Want a Fair Chance at a Government Contract? Think Again

by | Jul 11, 2017 | Construction Blog Construction News | 2 comments

If you’ve ever missed out on a government contract, part of the reason might have been because entrenched government contractors gained competitive advantages by under-paying their workers. The Fair Pay & Safe Workplaces executive order was nullified by Congress this year and much of the reporting by the business press presented just one side of the story. Here’s another perspective.

When awarding federal contracts the government is supposed to consider each contractor’s compliance with labor laws related to pay, health and safety. But, there is a huge problem with enforcement on a government contract, according to Senator Elizabeth Warren and other observers.

  • Some federal contractors frequently underpay their workers violating wage and hour laws. More than 300,000 workers were cheated out of pay while working under federal contracts in the last decade. There were 12,000 companies working on federal contracts that were doing the cheating.
  • 692 federal contractors significantly violated federal labor laws, and then repeated the behavior, over and over. The repeat offenders receive millions in taxpayer dollars as they violated safety and health standards. Those violations caused a wide range of physical harm to workers. Dozens of workers died, and countless numbers were exposed to chemicals that cause long term health problems.

“Of the 100 largest penalties imposed by OSHA since January 1, 2015, more than a third were issued to companies that have held federal contracts within the last decade, and 12 applied to companies that received contracts worth at least $100,000 from the federal government in 2016. Each of these penalties, which range from $150,000 to $1.4 million, resulted from serious, willful, or repeat violations.”- Breach of Contract: How Federal Contractors Fail American Workers on the Taxpayer’s Dime

It’s a Performance Issue Too

But, it gets worse. The Center for American Progress Action Fund (CAP Action), analyzed the same Government Accounting Office 2010 report that Warren used, and discovered even more.

“One quarter of the federal contractors responsible for the most workplace violations also had significant contract performance problems, such as fraud and cost overruns.”

When contractors aren’t properly vetted before contract award time, other deserving contractors who don’t violate labor laws are losing out on contracts awarded to firms that do violate labor laws. Plus, as CAP Action discovered, the government, and ultimately the tax payers, are getting ripped off when these violators don’t deliver projects according to government contract requirements.

The Fix Begins

To begin fixing the problems of unethical contracting, The Fair Pay and Safe Workplaces Executive Order went into effect in July 2014. It standardized how contracting officers in different agencies consider violations of labor laws.

For federal contracts worth more than $500,000, contractors were required to disclose any labor violations they committed in the previous three years. The order also outlined how contracting officers should consider labor violation information so they choose contractors who handle tax payer money effectively and with integrity. Most people would probably agree that violating wage, safety and health laws is not ethical behavior, regardless of how they feel about the law. But, there was a mixed response from industry.

The Fix Ends

The Associated Builders and Contractors along with the National Association of Security Companies, sued over the rule, while others opposing it in the contracting community didn’t like the timing of the implementation. An alliance of the Professional Services Council, the National Defense Industrial Association, the Council of Defense and Space Industry Associations, the IT Alliance for Public Sector, the Aerospace Industries Association, the American Council of Engineering Companies and the U.S. Chamber of Commerce wanted the rule delayed until the government had the appropriate infrastructure in place (portal for reporting violations).

The alliance “supports balanced policy efforts to ensure that only responsible contractors receive federal contracts,” the letter stated. However, “the government is not prepared to implement this rule; for example, the new portal for reporting ‘violations’ has neither been designed nor established.” – Government Executive Article.

Many members of Congress, and the president recently decided the contractors’ privacy was more important than the health, safety and pay of the workforce. They voted to eliminate The Fair Pay and Safe Workplaces Executive Order and also stopped any similar actions from happening again.

So, if you were hoping that following the pay, safety and health rules would help you win a government contract, it just depends on who you are competing with. The entrenched government contractors can underbid you by under-paying, or not paying their labor, and can avoid the costs of following widely accepted health and safety rules.

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