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. Thornbrough. 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 Workmen 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 not >K
employ plumbers (VERIFYING WITH UNION AT THIS TIME)
PROJECT 00 3 -LOG
1, Data submitted by piimhpr local, per call to firm they 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 by Mill- ^
Wrights Loca.T »<nf» r'''""'^ers local, per call to firm they do not
I employ millwrights or plumbers (VERIFYING WITH UNION At THIS
j TIME)
! PROJECT 012 -OKL
' 1. Data submitted by plumber union - per call to firm 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 IXwaMin i*
47.
Mport'orcmtktftkntoitneki^ jtf- P«P§rtrrnnt of Ubor
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 — — — ■irlnTiKii n 9mm luia — »— — 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^ Station Consmictioo 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 gdwrhighlift jump stations 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 in 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 apyroyed 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 iao*» not include —fr
y ^ ^,,.^^, .,... ^^fi^
■Bdlficmrtoti mi^bcx »Hl>lif»tia» BKt«
0 «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 aiai)
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
la/W/iSM
^\
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[EXHIBIT
I 13
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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 Depart
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. 0
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 TmvRUATXrHAi innrn ne nffPATTNT, FNf^TNFra-^ \nrAX
627, AFL-QO. hereinafter referral Sais'lie' 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 fngii»»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 0 BE PAID » AiXirnON TO TIffi ABCVE MAGE SCHEDULE;
Health 4 Appren- Supple-
tfelfare Pttision 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 pcxigrams required tsider the
Bagineers for — r^riiWT aot listed under tliese cLasslf ications Aall receive
the scale coaipairaJble to tIauiL. 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 Liiaimly 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.PopytiMntofUbof ^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-Bacon 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 analysistj) 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.
. 0 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/TREAS
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
5rt of Constnjction Cohtractot's
wage Rates C\l .^(>, (^C)l
UJS. Department of Labor
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117
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118
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wage Rates QO^.f^. O0(
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Hotr Tha fo<m It umo ty (r>* u^
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I «•«■ f«iM i^iMi ue» I
119
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port of Construction Contractor's
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120
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121
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122
?«pon of Construction Cchtnctors
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Supplenental Duts and 2S( increase to wages.
U.S. c: '
®
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
0 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
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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>Tnployees 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 repealing 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 immediately.
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 sense 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 know this law is indefensible --
even President 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 certain 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 along 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 BILLIONS 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
„ , BOSTON PUBLIC LIBRARY
iililiilllliiliilllill
3 9999 05984 277 1
167
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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ISBN 0-16-053915-3
7QnH cniicooi CO
90000
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