Construction Industry Force Account Council

Promoting Transparency Through Public Agency Compliance

Department of Industrial Relations Contractor Registration Violation Could Cost You!

Violation Cost

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By Richard Marks, Northern Regional Compliance Manager

As a Regional Compliance Manager for CIFAC, the type of investigations we perform fall within a broad range.

From force account issues to Illegal subcontractor substitutions; from genuine mistakes to collusion; you never quite know what you will uncover during the investigation process.

A common issue that we continue to encounter is violations concerning contractor registration. Whether it is a contractor that failed to register and/or allowed their registration to lapse or an awarding agency that hired one of these unregistered contractors, there seems to be a genuine misunderstanding of the requirements.

Just recently, I received inquiries from Reporting Parties involving questions concerning a couple of contract awards in Northern California. More specifically, the questions were regarding contractor compliance in the submission of the bids and public agency compliance in the award of the contracts.

When there is a question regarding a public works contract award, one of the first things a Regional Compliance Officer will do is check the Public Works Projects Registration (PWC-100) with the Department of Industrial Relations (DIR) for information related to the project and the contractor awarded the bid. All contractors that perform public works projects requiring prevailing wage must register with the DIR. Further, all construction contractors doing business in California must be registered at both the time of bid and at the time of the award per Labor Code (LC) 1725.5 and 1771.1(a). Also, the public agency is required, per Public Contract Code (PCC) 4104, to request the DIR registration information as part of the bid submission for all listed subcontractors. While this article focuses on the majority of public works projects, there is a small project exemption that applies for public works projects that do not exceed: $25,000 for new construction, alteration, installation, demolition, or repair and $15,000 for maintenance. However, prevailing wages must still be paid on projects with a small project exemption (where applicable).

The first investigation was regarding an out-of-state contractor who submitted the lowest bid on a curb ramp project. After researching the project, I noticed the contractor was not registered with the DIR. I contacted the agency that had awarded the bid and informed them of the requirements for contractor DIR registration. The agency contacted the contractor and advised them of the requirement of LC 1725.5(a)(2)(E)(ii), which, to become compliant, requires the contractor to register with the DIR and pay a penalty fee of $2,000. The contractor was eligible to do so since they had no prior violations. The agency project manager asked me how to avoid a similar situation in the future. I shared a process used with success by other agencies, which is having the bidding contractor write their DIR registration number on the outside of their sealed bid. The agency can then verify that the contractor complies with DIR registration before bids are opened. The agency agreed that this would be a simple solution to implement.

The second case was another similar violation with a soil hauling project. In this instance, the lowest bidder had let their annual DIR registration lapse. I contacted the agency to inform them of their obligation to award the bid to a DIR registered contractor. The agency agreed with CIFAC’s assessment and deemed the low bid unresponsive and awarded the project to the second-lowest bid. By not paying the $400 registration fee timely, the contractor lost a sizeable contract like the ones they had performed several times over the years.

In these two cases, a simple online registration with DIR would have made a significant difference to the contractor. One contractor could have saved $2,000 and not had a DIR violation charged against them. The other contractor could have paid $400 and gained thousands of dollars in an awarded contract. It pays to know the requirements for bidding on a public works project and make sure you comply.

The DIR is responsible for oversight of certified payrolls to ensure workers are appropriately classified, apprenticeship requirements are followed, and that prevailing wages and other benefits required are accurately paid to the workers. The DIR website states, “Its mission is to improve working conditions for California’s wage earners and to advance opportunities for profitable employment in California.” This oversight helps keep the playing field level for all contractors seeking to bid on public works projects. CIFAC will continue to monitor public works projects for compliance with all applicable Public Contract and Labor Codes.

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