Kentucky repealed its prevailing wage law with House Bill 3, effective January 9, 2017, for public works not yet awarded by that date. The state's 40-hour and seventh-day overtime rules still apply, and federally funded work follows Davis-Bacon with weekly certified payroll.
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Kentucky no longer has a state prevailing wage law. In January 2017 the General Assembly passed House Bill 3, which repealed KRS 337.505 through 337.550 and abolished the Prevailing Wage Review Board. The Governor signed it on January 9, 2017, and the statute history lists that as the effective date. The repeal applies to public works projects whose bids had not been awarded by then. So a Kentucky public job bid today carries no state wage rates. If it has federal money in it, Davis-Bacon rates and weekly certified payroll still apply.
Kentucky prevailing wage at a glance
Item
Kentucky rule
State prevailing wage law
None. KRS 337.505 to 337.550 repealed by 2017 Ky. Acts ch. 3 (House Bill 3), effective January 9, 2017.
Old threshold
Public works fairly estimated to cost more than $250,000 (before the repeal)
Contracts awarded before the repeal
Still owe the old state prevailing wage and the 8-hour daily overtime rule
Prevailing Wage Review Board
Abolished
State overtime that still applies
Time and a half over 40 hours a week (KRS 337.285), and for all hours on the seventh day when an employee works seven days in a workweek, unless exempt
Federally funded work
Davis-Bacon applies on federally funded or assisted contracts over $2,000
Certified payroll
No state form or portal. Federal jobs: weekly payrolls, WH-347 optional
Who sets rates on federal jobs
U.S. Department of Labor wage determinations, on SAM.gov
What the 2017 repeal did
Before the repeal, Kentucky required state prevailing wages on public works projects fairly estimated to cost more than $250,000. House Bill 3 moved fast: introduced January 3, 2017, passed the House 57 to 40 on January 5, passed the Senate 25 to 12 on January 7, and signed January 9 with an emergency clause. It repealed eleven sections, KRS 337.505, 337.510, 337.512, 337.520, 337.522, 337.524, 337.525, 337.530, 337.540, 337.548, and 337.550, and abolished the Prevailing Wage Review Board. The bill summary also describes a new section in KRS Chapter 65 that bars local governments from requiring employers to pay prevailing wage, so a city or county cannot put its own wage schedule back into a locally funded job.
The cutoff is the bid award. Projects already awarded when the law took effect stayed under the old rules for the life of the contract. Projects not yet awarded did not. The state's own CDBG handbook dates the repeal January 7, 2017, the day of final passage, while the legislature's statute history uses January 9. If an old contract award falls in that window, check the award date against the enrolled act.
Overtime rules that survived
The repeal also took out KRS 337.540, the public works rule that required time and a half for hours over eight in a workday. That daily overtime rule now applies only to contracts awarded before the repeal. On those older jobs, the contractor could switch to four ten-hour days only by signing an agreement with each employee waiving the eight-hour rule.
Do not confuse that with Kentucky's general overtime law, which did not go anywhere. KRS 337.285 still requires time and a half for hours over 40 in a workweek on all contracts unless the worker is exempt. Kentucky also requires time and a half for all hours worked on the seventh day when an employee works seven days in a workweek, unless exempt. A crew pushing a seven-day schedule to make a school opening date owes that premium even on a job with no wage determination.
When Davis-Bacon applies in Kentucky
Federal requirements are untouched by the state repeal. The Davis-Bacon Act and Related Acts cover federally funded or assisted construction contracts over $2,000, including projects supported by federal grants, loans, loan guarantees, and insurance. Community Development Block Grant work run through the Kentucky Department for Local Government is a common example, and its handbook spells out how the federal rules work on the ground:
Threshold and exceptions: CDBG applies Davis-Bacon to construction financed with more than $2,000 in CDBG funds. Rehab of residential buildings with fewer than eight units is exempt, and splitting a job into contracts under $2,000 to dodge the rules is not allowed.
Wage decision: the grantee requests the federal wage determination from DLG at least 30 days before bid documents are bound. Decisions come in four types: building, residential, heavy, and highway. Water and sewer lines are typically heavy.
Posting: a copy of the wage decision and the wage rate poster go up at the job site.
Apprentices: apprentice or trainee rates can be paid only when the program is certified by the State Bureau of Apprenticeship and Training, and the contractor gives the grantee a copy of the certification.
Overtime: on contracts of $100,000 or more, time and a half over 40 hours a week under the Contract Work Hours and Safety Standards Act.
Certified payroll on Kentucky federal jobs
Kentucky has no state certified payroll form or portal. On federal work, the Copeland Act requires weekly payrolls with a signed Statement of Compliance. The U.S. Department of Labor's WH-347 is optional, but a substitute must carry all the same elements. On Kentucky CDBG jobs, contractors submit certified payroll to the grantee within seven to eleven working days after the end of the payroll period, and the prime collects and checks every sub's payroll first. Leave off full Social Security numbers and home addresses. Use the last four digits or an employee ID instead.
Say an electrical sub in Bowling Green is wiring a CDBG-funded community center for a $310,000 contract. The general contractor reviews its weekly payrolls, the city reviews and initials them, and the grantee may interview workers on site and compare what they say with the payroll. One wrong classification can mean restitution for every week it ran. The guide on what happens in a Davis-Bacon audit shows what reviewers look for.
No. House Bill 3 repealed KRS 337.505 through 337.550, effective January 9, 2017, for public works projects whose bids had not been awarded by that date.
What was Kentucky's prevailing wage threshold?+
Before the repeal, state prevailing wages applied to public works projects fairly estimated to cost more than $250,000. That threshold no longer applies to new projects.
Does Kentucky still require daily overtime on public jobs?+
Only on contracts awarded before the repeal. The 8-hour daily rule in KRS 337.540 was repealed with the prevailing wage law. Weekly overtime over 40 hours under KRS 337.285 and the seventh-day rule still apply unless the worker is exempt.
When do Davis-Bacon rates apply in Kentucky?+
On federally funded or assisted construction contracts over $2,000, such as CDBG projects. Rates come from the U.S. Department of Labor wage determination in the bid documents, also posted on SAM.gov.
Can a Kentucky city require prevailing wage?+
House Bill 3's summary describes a new KRS Chapter 65 section that prohibits local governments from requiring employers to pay prevailing wage. Federally required wages on federally funded projects still apply.
Laws and rates change. Confirm current requirements with the state agency before you bid, file, or pay. This page is general information, not legal advice.
Highway and bridge construction is projected at a record $209 billion in 2026. The IIJA allocated $350 billion for highways. 14 states are getting $1 billion+ per year. But the law expires September 30 with no replacement bill. This episode is the complete guide to getting DOT-prequalified, understanding prevailing wage, and winning highway work.
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Published transcript from Scaling Legends. It may contain transcription errors. View the source transcript.
Right now, there is $209 billion just sitting on the table. Yeah, and mid -sized contractors are, well, they're deliberately looking the other way. Exactly. Welcome to this deep dive for Scaling Legends. I am Justine, your host, and I'm here to tell you that the biggest construction boom of our lifetime is happening right now. And you might be completely missing it. I'm Nicole. And we are so thrilled to have you joining us today. We really are, Nicole, because today we are going to dismantle the biggest misconception in the heavy civil market. Right, which is this perception that government work is just this impenetrable fortress of red tape. Yes, that is exactly what people think. But the reality is it's really just a matter of learning a new set of operational rules. It is. You know, usually when we talk
about growth in the construction industry, the prevailing advice is to just, well... Stay in your lane. Stick to what you know. Right. Like if you pour concrete for commercial tilt -ups, you leverage those relationships to find more commercial tilt -up. Exactly. Or if you do site prep for residential subdivisions, you just hunt for more subdivisions. It's comfortable. It is incredibly comfortable. I mean, you know your historical margins. You know how your private clients operate. And most importantly, your back office knows the paperwork inside and out. Oh, the paperwork is a big one. Right. But comfort does not equal security, especially when... private markets soften up. Exactly. And that is why we are looking over the fence at government work today, specifically highway and bridge construction. The stakes here are just astronomical. They really
are. We are looking at a projected $209 .1 billion for 2026. Wow. But here is the critical part. You know, we are on a ticking clock. A very loud ticking clock. Yes. The primary legislation funding this massive wave of work actually expires on September 30th of this year. Which is coming up so fast. It is. So we are going to weave that urgency throughout our conversation today because every single day you wait is a day that $209 billion pie shrinks. Let's unpack that $209 .1 billion number first because the scale of it is... Almost hard to comprehend. It really is. Where does that projection even come from? So that comes from RTBA, the American Road and Transportation Builders Association. Okay. It is fueled by the
IIJA, which is the Infrastructure Investment and Jobs Act. That act allocated $350 billion to highways over a five -year period. $350 billion. Yeah. And we are hitting the absolute peak of that funding right now. And what fascinates me, Nicole, is the mechanism of how this money actually reaches the street. Right. It's not what people think. No, it's not just one giant federal agency in Washington, D .C. handing out individual contracts. The vast majority of this is formula funding. And that is a crucial distinction. Formula funding is statutory. Meaning what exactly? It means states do not have to beg for this money or, you know, write massive speculative grant applications. Oh, thank goodness. Right. The federal government uses a mathematical formula based on a state's
population, its total lane miles and other demographic factors, and essentially just says, here is your check. Which provides incredible market certainty for contractors. Absolutely. I mean, 14 different states are receiving over $1 billion a year purely from these federal formula funds. It's staggering. And the top five heavyweights. Texas is at $5 .38 billion. California at $5 .06 billion. Florida at $2 .61 billion. New York is at $2 .59 billion. And Pennsylvania is right behind them at $2. $4 billion. And Justine, those numbers are actually conservative when you look at the total market volume. Yeah, conservative. How? Because that is strictly the federal contribution. Historically, state -funded work, which is money generated
from local gas taxes and vehicle registration fees, that adds another 40 % to 60 % on top of those federal numbers. 40 % to 60 % more. That is a staggering amount of capital hitting local markets. It really is. But, you know, the window of low competition is definitely closing. Competitors are absolutely waking up to this. Oh, without a doubt. I mean, we have seen a massive 160 % surge in Google trends for the exact phrase highway construction near me. That makes total sense. Contractors are feeling the pinch of high interest rates slowing down private commercial builds. Right. So they are hunting for that guaranteed government check. It is a totally logical pivot. But finding the work is usually the very first
hurdle. You can't just drive around looking for tower cranes like you can with commercial build. Right. And if you want to see exactly where that capital is landing, you need the right tools. Smart Business Automator's Market Intelligence Report tracks these highway project awards by state, district, and exact dollar value. Which is huge. It is. It just completely removes the guesswork and shows you the active pipeline right in your specific region. Because, you know, formula funding... pushes so much money down to the state level so quickly, the departments of transportation are desperate for construction capacity. They literally have more money than they have contractors to do the work. Exactly. Which brings us to a really important question. What exactly are these DOTs buying with all those billions? I want to offer an analogy here that I think completely
changes the perspective on this. Okay, let's hear it. I want you to think of a highway project not as a road, but as a horizontal commercial building. I love that. That is a perfect way to visualize it. It totally reframes the whole scope of work. Because if you were a commercial general contractor, you would never look at a 50 -story high -rise and say, well, I can't build that. I only do commercial framing. Right. You know, it takes dozens of specialized disciplines. Exactly. A highway is the exact same mechanism. Even if you don't own a single asphalt paver, there are massive subcontracting opportunities here. because a highway requires all the core disciplines you already possess. Let's break down those disciplines, because there are a lot of them. Paving is obviously the largest piece of the pie, right? We're talking about milling
off old asphalt, laying down overlays, and full -depth concrete replacements. But you cannot pave over dirt. No, you definitely need the foundation first. Right. Earthwork and drainage. Before a single ounce of asphalt is poured, someone has to move the earth. Earthwork is... The grading, the deep excavation, building up the embankments, it's the literal foundation of the infrastructure. And right underneath that is the drainage component. The storm sewers, massive concrete culverts, retention ponds. Exactly. If you are a civil contractor who usually does, say, site prep and underground utilities for shopping malls or data centers. This is the exact same iron moving the exact same dirt. Precisely. Then you move up to the structures, bridges and traffic. A massive chunk of this IIJA funding is specific. We also
have to highlight the traffic sector, Nicole, because the Smart Highway Initiative is absolutely booming. Oh, it's huge right now. We aren't just talking about painting lines on the asphalt, though. Let me tell you, striping is a highly lucrative niche. It really is. But we are talking about installing complex traffic signals, overhead dynamic messaging signs, concrete barrier installations. And trenching miles of electrical conduit for highway lighting and digital sensors. Exactly. And we cannot forget the unsung heroes of heavy civil work utilities and guardrails. Oh, the utility conflicts are endless. Every single time a state DOT widens a road by even a few feet, the inevitable... inevitably hit utility conflicts. Water mains, sanitary sewers, fiber optic lines, it all has to be relocated. Plus guardrail installation
and repair is just a consistent year -round life safety work. So the mechanism at play here is that state DOTs know absolutely no single prime contractor can self -perform all of this. Right. They rely on an army of specialized subcontractors to get these mega projects across the finish line. So if the work itself matches the exact skills contractors already have, what is the bottleneck? Why aren't mid -sized companies just flooding this market? Well, it really comes down to one massive gatekeeper DOT prequalification. Ah, there it is. Every single state department of transportation requires prequalification to bid as a prime contractor. Let's dive deep into this because this is the barrier that scares everyone away. It really does. I like to think
of DOT prequalification as... It's sort of like a corporate credit score. A corporate credit score is a brilliant analogy. Because you cannot just download a set of blueprints, build an estimate, and submit a bid tomorrow morning like you would in the private sector. Right. The DOP is acting as a fiduciary for the taxpayer. They are handing out contracts worth tens of millions of dollars. They need absolute certainty that your company has the financial health, the equipment, and the operational history to finish the job without going bankrupt halfway through pouring a bridge deck. Exactly. But the timeline is the real killer here. And this is where that ticking September 30th clock comes back into play. Right. Pre -qualification takes anywhere from 30 to 90 days to process. 90 days. Yes. So you must apply preemptively.
If you wait to find a project you like and apply the week before the bid is due, you are already way too late. Exactly. That 90 -day waiting period is burning precious daylight in our six -month window. And the requirements are heavy, Justine. They want an exhaustive list of your equipment fleet. They want detailed experience records for your key personnel superintendents, project managers. All of it. They need letters from your surety company proving your maximum bonding capacity. And most importantly, they want three years of financial statements. And in almost all cases, they require those to be audited by a CPA. I want to pause and challenge that slightly, though. Okay. Because for a guy running a $10 million shop, dropping significant cash on a full CPA audit feels like a massive, unnecessary gamble
just for the chance to bid. It absolutely feels like a gamble on the surface. But you have to look at the return on investment. Right. You spend the capital to get your financials formally audited, and it unlocks the door to a $209 billion market, where the client is the United States government. The checks literally never bounce. Exactly. It is an investment in guaranteed liquidity. That makes total sense. But let's say a listener is sitting there thinking, I just do not have the bonding capacity or the three -year commercial history to get pre -qualified as a prime contractor right now. Which is very common. Right. So what is the strategic play for them? the subcontractor strategy. You do not have to start as a prime. You don't? No. In fact, most highly successful
heavy civil firms do not. You start as a subcontractor to a prime who has already gone through the painful pre -qualification process. You essentially piggyback on their corporate credit score. Precisely. You build what we call a highway resume. You learn the DOT's inspection cadence, you learn their specific billing cycles, and you prove to the state engineers that you can execute the work to their standards and you do that for two years and suddenly applying for your own prime pre -qualification is an absolute breeze it really is and here is a massive tactical advantage for anyone listening if your company is eligible for DBE MBE or WBE certifications. The disadvantaged minority or women -owned business enterprises. Yes. You need to secure those immediately. The
leverage those certifications provide really cannot be overstated. Let's explain the mechanism of why it provides leverage. Okay. Federal highway projects mandate strict DBE participation goals, often around 10%. Right. If a prime contractor bids $50 million on a project... they are legally bound to allocate $5 million of that to certified GBE subcontractors. And if they fail to meet that quota, the DOT considers their bid non -responsive and literally throws it in the trash. Exactly. Primes are quite literally scrambling to find qualified DBE subcontractors. So if you hold that certification and you can actually execute the work, whether that is lane pipe or hauling aggregate, You aren't just a subcontractor anymore. You are a bid saver. You become an invaluable
asset to the prime just by existing on their team. And instead of guessing what your local agency requires, Smart Business Automator's Market Intelligence Report maps out the impending pre -qualification deadlines. Oh, so awful. And specific DOT requirements directly in your region. It is all about removing the friction from the process. So navigating pre -qualification gets you a seat at the table. But executing a federal highway project introduces a whole new set of job site rules. Oh, yeah. And this brings us to the ultimate friction point prevailing wage compliance under the Davis -Bacon Act. I can already hear contractors rolling their eyes right now. Oh, they definitely are. Yeah. Because they know the base hourly rate isn't the problem. The problem is the reporting. If I win a bid and I'm out on the job site and I have a guy jumping between different pieces
of equipment, the paperwork becomes a full -time job. You are hitting on the exact pain point, Justine. On a federally funded project, your labor costs are strictly set by the Department of Labor based on the project's specific county. You don't get to decide. No, you do not decide what you pay your crew. The local wage determination dictates it. But the complexity is entirely in the weekly certified payroll reports. Right, because this isn't just a summary spreadsheet you send to your accountant. Not at all. You have to detail each worker's exact classification, the exact hours they worked in that specific classification, their base rate, and their fringe benefits. Let's create a scenario to make this concrete. Let's say we have a midsize contractor. We will call him Bob's Excavation. Okay, Bob
wins a $2 million highway job. He is thrilled. Then he runs his first payroll. Bob's superintendent has a guy who usually pushes a general laborer jump into a skid steer for four hours to quickly move some dirt. On a private commercial job, that guy's just being a proactive team player. Exactly. But on a federal highway job, for those specific four hours, that worker is legally classified as an equipment operator and must be paid the higher operator rate. So if Bob misclassifies him on the certified payroll and pays him as a laborer... Bob is in violation of federal law. Wow. And the other massive trap for Bob is the fringe benefits, especially when it comes to calculating overtime. This is where margins go to die. Let's explain the math behind why this destroys margins. Prevailing wage requires you
to pay a base hourly rate plus a fringe benefit amount. You can pay that fringe into approved plans like health insurance, or you can just pay it as cash added to their hourly check. Let's say the base rate is $45 and the fringe is $15. Okay, that is $60 an hour straight time. But when that worker hits overtime, the law says you pay time and a half on the base rate, but the fringe rate usually stays at straight time. Right, so overtime should be 45 times 1 .5 plus 15. Which equals $82 .50. Exactly. back office doesn't understand the mechanism and they just calculate time and a half on the combined $60 rate. They pay $90 an hour. Yes. Bob is now bleeding margin on every single overtime hour worked.
And if he messes the math up the other way, he is underpaying his guys. And the stakes for underpaying are severe. We are talking about massive back pay liabilities. Worst case. The DOT terminates your contract for default. And worst case, a devastating three -year debarment from bidding on any federal work whatsoever. Three years in the penalty box will bankrupt a company that pivoted into government work without a compliance net. Which is exactly why you must change your estimating process. You cannot sit in your office and estimate a federal highway job using your standard blended shop rates. You have to learn the prevailing wage rates for your county. plug them into your estimating software, and bid the job based on the actual legal costs of labor. But the silver lining here is that it levels
the playing field. It really does. You aren't getting underbid by a competitor paying a less experienced crew cash under the table. Everyone bidding against you is legally bound by the exact same wage floor. So it becomes a game of operational efficiency, not cheap labor. Precisely. Now, we have covered the scale of the money. The types of work, prequalification, and navigating the compliance landscape. We really covered a lot. But we have to bring all of this back to the elephant in the room. The ticking clock. The September 30th cliff. Right. The Infrastructure Investment and Jobs Act expires on September 30, 2026. And as we sit here right now, there is no reauthorization bill that has been introduced in Congress to replace it. Which dictates everything about market timing. The construction industry
is used to standard economic cycles, but federal highway funding operates on these massive multi -year legislative cycles. And we are nearing the end of a historic five -year run. So what is the actual mechanism if September 30th comes and goes and Washington hasn't passed a replacement bill? Do the pavers just shut off the next morning? Not instantly. The active jobs do not instantly stop because that money is already obligated. Okay. But the future pipeline shrinks violently. If the law expires without a replacement, highway formula funding drops back to the baseline highway trust fund levels. Which is how much of a drop? We are talking about a potential 30 to 40 percent sudden decrease in available new work. A 40 percent drop in federal funding is a total market shockwave.
It absolutely is. The entire heavy civil industry is mobilized right now to prevent a funding gap. I know the Associated General Contractors, the AGC, is deeply concerned about this cliff. Oh, they have mobilized a $2 million campaign pushing Congress for reauthorization. But as a business owner, you cannot run your payroll on the hope that Congress acts efficiently. Never. You have to deal with the reality on the ground today. Which brings us to the six -month action plan. The golden window is right now. It really is. The funding for the current projects is allocated and certain. The next six months are when you must strike. Remember that 90 -day wait for prequalification, it is burning daylight. You need to use this window to get your DOT prequalification sorted out immediately. You need to aggressively network
to get on as a subcontractor, learn the Davis -Bacon compliance workflows, and lock in guaranteed contracts right now. Because if you look at the board, there are really only two possible outcomes. Scenario A, Congress passes reauthorization. And if you acted now, you are already pre -qualified, you have a highway resume, and you are perfectly positioned to ride the next five -year wave of funding from day one. Exactly. Scenario B, your authorization stalls and the market drops 40%. If you act now, you enter that funding drought with a massive backlog of federally funded, guaranteed work to carry your company safely through the lean years. It is the ultimate hedge against market uncertainty. It really is. Which brings me to a final thought I want everyone listening to. really mull over. Okay, let's hear it. Let's
say we hit that worst case scenario. Funding drops 40 % in October. The private commercial market remains sluggish. Which is very possible. There is going to be a brutal, unavoidable shakeout in the construction industry. The companies that waited too long, the ones that were terrified of the pre -qualification paperwork, they are going to starve. And when they starve, what happens to their assets? They go to auction. The contractors who use this exact six -month window to get pre -qualified and secure a massive backlog of government work will not just survive that downturn. They'll thrive. They will be sitting on guaranteed cash flow. They will be in the financial position to buy up the heavy equipment, the trucks, and the top -tier talent of the competitors who went under for pennies on the dollar. That is a profound
strategic advantage. Getting into this market isn't just about winning a waving job today. It is about positioning your company. to be the apex predator in your region when the cycle inevitably turns. But the window to capture it is rapidly closing. If you know a contractor who is looking for massive new revenue streams but terrified of government red tape, send them this episode. It could help them win a piece of this $209 billion pie before the funding deadline. Hit follow on whatever app you're listening on so you don't miss tomorrow's Intel. And to learn more about the AI tools helping construction teams scale and manage complex compliance workflows like prevailing wage without drowning in paperwork, visit smartbusinessautomator .com. The money is out there. Don't let the process intimidate you. Go get it.
