1. Michigan Minority Contractors Assn. Davis-Bacon and Prevailing Wage Overview

2. Agenda ●Define Government Markets Niche ●Demonstrate the Market Opportunity ●Review Industry Specific Business Problems & Solutions ●The Contractors Plan powered by Fringe Benefit Group ●Questions & Answers

3. Government Markets ●Construction & Maintenance Contractors Bidding Work Subject to Prevailing Wage Laws ●Federal & State Davis Bacon Act ●Federal Service Contract Act ●Required or Available Fringe Benefit Allocation ●Non-Union or Split Shop

4. U.S. Housing Starts 1991–2011

5. Value of Public Construction Put in Place 1993 – 2011

6. Solving Industry-Specific Business Problems

7. Sample Wage Determination BASE WAGE $30 FRINGE BENEFIT $10 + TOTAL HOURLY WAGE $40

8. Employer Decides How to Satisfy the Wage Obligation ●Contractors typically pay the “base” amount in cash and then choose how to pay the “fringe” portion; ➔ For vacation and holidays, ➔ Into an approved apprenticeship program, ➔ Furnish “bona fide” fringe benefits, or ➔ As cash, and have it treated as wages

9. The problem when performing Gov’t Work…….. All cash wages subject to payroll burden: ➔ FICA7.65% ➔ FUTA & SUTA*2.00% ➔ General Liability*2% - 15% ➔ Workers’ Comp*10% - 40% The actual payroll burden can be 11%-60% This increases your labor costs!!! *varies by company & state

10. How it works… Plumber, Ohio $2.58/hr savings per person Pay Fringe to “Bona Fide” Plan Base Wage $34.52 Total Wage $34.52 Payroll Burden $ 8.63 (25%) “Bona Fide” Plan $10.33 Bid Cost $53.48 Pay Fringe in Paycheck Base Wage $34.52 Fringe $10.33 Total Wage$44.85 Payroll Burden$11.21 (25%) Bid Cost $56.06

11. Plumbing Contractor ●About 75% of this contractor’s work is government ➔ 2080 annual hours x 75% = 1560 hours ●There are 25 hourly employees ●The hourly savings by removing the fringe from payroll is $2.58 ●The annual savings: ➔ 1560 hours x 25 EEs x $2.58 hour = $100,620 Many pay for health premium or retirement contributions “on top”!

12. Sample Bidders List Fairchild Hall Rehabilitation ProjectJan 8, 2011 1 Scotts Industrial Electric, 3178 Bincrete Lane (999) 298-7481 $674,595.00 2 Heatherville Electric, 360 Industrial Drive (999) 743-1220 $675,900.00 3 Johnson Electric, 1145 Bellbrook Ave (999) 372-8205 $681,000.00 4 Chappelle Electric,1985 Founders (999) 222-2290 $732,442.00 5 Caret Electric Company, 3925 Pansini Lane ( 999) 669-3399 $735,000.00 6 Kastle Electric, 4501 Libby Blvd (999) 254-2681 $740,300.00 7 BBW Electrical Contractors, 3400 Kettering Blvd (999) 293-6138 $745,897.00 8 Debra/Kuempel,1948 W.Phyllis Lane (999) 531-5455 $770,000.00 9 Schamberger Electric, 6901 Americana Pkwy (999) 863-1844 $788,500.00

13. The Solution:

14. What Makes a Fringe Benefit Plan “Bona Fide?” ●Specified in writing and communicated to covered employees ●Irrevocable contributions ●Group benefit plan ●Contributions made to a third party or trust ●Convey a benefit to the person actually performing the work ●Accounted for on an hourly basis (weekly payroll reporting form WH347)

15. Does this make sense for you? ●Union or non-union (merit, open or split shop)? ●Bidding or working on prevailing wage projects? if so, what % of your work is prevailing wage? ●How do you handle the fringe portion of the wage determination? ●How many hourly employees?

16. Questions? John Allen– RVP Government Markets jallen@fbg.com 512-663-0709