meet. Congress has the responsibility, therefore, to consider carefully only the 
most solid evidence before taking precipitous action undermining our fiduciary duty 
not to depress wages. 

DOL, with the assistance of the Department of Justice, has begun an investiga- 
tion of Reneau's charges. We should allow that investigation to proceed without po- 
liticizing the process with unsubstantiated declarations by politicians whose ulti- 
mate goal is the repeal of the Davis-Bacon Act. We should pay close attention to 
the investigations oi the Departments of Labor and Justice, review their conclusions 
once made, and decide on our course of action at that time. 



Statement of Lonnie P. Taylor, Vice President, Congressional Affairs, 
United States Chamber of Commerce, Washington DC. 

On behalf of our full membership, including the Oklahoma State Chamber and 
over 3,000 chambers of commerce throughout the country, the U.S. Chamber of 
Commerce commends Chairman Cass Ballenger and Peter Hoekstra, members of 
both the Worker Protections and the Oversight and Investigations Subcommittees, 
as well as you and your colleagues in the Oklahoma congressional delegation on the 
hearing being held to address reported fraud and abuse of Federal prevailing wage 
rates in Oklahoma. 

As you know, the issue of prevailing wage has been of critical importance to our 
members who have been burdened by artificially inflated wage rates with which 
they must comply in fulfilling Federal Government contracts. The results have been 
increased costs to taxpayers, additioneil regulations and lost jobs. The matter of re- 
ported fraudulent prevailing wage surveys in Oklahoma further exacerbates this 
costly and discriminatory policy. 



149 

The hearing today reflects a major effort in putting an end to this practice. As 
a result of joint efforts with the Oklahoma State Chamber, we are concerned as to 
how widespread the abuse might be, both within the State of Oklahoma and nation- 
ally In this time of shrinking Federal dollars and the pubhc s call for streamlimng 
the Federal Government, further oversight and investigation of this potentially na- 
tional problem is more than warranted. . ., , . «• ^ <. ^^^^.^i.,^ 

We urge you and your colleagues to remain vigilant m your efforts to determine 
the extent of such abusive practices and look forward to working with the Congress 
in this regard. 



150 



Due to the size of the document, the Davis-Bacon Act, and Fraudulent Wage Data 
Investigative Report document will be on file with the Committee on Economic and 
Educational Opportunities document's clerk located at B345 Rayburn House Office 
Building, Washington, DC. A/\ G^ftwAu^, 5i<**7/v7<v^^ foilcA^i-'. 



151 



© 

Oklahoma Department of Labor 



Brenda Reneau '' W V Frank Keating 

COMMISSIONER ^l^^tr GOVERNOR 



Investigative Report: The Davis Bacon Act and Fraudulent Wage Data 
Submitted to the U.S. Department of Labor 



Executive Summary 

Bacl<ground: 

On November 4, 1994, the U.S. Department of Labor issued new general wage decisions for 
heavy construction in Oklahoma County and other counties comprising the Oklahoma City 
metropolitan area. Many of the wages prescribed by these new decisions were significantly 
increased from the most recent modified versions of the heavy construction wage decisions. It 
had been several years since the previous survey, so a reasonable increase in rates was 
expected. In some cases, however, the increase was outrageous, which prompted a public 
outcry from the building industry and from a wide variety of government subdivisions that pay for 
the construction work with taxpayer dollars. 

Some of these affected parties approached the Oklahoma Department of Labor with allegations 
that fraudulent data had been submitted to the U.S. Department of Labor during the survey 
process. Because Oklahoma's Little-Davis Bacon Act forces Oklahomans to adhere strictly to 
the federal wage decisions generated by the U.S. Department of Labor and, due to the fact that 
the Oklahoma Department of Labor is responsible for strictly enforcing that law, Oklahoma Labor 
Commissioner Brenda Reneau commenced a preliminary investigation to determine whether 
Oklahoma's workers and taxpayers had been the victims of fraud and abuse. 

This investigation focused on three specific cases of possible fraud. In each case, the Oklahoma 
Department of Labor obtained initial documentation from affected parties. Appropriate government 
subdivisions were contacted to help establish the credibility of the initial documentation. Other 
potentially affected or involved parties were contacted, including contractors and others from the 
private sector, and all licensing, financial and anecdotal evidence was pursued. It should be 



(Executive Summary Page 1 of 3) 



PHONE (40515281500 • FAX (405)528 6751 



152 



noted that this exhaustive investigation attempted to eliminate all plausible explanations, with 
fraud being the absolute last resort. 

Findings: 

Case 1: Oklahoma City Sanitary Sewer 

Matthews Trenching Company, an open shop contractor, completed a $587,000 sewer project 
in Oklahoma City in the fall of 1992. Matthews' certified payroll indicates that during "peak" 
activity, six common laborers, four pipe layers and three operators — 13 total employees in three 
work categories — were employed on the project. A U.S. Department of Labor wage survey for 
the same project was submitted by an as yet unidentified "interested party" which lists 28 "peak" 
employees, with the "extra" 15 being classified as various categories of "operating engineers." 
None of these employees — who are listed as receiving substantially higher wages and benefits 
— were actually employed on the project. Thus, the wage sun/ey for an actual project submitted 
to the USDOL by an "interested party" lists 15 fictitious employees. 

Case 2: Underground Storage Tank 

Unlike the first case, the underground storage tank was never constructed. Case 2 involves 
fictitious workers on a fictitious project. A wage survey submitted to the U.S. Department of 
Labor claimed work for 20 plumbers and pipefitters on a $2 million underground storage tank in 
Mustang, Oklahoma. This survey indicated that each worker received compensation of $21 .05 
per hour — a wage of $17.00 per hour and fringe benefits of $4.05 per hour woiked. The 
investigation found that the Mustang underground storage tank was never built — no project was 
found that matched the description provided by the U.S. Department of Labor. As a result, the 
wage survey on which the USDOL wage decision was based contains false, and we believe, 
fraudulent data. 

Case 3: Oklahoma City Treatment Plant 

The third case involves two wage surveys: one for a project constructed by a different contractor 
than claimed, and another that was never constructed at all. The USDOL received two wage 
surveys identifying the Concho Company as a subcontractor on projects at the Lake Hefner 
Treatment Plant. Each sun/ey identified 16 operating engineer categories for 33 total "peak" 
employees. While Concho had performed some excavation and related work at a project 
adjacent to the treatment plant, another unrelated contractor, Flintco, Inc., actually performed the 
"high lift" job identified in one of the surveys. Interestingly, however, Flintco didn't even sign the 
contract to initiate the project until several weeks after the federal wage form had been date 
stamped in at the U.S. Department of Labor. 

(Executive Summary Page 2 of 3) 



153 



The project identified in the other survey — and falsely attributed to Concho — has never been 
built. Further, the surveys claimed that each job was performed pursuant to a collective 
bargaining agreement. Concho, to whom the projects were falsely attributed has a collective 
bargaining agreement with an operating engineer local union hall. Flintco, the company that 
actually performed the work, does not have a collective bargaining agreement with any of the 
operating engineer local union halls. 

Conclusion: 

It should be noted that the Oklahoma Department of Labor was provided with leads on several 
dozen possible cases of fraud. The three cases we investigated were selected at random. 
Since all three of these cases contain elements of fraud, we have no choice but to question the 
breadth and depth of what may be a significantly larger systemic problem. 

in each of these three instances, the Oklahoma Department of Labor believes that the false 
information was submitted to the U.S. Department of Labor with the intent to influence the 
outcome of the related U.S. Department of Labor wage decisions. Because Oklahoma law 
mandates that the U.S. Department of Labor decisions must apply to state construction, 
Oklahoma taxpayers are footing the bill for this fraud. 

If is our intent to present our findings to the appropriate investigative and prosecutorial authorities 
to help bring to justice those who knowingly have attempted to defraud the taxpayers of 
Oklahoma and the United States. In cases where Oklahoma law may have been broken, this 
report will be presented to the district attorney in each county where a fraudulent act may have 
occurred. 

The response of the U.S. Department of Labor to date has been disappointing. Repeated 
requests for information solely in the possession of the Department have been delayed or 
denied. Absent prompt and full cooperation in our effort to expose and prevent criminal activity, 
the USDOL will be engaging in conduct bordering on complicity in the illegal conduct. 

In all likelihood, the perpetrators of this fraud are unscrupulous "interested parties" who reap the 
benefits of an inaccurate survey. The evidence contained in this report provides a compelling 
case that the Davis-Bacon Act and its wage survey invites the submission of fraudulent 
information and protects those unscrupulous "interested parties" who participate in the process. 



(Executive Summary Page 3 of 3) 



154 



EPOf 



R^DIv 



York: 2-e 30»-:«» 



T«ANiewrT U«An|»l««: 2>1-<W.6124 

ASSOCIATED BUILDERS & WRC-TV 

"" CONTRACTORS JTATION ^gc Natwork 

PROGHAM NBC Nightly News ^ity Washington, D.C. 

BATi October 11, 1995 7:00 PK Auoituct 

The Fleecing of Ajnarica/The Davis-Bacon Act 

BROADCAST KXCERfT 

TOM BROK.\W; Tine now for cur regular Wednesday feature about 
your money and hew your goverr.rnant wa.st8s it. Tonight, how phantom 
construction projects are driving up the cost of real buildings. 

NBC's Robert Hager has details now in this Fleecing of 
America. 

ROBERT HAGER: Mustang, Cklahoaia, a rural town in the nation's 
heartland with a brand new 32 million underground storage tank. 
But where is it? 

JIM MORGAM [City Manger]: Nc, this is not an underground 
storage tank. 

HAGER: In fact, the underground tank was never built, needed 
or even proposed. It only exists in these documents, federal wage 
survey forms, fraudulently submitted to the U.S. Leisor Department, 
complete with fake salaries and fake jcbs, intended to persuade the 
government to set higher construction wage scales for that area. 
Remarkably, it worked. 

And since u.ntil recently by law, Oklahoma had to pay using the 
sane wage scales, the state labor corii-iiissioner is furious, saying 
the fraud is costing taxpayers there nillions of dollars. 

BRENDA REN2AU [Oklafcoma Labor Corjnlssloner]: The wage rate 
for this area was based on that non-existent or ghost project. 

HAGER: A federal law, the Davis-Bacon Act, requires that 
construction workers on alnost all U.S. government projects, be 
paid the prevailing or going salary for a specific region. Those 
salaries are set by the wage survey. But critics say many of those 
surveys are being rubber stair.ped without any checking. 



155 



In Oklahoma, th« inpa-t on the state's wage rate is 
tremendous. A backhoe operator whose salary was 8.40 an hour 
started getting $22 an hour. A truck driver whose salary was 7.30 
got $15 an hour. Total additional taxpayer cost/ 521 million. 

On Capitol Hill there's concern. 

REP. CASS BALLENGER [R-North Carolina]: If thay found out in 
Oklahoma that you could get away with cheating, it's not a secret 
thay roust have kept in Oklahoma. It's got to elsewhere in the 
country. 

KAGER; And NBC Hews has learned the FBI is now investigating. 
Because of this, the U.S. Labor Departnent says it's limited in 
what it can say. 

THOMAS WILLIAMSOhf [Labor Dspartnent Attorney]: We take very 
seriously alleaations of fraud thet call into question the 
integrity or accuracy of an'/ wage surveys used by the David-Bacon 
program. 

HAGER: In Oklahoma, ncre fakery. Someone wanted to double 
pay for asphalt workers, so a fern was sent to the U.S. Labor 
Departnent claiming asphalt workers had made big wages to resurface 
a parking lot. But a look today reveals it was never paved with 
asphalt. Another survey detailed high wages to put up a building 
at a water treatment plant. But a lock today reveals no building 
to be found, only barbed wir«. Now, because of continued abuse, 
the U.S. Labor Department has withdrawn the prevailing wage rate 
for Oklahona. 

And because she first raised questions of fraud, the state 
labor cotDinissioner's life has been threatened. But that's not 
stopping her. 

RENEAU: It's fraud. It's fraud at the fullest extent. 

HAGER: No one has been charged yet, but there's growing 
concern that the system of setting wages on U.S. govemaent 
construction projects is so flawed that it's fleecing taxpayers of 
hundreds of millions of dollars. 

Robert Hager, NBC Kews, Washington. 



156 

Opening Statement 

Representative Major R. Owens 
January 18, 1996 
Oklahoma Field Hearing: Davis-Bacon 

Thank you, Mr. Chairman for the opportunity to submit this statement for 
the hearing record. Unfortunately, the record blizzard sustained by the eastern 
part of our country made it impossible for me to attend the Oklahoma hearing on 
Davis-Bacon. 

It is my impression that the Republican party has misinterpreted and, 
therefore, misunderstands the Davis-Bacon Act and it's intent. During the 
depression unscrupulous fly-by-night contractors were hauling gangs of 
"itinerant", cheap, bootleg labor, around the country to undercut local firms on 
federal public works project, at a time when other new construction was limited. 

The Davis-Bacon Act of 1931 requires that the minimum wage rates 
paid to each separate classification of workers on federally-financed construction, 
repair, and alteration contracts be those determined to be locally "prevailing** 
by the Department of Labor. Therefore, carpenters ( representing various 
counties) working on highway construction projects in your state of North 



157 

Carolina earn $ 7.71 and no fringe benefits; while unskilled laborers working 
on federally-funded sewer and water construction projects and heavy construction 
projects earn $4.41 and no fringe benefits . These wages are not Michigan wages 
nor Texas wages; because the prevailing wage for Michigan is determined by what 
Michigan pays it's workers in the same category, and in Texas by what Texas 
pays. So, when the statement is made that: "The Davis-Bacon Act requires 
contractors on federally funded construction projects valued at over $2000 to 
pay a government-determined prevailing or inflated salary in a specific city 
or area." It is an untrue statement. It is the locality that establishes the 
prevailing wage, and the U.S. Department of Labor. 

Mr. Chairman , I have to trust that men such as ourselves—earning over 
$133,000 yearly and in some instances blessed with additional income and 
privileges—are not acting capriciously because we disdain poor and working 
people. I hope we have not become indifferent to their concerns when they 
organize to confront the tyrants who over-work and underpay or reftise to pay 
them. However, I can not ignore the unreasonable, mean-spirited attacks launched 
every day against American workers and their families by the Republican 
majority. Through unproved accusations, generalization and sensationalism the 
majority is attempting to create the false impression that a nationwide union 



158 

controlled Davis-Bacon Act is at the core of the misery of taxpayers. Davis-Bacon 
does not cheat the American taxpayer -it ensures that construction workers 
working on federal projects are paid a fair wage. Mr. Chairman, you bemoan the 
fact that $48 million are annually spent on federal construction under the Davis- 
Bacon Act, but you have no problem supporting a $240 billion tax cut for the rich. 

Since the earliest days of the 104th Congress the Committee leadership has 
made it clear that the policy implications of Davis-Bacon, such as its value in 
promoting quality construction and encouraging employer provided employee 
training, health care and pension benefits would not be debated. Nor would the 
Committee review the real Davis-Bacon scandal of contractors cheating workers 
by underpaying the reported wage on federal contracts. 

I am not willing to sit quietly by while the zealots conspire to destroy 
minimum wage protections for construction workers — Davis-Bacon. 

Eighty seven Democrats and Republicans are co-sponsors of H.R.2472 
(introduced by Mr. Curt Weldon, R-PA) a bill to reform Davis-Bacon; however, 
the leadership of this committee has not allowed the bill to come up for committee 
consideration. Why? A letter written and widely disseminated by Mr. Souder of 
Indiana may hold the answer. 

On October 12, 1995 and on February 9, 1996 Congressman Mark Souder, 



159 

Indiana-4th District, sent the following letter to contractors and others: (excerpts 
from the October 12, 1995 letter follow. Full text of February 9, 1996 is 
attached.) 

October 12, 1995 

Mr. Rick Cowley 

Mechanical Services & Systems, Inc. 

7021 South 400 West 

Midvale,Ut 84047-1032 •• , • • 

Dear Mr. Cowley: 

With your help, you and I can save American taxpayers billions of dollars and end a form of 
economic discrimination that costs Americans some 200,00 jobs annually. 
How? 

By repealing the five decade old Davis-Bacon Act, a law that effectively bars non-union 
employees from working on most government construction projects. 

For more than 60 years, all Americans have suffered under this law. 

Honest Businessmen and women who refuse to force their employees into unions have been 
denied federal contracts they've rightfully earned. 

Their employees have been deprived work of they're fully qualified to do, and the American 
taxpayer has paid literally billions in inflated costs over the years 

Now, you and I have chance to end this unjust, corrupt and costlv system by repealing the Davis- 
Bacon Act. 



But to have a chance of repealing Davis-Bacon, I will need to rally the American people to our 
cause. 



And your pledge of $500, $100, $75 or $50 to the Free Enterprise Institute will help pay for the 
Committee's campaign 

. These are vicious distortions of the truth. How can the Republican 
majority defend this ? The original authors of this law, both Davis and 



160 

Bacon were Republicans fighting to maintain decent standards of living for 

middle-class Americans. 

t 
THIS IS ONLY THE "TIP OF THE ICEBERG"; THERE IS 

FRAUD, DECEPTION AND COLLUSION ORCHESTRATED BY 

ZEALOTS WILLING TO DO ANYTHING TO DESTROY WORKER 

PROTECTIONS AND RIGHTS. 



Mark Souder 
Indiana - 4ih District 



161 



United States Congressman 

Washington, D.C. 



February 9, 1996 



Mr. David B. Norris 
Den Management Co. Inc. 
4053 Navajo Ln. 
Wichita, KS 67210-1542 

Dear Mr. Norris: 

With your help, you and I can save American taxpayers 
billions of dollars and end a form of economic discrimination 
that costs Americana some 200,000 jobs annually. 



By repealing the five decade old Davis -Bacon Act, a law that 
effectively bars non -nirinp f>Tn ployees from working on most 
government construction projects. 

For more than 60 years, all Americans have suffered under 
this law. 

Honest businessmen and women who refuse to force their 
employees into unions have been denied federal contracts they've 
rightfully earned. 

Their employees have been deprived work they're fully 
qualified to do, and the American taxpayer has paid literally 
billions in inflated construction costs over the years. 

Now, vou and I have a chance to end this unjust, corrupt and 
costly system bv r epealing the Davis -Bacon Act. 

1 am totally behind the effort to pass the Davis -Bacon 
Repeal Bill (H.R. 500/S.141) in this Congress, but I need your 
help - - today . 

I urgently need vou to sign - - and return to me right away 
- - special petitions prepared for you by the Committee to Repeal 
Davis -Bacon, a project of the Free Enterprise Institute. The 
Committee is a new coalition of employers and employees, 
dedicated to returning fairness and fiscal sanity to federal 
contracting. 

Our goal is to deliver a minimum of 1,000,000 petitions to 



NOT CRlNTSn r»-. MAII.lii) AT OOV'A? 



162 



Page 2 

Congress . 

Th;tr. means vou must act imm ediately. 

Will you join with me in this great coalition of Americans 
united in their desire to rid this nation of one of the most 
discriminatory, destructive and costly laws ever enacted by 
Congreas? 

Congress must know that Americans want to restore free and 
fair cornpetitive bidding on government construction projects. 

Por f^o long, union officials have treated the federal 
construction budget as if it was their own private slush fund. 

By repealing Davis Bacon, you and I will: 

*♦* Protect consumers and taxpayers , who ultimately pay Che 
price when union officials shut down vital federal 
construction projects with strikes or jack up the cost of 
construction with their "hate-the-boss" propaganda, 
senseless work rules and work slowdowns. 

♦♦♦ Return common sen se and sound budgeting to federal 

contracting , which is now rife with political favoritism and 
cronyism costing taxpayers billions of dollars. 

♦*♦ Bnd widescale discrimination against independent contractors 
and their employees, which shuts hundreds of thousands of 
workers out of jobs and denies contracts to the 8 out of 10 
contractors that don't force their employees to pay union 
dues. 

But to have anv chance of repealing Davis-Bacon. I will need 
to rally the American oeoole to our cause. 

That means you and I need to build massive nationwide 
support among America's independent contractors, their employees 
and their customers. 

And that's where you can help. 

By signing the petitions prepared for you bf the Committee 
to Repeal Davis Bacon, you will give me the backing I need to 
force a Davis-Bacon Repeal Bill to the floor of Congress for a 
public vote. * 

And your pledge of $500, $100, $75 or $50 to the Free 
Enterprise Institute will help pay for the Committee's campaign 



163 



Page 3 

to rally employees, einployers, taxpayers and consumers behind the 
drive to repeal this misguided and discriminatory law. 

The Free Enterprise Institute is behind me lOO percent. But 
I need the help of patriotic Americans like you -- today. 

The Big Labor political machine will be kicked into high 
gear in an effort to preserve one of the juiciest perks ever 
handed to union bosses by Washington politicians. 

But we can overcome this obstruction -- if we deliver a 
clear message to Congress that Americans want an end to Davis- 
Bacon discrimination and waste. 

Most Washington politicians k now this law is indefensible -- 
even Pre sident Clinton. 

The president has cried to slow down the drive for repeal by 
calking about a phony "compromise" Davis-Bacon Repeal measure 
that would leave all the old discriminatory practices in place. 

The fact is, every day the Davis-Bacon Act stays on the 
books, Americans pay --in lost jobs, lost opportunities and tax- 
boosting cost overruns on federal construction projects. 

And for what? So Washington politicians can feather the 
nests of the powerful union officials they depend on for election 
and re-election. 

Davis-Bacon was crafted as a political payoff for union 
officials who had only one goal -- to keep c ertain Americans from 
working . 

Over the years, union bosses have used the law to shut out 
anyone who could out ccxnpece them -- that includes contractors 
who don't force their workers to pay union dues, upstart 
businesses with low overhead and operating costs and, frequently, 
companies owned by minorities. 

Davis-Bacon is federally-mandated discrimination against 
independent workers. Pure and simple. 

Now, after 65 years on the books, the massivfe federal 
construction budget is Che private domain of powerful union 
officials and a few fat cac contractors willing t» sell out the 
rights of their employees. 

That's left the small, independent contractor out in the 



164 



Page 4 



It has also destroyed countless opportunities for new 
businesses. 

Under Davis-Bacon, many fledgling enterprises, looking to 
land even a small government contract and establish their 
businesses, can't get a foot in the door. 

They simply don't have a staff of lawyers and accountants to 
fill out the mountain of Davis-Bacon paperwork required to bid on 
a contract . 

In fact, experts estimate that simply complying with Davis- 
Bacon regulations alone costs contractors nearly $200 million a 
year, 

Clearlv. the time has come to rid this country of the dead 
weight of Davis -Bacon. 

In this highly competitive global economy, we cannot afford 
a system that penalizes the most efficient companies and crushes 
the dreams of the most willing workers. 

You and I can and must repeal Davis -Bacon. But we must act 
today . 

Please, sign and return to me as soon as possible the 
enclosed petitions urging your congressman and senators to vote 
for the Davis-Bacon Repeal Bill (H.R. 500/S. 141). 

And Please send alo ng vour most generous contribution 
possible . 

Some Americans are so fed up with years of Davis -Bacon waste 
and abuse that they've sent $500, $1000 and more to help the Free 
Enterprise Institute. 

Others have sent $50 and $75. 

Your contribution -- whether it's $1000, $500, $200, $iO0 or 
$75 -- will help pay for the mailings, phone bank;^, advertising 
and other efforts needed to generate grassroots support for the 
Davis -Bacon Repeal Bill. 

Through every means possible -- mass mailings, briefings for 
local and national media and. if possible, nationwide television, 
radio and newspaper advertising -- the Committee to Repeal Davis 
Bacon will need to organize and sustain intense public pressure 



165 



Page 5 

on Congress to repeal the Davis -Bacon Act. 

As Z said, our goal is to deliver a minimum of one million 
petitions to Congress. 

Thia wgn't b< easy 

But by contributing $75, $100, $200 or more, you will give 
the Free Enterprise Institute the wherewithal to meet this 
ambitious goal. I hope you will send at least $50. 

Only with your help can we build enough popular support to 
end a system that is patently unfair, wildly inefficient and 
grossly discriminatory. 

To do that we will have to rally thousands of America's 
en^loyers, en?>loyees, consumers and taxpayers to our cause •- by 
phone, by mail, by any means necessary. 

And y^ must act right away. 

The union bosses won't hesitate to spend whatever it takes 
to retain their Davis -Bacon privileges. 

Your contribution of $1000, $500, $200 or $100 is essential 
if we are going to overcome Big Labor obstruction and end 60 
years of discrimination against America's independent contractors 
and their enployees. 

So, please, return your petitions today, and send along your 
most generous contribution possible. 




Mark Souder 
U.S. Congressman 

P.S. The 1931 Davis Bacon Act costs taxpayers BILLION S OP DOLLARS 
and locks hundreds of thousands Americans out of good jobs. 

I need your help to end one of the most costly Big Labor 
perks on the books. 

Please, return the enclosed petitions urging your 
congressmen and senators to repeal Davis -Bacon, and send 
along vour contribution of SIOQO. S500. S200 or SiOO right 



166 



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Whereas: 



Whereas: 



Whereas: 



Therefm 



Petition to K 

United States House of Representatives 



for more than 60 years the American taxpayers have been burdened by 
billions in bloated constiuction costs as a result of the Davis-Bacon Act, and 
the Davis-Bacon Act costs small businesses working on Davis-Bacon 
projects almost S200 million a year in unnecessary and excessive 
paperwork, and 

the Davis-Bacon Act has blacklisted thousands of non-union companies by 
preventing them from bidding on most govemmem construction projects 
thereby guaranteeing that 9 out of 10 construction workers will be kept off 
the job, and 

the only ones who benefit from the continued existence of the Davis-Bacon 
Act are union officials who reap a huge annual fmancial wiixlfall as 
millions of taxpayer dollars get funncled into their political war chests and 
coffers; 

as a constituent of yours, I urge you, in the name of a prosperous and vital 
ecoiK>my. to co-sponsor and support repeal of the Davis-Bacon Act. 



Signed: 



Mr. David E. Norris 



City: 



m & -fS: m. ?.V -.- :••? .f:S?;: 'iiW" W'*, . i:1J>'\ -^j-S?- r=.; ::?• 



RETURN TO 



FROM: 



Congressman Mark Souder 

The Committee to Repeal Davis-Bacon 
The Free Enterprise Institute 
3238 Wynford Drive 
Fairfax, VA 22031 



Mr. David E. Norris 
Den Management Co. Inc. 
4053 Navajo Ln. 
Wichita, KS 67210-1542 



YES. Congres-sman. 

i understand that because of the Davis-Bacon Act American taxpayers have been forced to pay billions in 
additional taxes and that the American worker has paid an even greater price in lost jobs and Job opportunities. 

It's time to repeal the Davi.>!-Bacon Act and its giveaways lo the union bosses. To help the Free Enterprise 
Institute aMompli.'ih this : 



D Signed and returned the Petitions for you to present to ray Congressman and Senators. 

a Enclosed my contribution to support the nationwide mobilization elTott by Th« FMe Enterprise 

Institute's Committee to Repeal the Davis-Bacon Act: 



□ 100-1- cmplovecs $1000 



a 75-99 employees $500 



D 50-74 emnlovets S.SSO 



D 30-49 cmployeeji $250 
D 0-4 etnployeet $75 



168 

a 15-29 employees $150 
D Other 



D S-14 employees $100 



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