Wage Determinations for FHA-Insured Multifamily Construction Projects

We audited the U.S. Department of Housing and Urban Development’s (HUD) implementation of the prevailing wage provisions of the Davis-Bacon Act for its Federal Housing Administration (FHA)-insured multifamily construction projects.  We conducted the audit because we received an anonymous complaint alleging that HUD did not implement correct wage determinations for a $33 million multifamily construction project located in Oxnard, CA.  Our audit objectives were to determine whether (1) the allegation in the complaint had merit and (2) HUD implemented the correct Davis-Bacon wage determinations for its multifamily construction projects. The allegation that HUD did not implement correct wage determinations for the FHA-insured multifamily construction project in Oxnard, CA, had merit.  HUD’s use of incorrect wage determinations caused wage rates paid to laborers and mechanics to be incorrect.  Additionally, our review of wage determinations associated with four other FHA-insured multifamily construction projects not mentioned in the complaint showed that HUD also did not implement correct wage determinations for them.  This condition occurred because HUD lacked controls and did not implement guidance provided by the U.S. Department of Labor’s longstanding policy regarding the application of multiple wage determinations for construction categories in construction projects covered by prevailing wage provisions of the Davis-Bacon Act.  As a result, workers could have been underpaid. We recommend that HUD (1) seek guidance from the Department of Labor to correct the wage determinations for the five projects addressed in this report; (2) determine the correct wages to be paid to workers and ensure that appropriate actions are taken to pay the workers; (3) update HUD’s guidance to comply with the Department of Labor’s policies and guidance on the application of multiple wage determinations for construction projects; and (4) develop and implement controls to ensure that the appropriate Davis-Bacon wage rate determinations are implemented in the contracts of FHA-insured multifamily construction projects that require multiple wage determinations, including the requirement that contract specifications clearly identify the portions of the contract subject to each assigned wage determination.