Anyone who lives in Colorado knows there are a few constants to living here. We have comfortable weather most of the time, a brewery on every corner, and there is a massive amount of construction everywhere you look.
If you are one of the many contractors in the state, you may already know that some of the most lucrative contracts out there are the ones working to expand our current infrastructure in the Denver Metro area. If your business has ever taken on any of these state contracts or plans to in the future, then you need to get familiar with CO SB 19-196 and how this new Colorado law will affect your business and the projects that you can bid on beginning in July 2021.
Davis-Bacon Act
Before we get to CO SB 19-196, it’s important that we understand the Davis-Bacon Act. This federal mandate requires companies to pay their workers the prevailing wage plus fringe benefits when they work on federal projects. How these are determined is complex, but to put it in layman's terms, the contractor working on a federal contract is typically going to have to pay his people more than usual.
This law was put into place for a few reasons. One of which was to encourage quality personnel working on federal projects. They were concerned that companies would bring workers from outside their area that had a lower standard of living and would be willing to work for lower wages. Looking at the current situation in Colorado regarding wages and the cost of living, we are seeing a similar situation.
With wages in Colorado skyrocketing already, many contractors are seeing significant increases in their overhead on labor. Worker’s Compensation coverage uses the amount of payroll to determine the cost of premium, so many contractors are looking at increased costs beyond what they are paying their employees.
If a company decides to bid for a federal contract, they must be able to pay their people the prevailing wage plus fringe benefits. Many contractors, not having the administrative resources to handle benefits and payroll, just roll it all into payroll and let their employees purchase their own benefits if that is their preference.
Colorado Law - CO SB 19-196
When CO SB 19-196 goes into effect in July 2021, state projects will face similar requirements as the Davis-Bacon Act. The parties that will feel the most significant impact are those that are working state contracts, but stayed away from federal projects due to the extra headache of the federal requirements imposed by the Davis-Bacon Act.
It’s very possible that contractors that currently work state jobs will see their profits decrease unless they are ready to quickly adapt and adjust their current payroll structure. The larger contractors that already deal with this on the federal level shouldn’t have any issues adjusting to the new law.
What Are Contractors Supposed To Do?
When this law goes into effect, contractors will face two options:
One, they can switch their business model and start working on projects that don’t include state or federal projects. For some of these contractors, this is an impossible solution because their current business model revolves around state projects. The new rules coming into effect seem daunting for a lot of these contractors and the increases in payroll will have some of these contractors looking to save money any way they can.
Option two, contactors can adapt and adjust and continue to work on the large state projects they did before, and also bid on federal projects that they may not have been able to previously.
At Alliance, we use our tools to help our clients maximize their benefits and coverage, and lower costs overall. The best clients that come to us are utilizing all the tools we have to offer. One of those tools is a firm that can help with calculating the fringe benefits necessary to meet the law’s requirements. They can provide customized benefit plans that allow our clients to save money on their policies based off their payroll.
The clients that take advantage of programs like this can see savings to their bottomline, and this in turn allows them to invest more in their people, infrastructure, and pricing. We have seen our clients achieve gains that allow them to compete with some of the larger contractors and grow their business. Success in the Colorado market requires outside the box thinking in many cases. Here at Alliance, we look at all options inside and out of the box to help your company succeed.
To learn more about how we can ease this transition for you and your company, fill out the form below:
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Article by Andrew Mudge
Andrew has been working with companies to solve complex issues in the financial, human resources and insurance space since 2014. He frequently works with manufacturing, oil and gas, assisted living and contractors, but is comfortable with all types of businesses.
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