SR-205-003 (333)
\ \-1:
~~5"'003 :JtT 2 fl19RG
CM:SS:NM:JG:dvm
city council Meeting: 10/28/86
Santa Monica, California
TO: Mayor and city Council
FROM: City staff
SUBJECT: Recommendations Regarding Payment of Prevailing Wages
and Apprenticeship Programs for All City-Related
Rehabilitation and construction projects
INTRODUCTION
On August 12, 1986 City Council requested that Staff provide
information regarding the background and potential implications
of a policy regarding the payment of prevailing wages and
operation of apprenticeship programs as proposed by Local 1400 of
the United Brotherhood of Carpenters and Joiners of America. The
following report provides the information as requested.
BACKGROUND
In March of this year, Local 1400 of the united Brotherhood of
Carpenters and Joiners of America presented for council
consideration a resolution proposing that all "construction
employers be required to pay the State-established prevailing
wage rate on all projects involving city-owned or City-leased
land (even projects financed with private money). If In further
conversations, representatives of Local 1400 also specified that
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;"GlJ II ~ .
the prevailing wage requirement should apply to all proj ects
financed in total or in part with city funds.
In addition, Local 1400 proposed that the resolution be expanded
by including a requirement that for all projects performed on
Ci ty-owned or Ci ty-leased land or property, construction
employers provide uproof of participation as a signatory to a
recognized apprenticeship and/or training program. . ." The
proposed apprenticeship provisions would not apply to contracts
of general contractors involving less than $30,000 or 20 working
days or to contracts of specialty contractors not bidding for
work through a general contractor, involving less than $2,000 or
fewer than five working days. A copy of the proposed resolution
is attached for reference (Attachment I).
DISCUSSION
Currently, the city generally meets the request of Local 1400 in
that it requires all successful bidders on its public works
projects to pay prevailing wages as set by the California
Department of Labor. In addition, all successful bidders on
public works projects must apply for a Certificate of Approval
for the employment and training of apprentices for each craft or
trade, or contribute a pre-specified amount to a trade-specific
training fund sponsored by each union ~, if such contributions
are refused by the training fund administrators, make the same
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contribution to the California Apprenticeship Council. The
availability of three options far participation in apprenticeship
programs enables those smaller non-union and/or WHBE contractors
to successfully bid for public works projects since these types
of firms do not typically have the resources or union affiliation
required to operate a recognized apprenticeship program. All of
the City's current requirements are in accordance with California
state law (California Labor Code Chapter 4, Division 3, sections
1775 - 1777.5 and 3070).
In addition, many praj ects constructed in the City which are
financed with grant funds (CDBG, Rental Rehabilitation, section
8, CHFA, etc.) are already required to pay Davis-Bacon or State
prevailing wage rates if they are larger than the minimum size or
level of financing thresholds set by the grantor agencies. None
of the grantor agencies enforce any requirements regarding
participation in recognized apprenticeship programs. A mare
detailed discussion of these Federal and state requirements
begins on page 9.
However, the city has no such prevailing wage or apprenticeship
training requirements for privately financed projects performed
on city-owned or City-leased property (i.e. Airport
redevelopment; Pier business development) or for projects
partially financed with city funds (i.e. community Corporation
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projects). The ramifications of requiring that such non-public
works proj eets meet the requirements of the resolution vary
depending on the type of project. For larger private
construction projects which tend to use union craftspeople,
prevailing wages would generally be paid and on-site
apprenticeship programs offered. For smaller private
construction and rehabilitation projects, the requirements could
have a significant impact. A detailed discussion of these
ramifications is outlined below:
I) Analysis of the Impact of prevailinq Waqe Requirements
The proposed requirement that all contractors performing work on
city-owned or city-leased property or utilizing City funds be
required to pay prevailing wages would result in increased labor
costs since many such contractors normally perform the work with
non-prevailing wage labor. In the Los Angeles area, the
union-negotiated wage rates for each trade are adopted by the
Department of Labor as the "prevailing wage". Union-negotiated
wage scales include a base salary and a benefits package
(pension, disability, maj or medical, apprenticeship fund); the
total salary package is what is set as the prevailing wage by the
Department of Labor. Thus, contractors who normally use
non-union labor state that their labor costs under a prevailing
wage requirement increase due to the need to pay a wage equal to
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the union-established base salary for a laborer or skilled
craftsperson plus the benefits package.
A prevailing wage requirement also results in a significant
reporting workload for contractors who must be able to provide
evidence that they have actually paid prevailing wages. This
reporting requirement resul ts in addi tional administra t i ve
overhead cost associated with monitoring of procedures, paperwork
completion and payroll certification. In addition, the oversight
agency charged with enforcing the prevailing wage requirement
must also devote staff time for compliance review in the form of
construction site visits and employee interviews.
Discussions with several area contractors (including those
specializing in housing construction and rehabilitation and WMBE
firms), with representatives of the community Redevelopment
Agency of Los Angeles (which has a prevailing wage requirement
for certain new construction and rehabilitation projects) I and
with Community Corporation resulted in the following cost
increase estimates for projects with prevailing wage
requirements:
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Contractors and developers note several additional impacts of
prevailing wage requirements which should be highlighted:
1) Prevailing wage reporting and monitoring responsibilities
of contractors and oversight agencies can often result in
bureaucratic delays. Falsification of documents is not
unusual and requires diligent investigation.
2) Many small and/or WMBE firms refrain from bidding on
prevailing wages and apprenticeship training because they
cannot afford to pay themselves or their subcontractors a
prevailing wage rate and bid competitively against larger
contracting firms which are able to contain costs due to
their economies of scale. In addition, many such firms
are either unfamiliar with or simply unwilling to process
the wage reporting paperwork required. The end result is
to discourage small and/or WMBE bids resulting in a
less-competitive bidding process overall.
3) Many housing rehabilitation projects such as those
performed by Community Corporation are considered "small,
infill projects," which many large union contractors
consider too small to bid for. On the other hand, many
WMBE firms do bid for small, infill projects, but might
refrain from doing so if the payment of prevailing wages
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refrain from doing so if the payment of prevailing wages
was required due to the circumstances outlined above. The
end result could be a lack of competitive bidders for
community Corporation and other housing rehabilitation
projects.
4) Many organizations such as Community corporation rely on
self-help labor in housing rehabilitation. Requiring the
payment of prevailing wages would prevent such
organizations from taking advantage of the cost savings
resulting from the use of such labor, would increase the
level of funding assistance requested of the city, result
in fewer housing units constructed due to increased cost,
and contribute to increased housing costs upon proj ect
completion.
The City Attorney also notes one legal limitation of the proposed
resolution requiring the payment of prevailing wages for projects
performed on CitY-leased land. The requirement could only be
applied to leases signed after the adoption of the proposed
policy; pre-existing lessees would be exempted from the
requirement until the expiration of their leases and their future
renegotiation.
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Current Prevailinq Wage Requirements - Federal, state and other
Local Government Jurisdictions
Recipients of federal funding for construction are required by
Davis-Bacon wage laws to pay workers at the prevailing wage rate
set by the regional office of the Department of Labor and to
satisfy apprenticeship standards under the fOllowing conditions:
Funding Type
Threshold
Community Development Block Grant
A) Residential Construction
8 or more units
B) Non-Residential Construction
Cost of $2,000 or
more
Rental Rehabilitation
section 8
12 or more units
9 or more units
All construction
requires
Davis-Bacon
5 or more units
5 or more units
section 202
FHA 207 rentals
FHA 213 co-ops
FHA 221 ( d) (3)
8 or more units
FHA 312
8 or more units
FAU
All construction
requires
Davis-Bacon
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It should be noted that HUD considers bona fide self-employed
sole proprietors and partners exempt from Davis-Bacon. This
often includes local and/or WMBE contractors.
The California Housing Finance Authority (CHFA) requires that all
projects involving more then $400,000 in construction costs pay
prevailing wages.
The Community Redevelopment Agency (CRA) of Los Angeles requires
that projects receiving more than $100,000 in CRA funds for
commercial construction and $250,000 for residential construction
are to pay either Davis-Bacon wage rates if Federal funds are
also being utilized, or state prevailing wage requirements if
only CRA funds are being utilized.
The city of San Francisco requires that prevailing wage rates be
paid on most construction proj ects involving Ci ty funds, but
admits that the policy was established by default since
construction projects in the City always involve State and/or
Federal funds which automatically trigger state prevailing or
Davis-Bacon wage requirements. For large housing development
projects funded primarily through the City's Housing Development
Corporation, funding recipients are allowed to direct City funds
toward site acquisition, architectural and other development fees
which are not subj ect to the same prevailing wage requirements
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that apply to construction. Housing developers are then not
required to pay prevailing wage rates on construction as long as
they are not utilizing city, State or Federal funds. Just as
state law requires for the city of Santa Monica, all city of San
Francisco public works contracts require the payment of
prevailing wages.
II) Implications of the Proposed Apprenticeship Requirement
The proposed resolution's requirement that, "all project bidders
provide proof of participation as a signatory to a recognized
apprenticeship and/or training program or the city may rej ect
their bid" is significant because, while not readily apparent in
the wording, it would discriminate against most non-union and
small contractors. In general, the majority of officially
recognized apprenticeship programs are operated by the unions and
are not open to non-union members. A few government-sponsored
apprenticeship programs are available to non-union contractors,
but openings are limited. Non-union contractors tend not to
offer recognized apprenticeship programs because their operations
are small and the costs of offering a recognized program are
significant. A representative of the California Association of
Minority Contractors (CAMAC) indicated that, although CAMAC
itself hopes to offer a recognized apprenticeship program in the
future, to require such of individual contractors would prevent
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many small and/or WMBE firms from working in the City and could
be perceived as a restraint of trade on the City's part. The
Ci ty 's current apprenticeship training program requirements for
public works projects are not considered discriminatory because
they allow non-union contractors to make a contribution to the
California Apprenticeship council in lieu of operating an on-site
program.
Apprenticeship Program Requirements - City of San Francisco
Local 1400 has noted that the city of San Francisco has adopted a
similar ordinance regarding proof of participation as a signatory
to a recognized apprenticeship and/or training program. A copy of
that ordinance is attached for reference (Attachment II).
Discussions with a representative of the Mayor's Office of
Housing and Economic Development revealed several problems City
staff have faced in implementing such an ordinance.
First, the ordinance was adopted as a result of significant
pressure from San Francisco union leaders. Many City staff feel
the ordinance is discriminatory, and have sought to circumvent
the requirement based on their interpretation of the language.
In Section 6.46 the ordinance states, II In the awarding of any
contract or written order for any public work or improvement
mentioned in this article. . . .11 The lack of a clear statement
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of what constitutes a IIpublic work or improvement" has made it
difficult to interpret the ordinance. In Section 6.47, the
ordinance states that, ItBids may be rejected for lack of
qualifications or equipment." City Staff have assumed that the
language which states that the "awarding officer, board or
commission . may rej ect II a bid enables them to waive the
apprenticeship program requirement should they deem it desirable.
One significant problem with the ordinance is that its official
adoption signaled to the Unions the City's willingness to concede
to their wishes. As a result, they feel they have the authority
to continually challenge city staff's decision to waive the
apprenticeship program requirement in individual cases, and do so
on a regular basis.
SUMMARY
As outlined in this report, the city of Santa Monica has in place
as adopted city policy much of the prevailing wage and
apprenticeship program requirements as proposed by Local 1400 of
the United Brotherhood of Carpenters and Joiners of America.
However, further expansion of the requirements would require an
evaluation of the impact on several other important public policy
objectives of the City such as encouragement of women and
minority owned firms and affordable housing production.
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For example, equitable pay rates for employees is a city
objective. We further emphasize this objective by requiring that
all contractors on public works projects pay a fair wage as
determined by the Department of Labor. On the other hand, the
City supports the WMBE program a program which could be
seriously compromised by the proposed policy which would appear
to discriminate against small and non-union contractors. In
addition, the City supports construction of affordable housing,
which is affordable, in part, due to the reliance on low cost and
self-help labor by organizations such as Community Corporation.
Should the use of such labor no longer be an option for
City-funded housing projects, the level of affordable housing
construction would be reduced. Finally, the City has begun to
require the inclusion of several design amenities by developers
in order to enhance the quality of life in Santa Monica. Such
amenities include park-like open space and childcare facilities.
Should developers face increased construction costs in Santa
Monica, we could be faced with decreased interest in such
development and thus decreased construction of these important
amenities.
It should also be noted that of the $25 million budgeted in
FY1986-87 for Capital Improvement Projects, approximately $18.9
million is allocated for "public works" proj ects which require
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the payment of prevailing wages and participation in the three
option apprenticeship program.
Only $2.6 million is currently
allocated for the purchase, rehabilitation and/or construction of
affordable housing and would not require the payment of
prevailing wages and apprenticeship program participation.
RECOMMENDATION
In light of these issues, staff recommends that the City Attorney
be directed to prepare an ordinance expanding the scope of
proj ects subj ect to prevailing wage and apprenticeship program
requirements to include a higher threshold of project size than
that recommended by Local 1400.
Prepared By: Stan SchOll, Director of General Services
Neil Miller, Assistant Director General Services
Julia Griffin, Senior Management Analyst
Attachments
(wagesl)
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..
ATTACHME~T I
March 21,
1986
TO: Me~bers of Santa Manlca Clty CouncIl
ke: PubllC Works ProJects
Cauncl1persons:
As you are aware, the Callfornla DaVls-BaC0n :,~: r~~u~~~~
that the preva~11ng wage rule establlshed by th~ ~t~:c ~f Ca~::~!-
n1a must be pa1d on all publlC works proJec~s.
We be11eve that the constructlon workers emp l:::y,::", ()r~ C 1 r -
owned or C~ty-leased land deserve to be ~ald a~ l~ast l~L~' ~~~-
Lng wage ra':e pald to tne maJor2..y of Qt'1....r ,-"8ns:'-,:":::~,,,:" ,_': ,,'..-:5
employed wlth~n the ]urlsdlctlun of the CltV ot ~~Ilt~ ~~~l~~.
Our bellet IS based on the fact that cons~ructlo~ ~cr<~r~ ~-~:2~c~
on Clty-owned or Clty-leased property are tdxpayers ~~o ~dl~
to f~nance the operatlon of the CltYi anc, there!8r2, 3 ~0~_~
~o~ be reau1red to work for substandard wag~s.
Therefore, we request t.ha t the C:L t. y CO''';':-:C l ~ ~ao;~~ :- _"' ~ :.~ 2.:' 2....-
:ng resolut~on: Construct~on Employers are ~equ:~~~ ~~ . 2'
the state es~abl~shed preva1l~ng wage rate or. al' .'rv~c~~~ _~\~_\-
109 Clty-owned or Clty-leased land 'even prcJec~ ~:na~c~~ ~_~.'
prlvate money).
Furthermore. in order to comply wlth the PO~lCY c: ~re
State of Callfornla urglng the use of apprentlces as set :crt~
1n Labor Code Sectl.on 3075.1, the Clty Councll should agree
to make the following a part of the above-referenced reS01~~lGn.
In the awardlng of any contract or wrltten order for ar.y
pub11c work or improvement mentloned 1n thlS artlcle, the awa~d~:'~
offlcer, board or commlSSlon shall requlre from all contrac~ors
and subcontractors offerlng or agreelng to perform any wor<
on sald publlC improvement, proof of partlclpaLlon as a slgna:c~~
to a recognlzed apprentl.CeShlp and/or traln:ng prU(lram i..lnJer
Chapter 4 (comrnenclng at Section 3070), Dl'..'lSH)11 3, ci :118 ':.3.~:1~'L-
nla Labor Code and certlfled by the State of Ca11forn:a D1V1S10~
of Apprentlceshlp Standards, where such programs ~XlS= :or ~he
wor~ to be performed, informatlon concerning ~helr ~^p~lle"ce,
flnanClal guallficatlons and abllity to p~rtorm said contrac=
or sald subcontract, as well as to whether saId contracror or
~
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1, 1986
Pag~ 2
subcontractors possesses, or can obta~n ~n time co p~r:ol~ sal~
contract or subcontract, the necessary eqUIpment.
The apprent~cesh~p prOV~Slons of thlS section shall not
apply to contracts of general contractors lnvolvlng l~ss than
th~rty thousand dollars ($30,000) or 20 working days or to con-
tracts of spec~alty contractors not b~dd~ng for work through
a general or prIme contractor, Involvlng !ess thar twu thou~and
dollars (S2,000) or fewer than five work~ng days.
Should said awarding off1cer, board or comW1SSlcn determine
that sald contractor or any subcontractor 15 not a s~gnatory
to a recognized apprentlcesh~p and/or traln~ng program under
Chapter 4 (commencIng at SectIon 3070), D~V1S10n 3, of the Cal~fo=-
nla Labor Code and cert1fied by the State cf Callfornla DIV1Sl0~
of Apfrentlceshlp Standards, where such programs eXist for ~~~
work to be performed, does not possess the necessa~y exper~ence
and f~nanc~al qual~f~cat~ons to perform sa~d contract or subcon-
tract, or that he does not possess, or cannot obta~n ~n due
t~me the necessary equ~pment to perform sa~d contract, sa~d
award~ng officer, board or commission may reJect the b~d of
any such contractor and should said determinat~on affect only
a subcontractor, then said awarding officer, board or comm1S5~on
may compel said ~ontractor to subst1tute a subcontractor who
~s a signatory to a recogn~zed apprent~ceshlp and/or traln~ng
program under Chapter 4 (commenc1ng at Sect~on 3070), D~v~s~on
3, of the California Labor Code and cert~fled by the State of
Callforn~a Division of Apprent~cesh~p Standards, where such
programs ex~st for the work to be performed, or who, 1n the
opin1on of sa~d awarding officer, board or comffi1SSlon, pos~esses
the necessary experience, f~nanc~al qual~ficat1ons and equlpmenL
to perform the sa~d subcontract.
The apprent1ceship prov~s~ons of th~s sect10n shall not
apply to contracts of general contractors ~nvolv~ng less than
L, 1986
Page 3
th~rty thousand dollars ($30,000) or 20 worklng d.J'l::' Ot- to ..:..::'~-
tracts of spec1al ty contractors not b1.dchng for wur.. ': 1. 1-0US~,
a general or pr1rne contractor, 1nvolv1ng Ics5 than 'Wl; rhousarJ
dollars ($2,000) or fewer than f1ve work1ng days.
Very truly yours,
-.
::-
".
ATTACHr>1E);"T II
FILE toO. 3Z3-52
lh~~".f.'t~:. ~
:1)-:1
ORDINAl~CE. A.."!ElmING SECTIO~S 6.33, 6.L.6 Ahl) 6.47 OF TII[ SMl F?_\~;::::IS:C 1\..::l~I!,!-
STRATlVE CODE TO INCLUDE WRITTEN ORDERS AND PROVlSl0NS FOq PARTICIPATIO:: IN
APPRENTICESHIP AND/OR TRAINING PROGRA~.
NOTE: Additions or substitutions tire und(,l lined, deletIons are
indicnted by (double p~renthescE)
Be it ordained by the People of the City and County of San F.anClsco'
Section 1. The San FrancIsco AdministratIve Code is hereby 3menced by
amending Sections 6.33, 6.46 and 6.47 thereof to read as follows:
-
>
Sec. 6.33. Applicability of Section 7.204 of Charter
All the terms and prov1sions of Section 7.204 of the C~arte~ shall be
applicable to and become a part of any and all contracts or wrltte~ orcers
entered Into pursuant to the terms ~nd prOVISIons of thIS chapter.
Sec. 6.46. Contractors and Subcontractor,> to rurn!.sh QU.11:hc:Jtlons
In the awarding of any contract or written order for any p~~llC ~ork
or improvement nentioned in this article, the n~~rdlng office., bO.1r~ or
COnmlSSlon shall require from all contractors and ~ubco~tractors offerIng or
agreeing to perform any ~ork on saId public lmpruvement. proof of ?art~cl:a(ICn
as a signatory to 8 recognized apprenticeship andlor tr~lnIng F"cgran unde~
Chapter 4 (commencln~ at SectIon 3070) I DIVISIon 3: of the CalIfornIa Labor
Code and cert1fied by the State of CalIfornIa DIViSIon of ^?prentIceship
E.~Bndards, vhere such programs eX1S[ for the \.Iork to be perforred, Iniorr:atlon
concernIng the1r Exper~ence, fInanCial qualIfIcatIons and abIlity to perform
said contract or said subcontract, as well as to ~~ether said Contractor or
subcontractors p05se8ses, or can obtain in time to perform said contract or sub-
contract, the necessary equipment.
The apprenticeship provisions of this sectlon shall not apply to contracts
of general contractors involving less than thirty thousand dollars <S30,OOO}
or 20 ~orking days or to contracts of specialty contractors not bIddIng for
work through a general or prime contractor, involVing less than tyO thousand
dollars (S2,OOO) or fewer than five ~orkIng days.
Sec. 6.47 Bid May Be Rejected for Lack of Qualifications or EqUIpment.
Should said a....arding officer. bo~rd or COlr:fTllSsion determlne that sald
contractor or any subcontractor is not a Signatory to a reco~nized a?prentlces~l~
and/or trainlns pro~ram under Chapter 4 (co~encln~ at Sectlon 3070, DIVtSiO~ 3~
"
of the Callfornu] L3bar Code and certIfIed I,; thl"' ~t.JtL L'[ c.l~d':r:ll.J ')IVISl":'
of Appre'1tlcesnlP Standards', ....,hcre such pro[r"[T'o; CY1S:" for the "'vr\... to be r~r-
fo!"t:'ed, does not' possess th~ necessary experIence and fln<:.ncl.Jl qU,Jililcat\.c~9
to perform sald ccntract or subcontract, or tn.:!t he doc9 not possess, or c.Jnnot
obt~in in due time the necessary equipncnt to perforM said contr~ct. said a-
varding officer, board or commlssion may reject the bid of any such contrac:or
and should said deter~ination affect only a subcontractor, then said a~~rding
officer. board or co~ission may compel sald contractor to substltute a sub-
contractor vho is 8 signatory to a recognlzed apprentlceshIp and/or tr.Jlnln~
pro~Tac under Chnptcr 4 (conmencln~ at Section 3070) r DIViSlon 3l of t~e
Callfornla Labor Code and certIfied by the State of Cal1fornla Dlvlslcn of
Apprentlceshlp Standards I where such proRrar-:s eX15t for the ,-,orK to be per-
formedl or ~ho. 1n the oplnlon of sald awarding offlcer, board or CO~lSSlon,
possesses the-necessary experience. fln~nclal qualifications and equipment
to perform the 8aid subcontract.
The apprenticeship provisions of this sect~on shall not apply to contract3
of general contractors involving le65 than thlrty thousand dollars (530,000) or
20 worklng days o~ to contracts of ~peclalty contractors not blcdlng for ~ork
through a general or pri~e contractor, involvlng less than t~o thous~nd dollars
($2,000) or fewer than five vorklng days.
GEORGE AGNOST, City Attorney
By
Is).~nedl
. ~'
Deputy Clty Attorney