Contractor Compliance Horror Stories

There are many things that go “bump” in the night within the government contracting space. Employee retention and the lingering impact of COVID-19, tight competition for infrastructure bids, and rapid inflation are all factors that are giving contractors that heebie-jeebies. But nothing sends a chill up a contractor’s spine like the looming threat of falling out of compliance.

Non-compliance can spell disaster for a Davis-Bacon Act or Service Contract Act contractor. Fines, penalties, and owing back wages can drain resources (like Dracula). Being removed from jobs and barred from bidding for others can be a nail in the coffin. It’s a scary thought!

We’ve gathered the most common compliance horror stories to send a shiver down your spine!

Frightening Burden of Fringe Benefit Administration and Reporting

Contract compliance depends on proper reporting and careful administration. Benefit elections, fringe expenditure, payment of proper wages, and hours worked must be carefully recorded for each individual employee. The burden of proper reporting – and the looming threat of Department of Labor Audits – leaves may contractors shaking in their boots. It’s a tall, intimidating order that would make any contractor nervous, especially for small business or employers that have won their first contract.

Check out this horror story of employee reporting gone wrong.

An Unlikely Boogeyman: Subcontractors

Subcontractors that join in the performance of a contract are subject to the same regulations as the prime contractor. Each of the subcontractor’s employees must be paid a proper prevailing wage and fringe rate and must have their hours worked carefully accounted for. What’s so scary about that?

Well. When a subcontractor falls out of compliance, the prime contractor must face the consequences. All penalties and back wages owed are taken by the prime contractor. The burden of compliance is double and the stakes for non-compliance are twice as high! Yikes!

The Wage and Hour Division shows no mercy to subcontractors that fall out of compliance. Read more. - us department of labor recovers $17k for eight workers after investigation finds guam federal subcontractor shortchanged workers’ wages, benefits | u.s. department of labor

Haunted by the Prevailing Wage

Prevailing wages are a requirement of the Service Contract Act and Davis-Bacon Act. These laws are vital to ensuring that employees are paid appropriate wages and can vary from state to state and even from city to city. That’s a lot for any contractor to keep up with and the consequences for non-compliance are severe! Calculating the required prevailing wage and fringe benefit is an absolutely necessity and the Department of Labor keeps a close eye. This simple misstep can cost contractors hundreds of thousands of dollars in back wages and penalties!

That’s a lesson that this contractor learned the hard way.

Compliance Doesn’t Have to be Scary

Compliance has always been a top concern for contractors, but that doesn’t mean it has to be scary. Boon takes a consultative approach to creating fringe benefit solutions that actually feel like solutions!  Our expert consultants craft benefit solutions to meet the unique needs of our contractor clients and take the burden out of benefits administration.

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