Prevailing Wage Changes Tied to Proposition 47

With Proposition 47 passing, Assembly Bill (1506) regarding prevailing wages will be in effect starting April 1, 2003. There is some controversy over whether this extends to all prevailing wage projects or only those that receive Prop 47 funding. There is no question, though, that this requirement will be enforced on all projects receiving Prop. 47 funding that start after April 1st 2003.

What does this mean to school districts? School districts will be responsible for producing and enforcing a prevailing wage compliance plan. Both the requirement to create a prevailing wage compliance plan and enforcing the plan will be an onerous task. Failure to comply with this regulation may cause the loss of Prop. 47 funds for renovation projects.

The fact that failure to comply with this regulation would cause loss of the funds after those funds were technically spent (discovery of non-prevailing wage compliance can only occur after a project is under way) would have significant economic impact on a district.

Districts that do not have the capability to write their own prevailing wage compliance plans should look into hiring an expert to help them with this requirement. (HMS, Inc. does not currently have the capability to write a compliance plan nor to enforce prevailing wage requirements.)

The above requirement, which will result in more strictly enforced prevailing wage requirements, will mean that contractor’s bid prices will increase, both for abatement and non-abatement disciplines. The plain truth is that many contracts in the past (although far from all) have been won by contractors who have been skirting the prevailing wage regulations.

Another issue that will affect prices for this year’s renovation projects is that Governor Davis has stated his intention to release all the Prop 47 funding at one time. This will increase the demand for contractors. Supply and demand pressures could cause contractor prices to rise significantly. This issue will affect both prevailing wage projects and non-prevailing wage projects, as both are bid on by the same contractors.

It is the intent of this memo to give our clients a “Heads-Up” on what to expect this year. Our advice would be to look into retaining legal advice on writing a prevailing wage compliance plan (or find a canned plan) and start now to prepare your staff to enforce the plan. Also, the earlier in the year you can bid your renovation projects, the better the price you will receive, as contractors will still have room on their calendars.

Posted in Regulatory

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