The requirement that contractors pay "prevailing" wages to weatherization employees is holding up hundreds of millions in stimulus spending, a new government report suggests. The stimulus act provided states with $5 billion for weatherization over three years. Almost half the money has been disbursed, but more than half the states that the Government Accountability Office contacted hadn't started weatherizing houses as of the end of August.

A big reason: red tape resulting from the 1931 Davis-Bacon Act, which requires the payment of the locally prevailing wage on federal contracts. Republicans unsuccessfully opposed Davis-Bacon being folded into the stimulus. Because Davis-Bacon hadn't previously applied to weatherization work, people in the Labor Department had to figure out prevailing wages county by county in every county across the country. (They finished on Sept. 3.)

Contractors didn't want to start weatherization jobs if it meant they might have to retroactively adjust workers' pay. The prevailing-pay requirement will increase wages for people who probably need it, but it's also delaying the stimulus and possibly producing fewer jobs than would have been created otherwise. And it may be reducing energy savings that could be had if insulation, caulk, weatherstrips etc. were in place to the greatest extent possible before it gets cold.

Here's what the conservative Heritage Foundation said about David-Bacon in February:

Congress has included a little-known provision in the economic stimulus legislation that wastes tax dollars and costs jobs. All $188 billion worth of construction projects funded in the American Recovery and Reinvestment Act (H.R. 1) must pay Davis-Bacon prevailing wage rates. This requirement will inflate construction costs by $17 billion and depress the economy.

Sez the GAO:

While DOE has provided each of the states in our review with half of their total allocations, 8 of the 14 states for which we collected information had not started weatherizing homes using Recovery Act funds as of August 31, 2009. However, many of the 14 states had used Recovery Act funds for startup activities such as hiring and training staff, procuring equipment and vehicles, and performing energy audits of eligible homes. Other states told us that they would begin weatherizing homes shortly.

Specifically, state weatherization officials expressed concerns about wage rates and administrative requirements under the Recovery Act’s Davis-Bacon provision. Regarding wage rates, officials in about half of the states we reviewed decided to wait to begin weatherizing homes until Labor had determined county-by-county prevailing wage rates for their state. These officials explained that they wanted to avoid having to pay back wages to weatherization workers who started working before the prevailing wage rates were known.