The Davis-Bacon Act changes present a chance for startups to disrupt construction tech


Puzzle house with a missing piece. The acquisition or construction comfortable dream home. Mortgage loan purchase real estate. Arrangement premises repair. Availability and cheapness. Finish building (Puzzle house with a missing piece. The acquisition
Image Credits: Andrii Yalanskyi (opens in a new window) / Getty Images

Manish Kumar


Manish Kumar is the co-founder and CTO of Lumber, a construction workforce management platform built for contractors.

The U.S. construction landscape looks much different this week compared to last Friday following the amendments to the Davis-Bacon Act that went into effect on Monday.

While these amendments primarily concern contractors of federal construction projects, they still present a unique opportunity for construction technology startups to offer innovative solutions to help legacy construction firms navigate the complexities of compliance with this historic piece of legislation.

New grounds, new challenges

The Davis-Bacon Act, originating in 1931, mandates that contractors engaged in federal construction projects pay their workers prevailing local wages and fringe benefits. This applies to all contracts exceeding $2,000 for public building and public works construction, harking back to the act’s roots in the Great Depression.

The core objective of this act has been to safeguard workers on federal construction projects from being underpaid, ensuring they receive fair compensation for their labor.

However, the intricacies of this piece of legislation have always posed challenges. Initially, the Department of Labor applied a 30% rule to determine prevailing worker wages and benefits, but this approach evolved over time. In 1983, the Reagan administration discontinued the 30% rule, opting for a weighted average wage rate based on geographic areas.

August 2023 saw amendments to the act that reintroduced the contentious 30% rule, among other changes, which went into effect on October 23.

The implications of these amendments are broad, particularly because construction payroll involves many components such as certified payroll, minimum wage, prevailing wage and union rates, all of which vary from state to state. For companies, compliance requires adhering to the wage determinations for the specific county or state where the construction occurs, which often leads to varying pay rates for the same worker depending on their location.

Furthermore, the act requires construction firms to classify their workers according to the work they perform. Misclassification can result in substantial penalties and back payments.

In 2022, the Department of Labor led a federal investigation of a Jersey City electrical subcontractor and found that they had paid 11 electricians a lower rate and fringe benefits because they were misclassified as laborers. This led to a recovery of $799,479 as back wages and benefits from the company.

Yet another example of misclassification happened in 2021 when a Chesterfield Township–based electrical subcontractor violated the Davis-Bacon Act by paying electricians, laborers, and apprentices on a federal construction project less than the required prevailing wage rates and benefits.

The Davis-Bacon Act also demands that construction firms maintain certified payroll records for at least three years. Furthermore, they must be prepared to present subcontractors’ payroll records alongside their own for auditing purposes.

This documentation can be extensive. Payroll and time-tracking applications will need to be tailored specifically for construction firms that need to adapt to the weekly certified payroll requirement for federal projects. Companies will need to maintain certified payroll records for at least three years, present subcontractors’ records, and ensure proper worker classification. Documentation of laborer details, classifications, work hours, hourly rates, and fringe benefits must be maintained meticulously.

Additionally, if a specific worker classification isn’t available, the construction firm or contractor must formally request its addition from the Department of Labor.

How tech can fill the gap

What the Davis-Bacon Act amendments make clear is that the construction industry quickly needs tailored technology solutions. Construction firms will need to rethink their payroll and time-tracking systems.

Startups can leverage automation, specifically robotic process automation (RPA), to help address some of these challenges by providing construction firms with a unified view of all their labor data.

RPA can automate the collection, storage, and retrieval of data, pulling information from various sources such as payroll systems and subcontractor records, and centralizing it in a unified database. This saves time and reduces the risk of data discrepancies and errors. This unified database can then serve as the central point for implementing compliance procedures with all laws, not just the Davis-Bacon Act.

Another pressing challenge in ensuring compliance with the Davis-Bacon Act is keeping up with the frequent changes in prevailing wage rates. This necessitates constant monitoring and adjustment of payroll, which can be resource-intensive and error-prone if done manually.

To address this, tech startups can employ vector databases and retrieval augmented generation (RAG). Vector databases can be used to store compliance regulations in a structured and easily retrievable format. By maintaining a repository of prevailing wage rates and related data, construction tech startups can ensure that their solutions are always up-to-date and accurate.

This is a crucial advantage in a field where compliance is paramount.

RAG takes information retrieval to the next level by combining the capabilities of LLMs with the ability to retrieve specific and relevant information from structured databases. This combination lets one quickly and accurately access the latest compliance regulations, prevailing wage rates, and other essential data.

Compliance is slowly becoming one of the most important factors in construction, so solutions that facilitate compliance stand to play a pivotal role in the industry’s future. It’s crucial to recognize the broader implications of digital transformation on the sector as a whole, as the construction industry is on the brink of a significant transformation and this legislative change is just one piece of the puzzle.

By embracing technologies such as vector databases and RAG, construction technology startups and established players can create solutions that simplify the compliance process, reduce the risk of errors, and provide construction firms with the tools they need to thrive in a complex regulatory landscape.

More TechCrunch

After Apple loosened its App Store guidelines to permit game emulators, the retro game emulator Delta — an app 10 years in the making — hit the top of the…

Adobe comes after indie game emulator Delta for copying its logo

Meta is once again taking on its competitors by developing a feature that borrows concepts from others — in this case, BeReal and Snapchat. The company is developing a feature…

Meta’s latest experiment borrows from BeReal’s and Snapchat’s core ideas

Welcome to Startups Weekly! We’ve been drowning in AI news this week, with Google’s I/O setting the pace. And Elon Musk rages against the machine.

Startups Weekly: It’s the dawning of the age of AI — plus,  Musk is raging against the machine

IndieBio’s Bay Area incubator is about to debut its 15th cohort of biotech startups. We took special note of a few, which were making some major, bordering on ludicrous, claims…

IndieBio’s SF incubator lineup is making some wild biotech promises

YouTube TV has announced that its multiview feature for watching four streams at once is now available on Android phones and tablets. The Android launch comes two months after YouTube…

YouTube TV’s ‘multiview’ feature is now available on Android phones and tablets

Featured Article

Two Santa Cruz students uncover security bug that could let millions do their laundry for free

CSC ServiceWorks provides laundry machines to thousands of residential homes and universities, but the company ignored requests to fix a security bug.

12 hours ago
Two Santa Cruz students uncover security bug that could let millions do their laundry for free

OpenAI’s Superalignment team, responsible for developing ways to govern and steer “superintelligent” AI systems, was promised 20% of the company’s compute resources, according to a person from that team. But…

OpenAI created a team to control ‘superintelligent’ AI — then let it wither, source says

TechCrunch Disrupt 2024 is just around the corner, and the buzz is palpable. But what if we told you there’s a chance for you to not just attend, but also…

Harness the TechCrunch Effect: Host a Side Event at Disrupt 2024

Decks are all about telling a compelling story and Goodcarbon does a good job on that front. But there’s important information missing too.

Pitch Deck Teardown: Goodcarbon’s $5.5M seed deck

Slack is making it difficult for its customers if they want the company to stop using its data for model training.

Slack under attack over sneaky AI training policy

A Texas-based company that provides health insurance and benefit plans disclosed a data breach affecting almost 2.5 million people, some of whom had their Social Security number stolen. WebTPA said…

Healthcare company WebTPA discloses breach affecting 2.5 million people

Featured Article

Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Microsoft won’t be facing antitrust scrutiny in the U.K. over its recent investment into French AI startup Mistral AI.

14 hours ago
Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Ember has partnered with HSBC in the U.K. so that the bank’s business customers can access Ember’s services from their online accounts.

Embedded finance is still trendy as accounting automation startup Ember partners with HSBC UK

Kudos uses AI to figure out consumer spending habits so it can then provide more personalized financial advice, like maximizing rewards and utilizing credit effectively.

Kudos lands $10M for an AI smart wallet that picks the best credit card for purchases

The EU’s warning comes after Microsoft failed to respond to a legally binding request for information that focused on its generative AI tools.

EU warns Microsoft it could be fined billions over missing GenAI risk info

The prospects for troubled banking-as-a-service startup Synapse have gone from bad to worse this week after a United States Trustee filed an emergency motion on Wednesday.  The trustee is asking…

A US Trustee wants troubled fintech Synapse to be liquidated via Chapter 7 bankruptcy, cites ‘gross mismanagement’

U.K.-based Seraphim Space is spinning up its 13th accelerator program, with nine participating companies working on a range of tech from propulsion to in-space manufacturing and space situational awareness. The…

Seraphim’s latest space accelerator welcomes nine companies

OpenAI has reached a deal with Reddit to use the social news site’s data for training AI models. In a blog post on OpenAI’s press relations site, the company said…

OpenAI inks deal to train AI on Reddit data

X users will now be able to discover posts from new Communities that are trending directly from an Explore tab within the section.

X pushes more users to Communities

For Mark Zuckerberg’s 40th birthday, his wife got him a photoshoot. Zuckerberg gives the camera a sly smile as he sits amid a carefully crafted re-creation of his childhood bedroom.…

Mark Zuckerberg’s makeover: Midlife crisis or carefully crafted rebrand?

Strava announced a slew of features, including AI to weed out leaderboard cheats, a new ‘family’ subscription plan, dark mode and more.

Strava taps AI to weed out leaderboard cheats, unveils ‘family’ plan, dark mode and more

We all fall down sometimes. Astronauts are no exception. You need to be in peak physical condition for space travel, but bulky space suits and lower gravity levels can be…

Astronauts fall over. Robotic limbs can help them back up.

Microsoft will launch its custom Cobalt 100 chips to customers as a public preview at its Build conference next week, TechCrunch has learned. In an analyst briefing ahead of Build,…

Microsoft’s custom Cobalt chips will come to Azure next week

What a wild week for transportation news! It was a smorgasbord of news that seemed to touch every sector and theme in transportation.

Tesla keeps cutting jobs and the feds probe Waymo

Sony Music Group has sent letters to more than 700 tech companies and music streaming services to warn them not to use its music to train AI without explicit permission.…

Sony Music warns tech companies over ‘unauthorized’ use of its content to train AI

Winston Chi, Butter’s founder and CEO, told TechCrunch that “most parties, including our investors and us, are making money” from the exit.

GrubMarket buys Butter to give its food distribution tech an AI boost

The investor lawsuit is related to Bolt securing a $30 million personal loan to Ryan Breslow, which was later defaulted on.

Bolt founder Ryan Breslow wants to settle an investor lawsuit by returning $37 million worth of shares

Meta, the parent company of Facebook, launched an enterprise version of the prominent social network in 2015. It always seemed like a stretch for a company built on a consumer…

With the end of Workplace, it’s fair to wonder if Meta was ever serious about the enterprise

X, formerly Twitter, turned TweetDeck into X Pro and pushed it behind a paywall. But there is a new column-based social media tool in town, and it’s from Instagram Threads.…

Meta Threads is testing pinned columns on the web, similar to the old TweetDeck

As part of 2024’s Accessibility Awareness Day, Google is showing off some updates to Android that should be useful to folks with mobility or vision impairments. Project Gameface allows gamers…

Google expands hands-free and eyes-free interfaces on Android