Acts Regulating Compliance for Government Contractors

Government contractors are subject to several laws and regulations that are mandatory to maintaining their compliance. The McNamara-O’Hara Service Contract Act of 1965 (SCA), Davis-Bacon Act of 1931, and city or county living wage laws all present challenges and requirements that each government contractor must consider. All government contractors must account for proper administration and recordkeeping of the fringe contribution, and the most strategic will seek to use the fringe dollars to their competitive advantage.

The Davis-Bacon Act

The Davis-Bacon Act, or DBA, primarily covers federal construction contracts like bridges, roads, airports, and other infrastructure. The DBA has roots going back to the national construction boom that occurred around the time of the Great Depression.

The Act was conceived in the interest of protecting local workers and preventing contractors from importing cheap labor from other parts of the country. As such, the federal government created prevailing wage laws to account for the wages in the area where the project was taking place and to determine fair wages for works operating within a specific field. This requires federal contractors to pay the applicable prevailing wage to the workers they employ.

The Service Contract Act

The Service Contract Act applies to every service employee performing under a government contract. The Service Contract Act was adopted in the mid-60s to apply the same general principles to services that the Davis-Bacon Act had put in place for construction contracts. This new act relied on wage determinations to ensure that pay for service personnel, like a security guard or food services worker, is fair for the job classification and the area.

Though the two Acts are similar, they differ in a couple of key ways:

1. Under the Service Contract Act, wage determinations are created based on wages at the county level
2. The David-Bacon Act provides wage determinations based on state level wages

The Acts and Compliance 

The type of records that must be maintained to prove contract compliance with the aforementioned regulations differ between the Service Contract Act and the Davis-Bacon Act. Under the Service Contract Act, for example, contractors must maintain records regarding fringe benefits for seven years in case of an audit. With respect to the Davis-Bacon Act, contractors must provide certified payroll as well as written records showing fringe benefit calculations and allocations.

The third and final governing regulation that pertains to government contractors is city / county living wage laws. Living wage laws essentially mirror the intent of the Service Contract Act and Davis-Bacon Act, but on a much smaller scale. These kinds of regulations will occur in certain counties or cities, where the cost of living and other factors may differ from the rest of the area. Living wage laws require an employer to provide a benefit or an hourly cost for the city or county.

Addressing Compliance Concerns for Government Contractor

Government contractors have multiple options available when choosing how to utilize the fringe dollar. Some elect to pay the benefit out in cash. However, providing bona fide fringe benefits comes with certain tax-preferred advantages which makes it the preferred option for a strategy-minded contractor. To take advantage of the preferred tax treatment, employers must generally take on the administrative burden to maintain compliance.

AssuredPartners Government Contractor Solutions team can help ease the administrative burden. Our niche experts have the necessary experience and knowledge to handle the administrative needs of government contractors. That leaves contractors open to take advantage of the tax-preferential treatment permitted by the governing laws. Employers who would like help streamlining compliance while minimizing the personal burden can contact our team of Government Contractor specialists or visit our website for more information.