Funding for energy saving retrofits in Northwest states are getting entangled in the complexities of the Davis-Bacon Act (DBA), well-intentioned legislation passed by Congress in 1931, and amended over subsequent years, to ensure decent wages for workers on publicly-funded projects. But the DBA’s good intentions are creating some problems that might smother job growth in the energy efficiency field.
Higher hourly wage requirements and additional reporting are inflating costs, tipping some projects, supported by the Weatherization Assistance Program (WAP), away from feasibility. That means contractors and workers may not get the promised benefits from new stimulus dollars for retrofits. The solution to this problem isn’t just boosting wages. Leaders in the region should create certifications for weatherization workers and a labor-supported apprenticeship program so workers can meet the requirements. But let’s start with a look at the problems with DBA.
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Figuring out whether an energy efficiency project makes financial sense is determined using a “Savings to Investment Ratio” or SIR. An SIR is calculated by taking the lifetime savings of an energy efficiency retrofit, multiplying it by how long that efficiency will deliver the savings, and then dividing that the cost of the improvement.
An energy efficiency project with an SIR of 1.0 or higher, is considered a feasible project, saving enough energy to make financial sense; the higher the SIR, the more savings. Like performance contracting, weatherization work is dependent on calculating and capturing future savings. In the chart below you can see how a project’s SIR can vary based on costs and subsidies. These numbers are hypothetical and high level. Determining an SIR for a project is complicated enough that agencies use special proprietary software created for the Department of Energy by Oak Ridge National Laboratories.
Now, this isn’t just playing with numbers. When compared to each other, projects with increased costs from DBA wage mandates and reporting end up with an SIR below 1.0. Some projects will require multiple subcontractors to do different pieces of the work—like windows, water heaters and insulation—and, in Washington, under DBA requirements, each worker could need a wage determination from the Department of Labor and Industries. Each determination costs $80 and requires paper work for each position. For big jobs—like retrofits of apartment buildings—many workers are required, meaning multiple wage determinations costing time and money.
There are two solutions to the problem of increased costs. First, and most obvious, projects can create more efficiency. As the last line of the chart shows, increased annual savings increases the SIR on a project. But, generally speaking, contractors already push to squeeze as much efficiency as they can, so there may not be enough additional savings.
The second solution is longer term. Certification and apprenticeship can help increase wages and efficiency. Obviously, the point is not to keep workers’ wages low, but to create jobs in the energy sector that are career track, living wage jobs—not dead end, temporary jobs that can’t support a worker’s family. But with additional costs created by DBA requirements, displaced workers won’t get paid prevailing wages or any wages at all, if projects don’t get completed.
The larger energy economy continues to be plagued with worker shortages caused, in part, by uneven training, credentialing, and lack of basic skills. A national, or at least regional, credentialing program would raise the standards of weatherization and energy retrofitting work, creating a highly-skilled workforce like the one being turned out by Shoreline Community Colleges automotive repair program. These workers would be armed, by colleges and through union supported-training, with basic skills, know-how on the latest equipment, and certified to work on a wide range of energy efficiency projects. And they could demand higher wages for their work.
Furthermore, it is really too early to tell how this all will play out, but DBA will not completely shut down weatherization in the region, just reduce the number of energy efficiency opportunities that we seize. And as the field of weatherization evolves and the number of trained workers goes up, savings will likely increase which could substantially off set increases in costs.
Determinations do not cost $80 and requires paper work for each. L and I requires an “Intent” to pay prevailing wages (PW) be filed for each job, and that at “Affidavit” be filed after completion. These are $40 a piece to file. Currently the WXN program in Washington are allowed to “batch” 20 jobs per Intent. The escalated cost of projects with either DBA or State PW are do to the nonsensical calculation of classifications, i.e. over $40.00/hour for simply wrapping pipes, or over $30.00/hour for repairing existing duct work. This is cause by the FACT that Washington State will not adopt an classification strictly for weatherization workers like the Feds. This mean we have use these numerous classification for one or two workers while on a job. It is also the additional administrative burden to both the weatherizing agencies and sub-contactors that is contributing to this mess. John HillDirector, Housing and Energy ServicesRural Resources Community Action
What I struggle the most with here is the assertion that prevailing wage by craft determination is mainly about attaining higher wages for workers doing the weatherization work. I offer some points, while nothing new, that may have been missed by some who engage in this debate:Point #1: Without craft determination, residential energy efficiency upgrades cannot be scaled up to the level needed to significantly reduce our GHG emissions. It is widely accepted that we can best reduce GHG emissions by using a neighborhood-by-neighborhood approach, as opposed to a handful of individual projects strewn across a region. Transportation and rigging costs are streamlined, the housing stock is likely to be relatively homogeneous, and contractors have the most flexibility in deploying or reducing each craft based on project needs. If Davis-Bacon craft determination is given up, then there will be no incentive for contractors to bid on the scalable projects that actually have a meaningful impact on GHG emissions. Point #2: $40/hour for wrapping pipes and $50/hour to change light bulbs may be the journey-level rates for these crafts. However, apprentices in all crafts earn apprentice wages, which are significantly lower than journey wages and barely higher than weatherization wages. Apprentices are typically assigned basic tasks at first (under proper supervision by a journey-level worker) and are progressively assigned more advanced tasks as they advance through their training. This is how apprenticeship is efficient for both the employer and the trade itself. Apprentices also experience wage progression as they advance through years of training to journey status. They also have health care and retirement benefits. This is called a career pathway. Point #3: The absence of craft-determined prevailing wage hurts the regional economy in Washington. Without the protections to local workers that Little Davis-Bacon afford, contractors are able to bring in workers from other areas of the country or world who work for lower than the self-sufficiency rate for our region and bring those wages back to their home regions. They do not re-invest what they earn in Washington’s economy.Point #4: Craft determination exists much more to keep workers safe than to simply raise wages. This is why we have over twenty crafts in construction, not one big general construction craft. Homogenization of construction work was widely practiced by employers in the days before there were any labor laws protecting the workers’ rights and safety on dangerous construction projects. Scores of workers gave their lives on the jobsite because they were ordered to do work for which they were not properly trained. To roll back Big or Little Davis-Bacon would be to effectively roll back over 100 years of workplace safety gains, at a far greater cost to society than whatever benefit we perceive from weatherization efforts. Patrick NevilleEconomic Development Dir.-Worker CenterMartin Luther King, Jr. County Labor Council, AFL-CIO