10.01.2008 0

Federal School Construction Project to Increase Costs of Building Schools

  • On: 10/07/2008 16:17:58
  • In: Big Labor
  • Big Government is proving once again that whenever it intervenes in matters better left to States, localities, or the free market, under the guise of helping out the “little guy” or doing it “for the children,” it invariably raises the costs of the very projects which it seeks to fund.

    And so it is with a new proposal, the “21st Century High Performing Public Schools Facilities Act,” in Congress to stick Big Government’s nose into public school construction. This bill, amongst other things, would apply the Federal prevailing wage law, the Depression-era Davis-Bacon Act, to public school construction.

    According to a report drafted by the minority staff of the House Education and Labor Committee, applying that law to school construction would add about 10 percent in additional construction costs, and about a 22 percent increase to labor costs:

    “One of the most troubling aspects of a massive new federal school construction program is that it will be subject to the requirements of the Depression-era Davis-Bacon Act, which requires construction projects be paid using flawed “prevailing wages” and favors union wage workers. Under the General Education Provisions Act (GEPA), all laborers on all construction projects assisted under any program administered by the U.S. Department of Education must be paid wages at rates not less than those prevailing on similar construction in the locality as determined by the Secretary of Labor in accordance with the Davis-Bacon Act.

    “The law was originally passed in 1935 to ensure that the government’s buying power did not drive down construction workers’ wages during the Great Depression. Decades later, these prevailing wage rates have been proven to be fundamentally flawed, often bearing no relation to market wages. Still, they persist in adding bureaucratic complexity to federally-funded construction projects.

    “As such, any federal intervention into school construction carries with it significant burdens.

    “A number of studies have confirmed the flaws inherent in Davis-Bacon wage calculations, and point out that projects conducted under the requirements of the Davis-Bacon Act commonly cost between 22 and 26 percent more when compared to similar projects completed under market conditions. For example, the Beacon Hill Institute recently completed a study on the effects of paying Davis-Bacon inflated wages in public construction projects and found that when the Davis-Bacon mandated wages were followed, labor costs rose by 22 percent above the reported median wage, while overall construction costs went up 10 percent (which means that almost 10 percent of the total construction cost of a new school would be attributable to mandates imposed under the avis-Bacon Act). In total, the study reports that Davis-Bacon costs taxpayers over $8.6 billion annually, enough money to hire over 18,000 teachers. [emphasis added]”

    To give you an idea of the staggering costs association with Davis-Bacon, the report cites the example of Ohio, which repealed prevailing wage laws as related to school construction projects:

    “In 2002, a study from researchers working for the Ohio General Assembly determined that rescinding prevailing wage requirements for the state’s school construction program saved the state’s residents and taxpayers more than $488 million in aggregate school construction costs during the post-examination period, an overall savings of 10.7 percent. In particular, the state of Ohio saved $24.6 million in new construction project costs (1.2 percent), $408 million in school building additions (19.9 percent), and $55.2 million in school building alterations (10.7 percent). The state also estimated that it saved $310.5 million in urban counties and $177.4 million in rural counties by exempting the state’s school construction program from the Davis-Bacon Act. The study also found indications that the exemption had little impact on the quality of public school building construction.”

    In other words, Davis-Bacon diverts a significant amount of taxpayer funds from other worthwhile projects and instead simply lines the pockets of the construction companies and unions involved well above market value. This in turn will dramatically raise the costs of school construction at the State and local level.

    There is much valuable information on the Internet about prevailing wages and Davis-Bacon. For example, in August 2007, the Mackinac Center looked at the effects of Michigan’s prevailing wage law. In December 2007, the Heritage Foundation published this memorandum urging Congress to fix its fatally flawed wage determination process. And in February 2008, the Beacon Hill Institute published its own study on the miscalculation of wage under Davis-Bacon.

    In the end, it is clear that without these flawed, socialistic prevailing wage laws, government could accomplish a lot more with a lot less. It is time to do away with these Depression era laws which place unnecessary burdens upon the cost of government projects by overpaying for labor and other costs.

    Is there no theft or depravity these people won’t commit in the name of “the children” while lining the pockets of their Big Labor overlords?

    ALG CTA: We urge journalists across the nation to encourage their audiences to contact members in Congress who are sponsoring this legislation to let them know that they do not want schools to be constructed by the Federal government, that they do not want prevailing wage laws applied to school construction, and that the Davis-Bacon Act ought to be repealed. This is a perfect example of the inherent flaws of fixing wages in the tradition of central planning: it increases costs without improving quality.

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