The Obama administration is considering a proposal that would heavily favor government contractors that implement policies designed by organized labor.
The “High Road Contracting Policy” would give preference to companies that adopt practices above and beyond existing labor laws. Multiple sources have confirmed the discussions, which are part of the White House’s attempt to spur economic growth through procurement reform and are driven by the Center for American Progress and the Service Employees International Union.
The proposal would advantage contractors that provide hourly workers with a “living wage”, health insurance, an employer-funded retirement plan and paid sick days. Contracting officers would weigh a company’s labor policies as a criteria for awarding the contract, along with the standard metrics: price, past performance and the ability to meet the contract’s requirements.
As part of the implementation, the Department of Labor would be responsible for collecting and scoring the labor records of all federal contractors, giving the department an unprecedented amount of influence in deciding who receives federal contracts. Each agency would be required to establish a labor advocate, who would have the discretion to increase a bidder’s labor score based on the company’s commitment to implementing the new labor standards. Professional Services Council Vice President Alan Chvotkin said such an arrangement would effectively make the Department of Labor the gatekeeper to the $523 billion federal marker.
“I think Senator Collins and the others are rightly concerned about that,” Chvotkin said. “I can’t think of another example where a [separate] federal agency rates a company in advance of a procurement.”
Neil Gordon, investigator at the Project on Government Oversight said his organization is favor of the policies, pointing out companies that employ better labor practices are inherently at a disadvantage without such regulations.
“We’re of the opinion that federal contractor has to be judged on its responsibility,” Gordon said. “We think labor practices should also be factored in as they have very important consequences. Employees who are not treated as well aren’t going to do as good a job. Also, they exact a cost on society through things like public assistance and food stamps. We think that should be considered when awarding a contract.”
Chvotkin said contracting officers have no ability to make such determinations and his organization opposes the policy because the federal market is already heavily regulated. He said two laws currently apply to hourly workers working for federal contractors: the Davis-Bacon Act for construction and the Services Contract Act for companies providing services. The laws establish what’s known as prevailing wage for hourly workers on federal contracts, which is a minimum wage set by the Labor Department for a specific class of workers in a particular location.
Chvotkin said the prevailing wage laws are in place to prevent exactly the type of wage disparity the regulations target and said the government should focus on enforcing the existing statutes rather than introducing onerous new regulations to the federal procurement process.
Other critics of the proposal contend that it would raise the price tag on federal contracts, which President Obama has vowed to rein in. They also say the preferences could adversely impact small and non-union businesses and discourage them from bidding, reducing competition and again raising prices.
On Monday Republican Senator Susan Collins of Maine sent a letter to Office of Management and Budget Director Peter Orszag requesting a briefing on the potential changes and outlining the potential negative effects of the proposed policies. The letter is co-signed by Republicans Sens. Tom Coburn of Oklahoma, Robert Bennett of Utah, Lindsey Graham of South Carolina and Maine’s Olympia Snowe:
“We are concerned that the imposition of these requirements, during a time of significant economic turmoil in the private sector and tight federal budgets, could have serious, negative consequences, especially for our nation’s small businesses. Moreover, injecting such an arbitrary variable could jeopardize the integrity of the federal competitive source selection process.”
If implemented, Gordon said the government could easily establish a database that would contain information on all the labor violations and lawsuits against federal contractors, which would be used when evaluating their bids. He stressed that companies should also be evaluated on their compliance with labor laws and their treatment of female and minority employees.
OMB did not respond to a request for comment.