The Hill: Don’t Reward Lawbreakers with Federal Contracts

Companies that repeatedly violate our nation’s labor and employment laws should not be rewarded with federal tax dollars in the form of government contracts.  Yet these are awarded to such companies with shocking frequency.  To better ensure that our tax dollars only go to responsible companies with a satisfactory record of performance, integrity, and business ethics—a requirement already in federal law—President Obama recently issued a “Fair Pay and Safe Workplaces” executive order.

It comes as no surprise that the usual employer groups are going to great lengths to mischaracterize the executive order, claiming it will create all sorts of new and expensive administrative burdens and result in law-abiding companies being “blacklisted” from federal contracts.

Nothing could be further from the truth, and it’s time to set the record straight.

As the Government Accountability Office and the Senate’s Health, Education, Labor and Pensions Committee have extensively documented, there’s a long and unfortunate history of federal agencies continuing to grant contracts to unscrupulous employers who flout federal labor law.  And not surprisingly, those that can’t be bothered to comply with labor laws are more likely to have other performance problems.  The Center for American Progress Action Fund, which has extensively researched this issue, found that of the companies that committed the worst workplace violations over a five-year period and later received federal contracts, one in four had significant performance problems, including fraudulent billing, cost overruns, and schedule delays costing taxpayers billions of dollars.

Obama’s executive order is designed to remedy these problems for the scant five percent of federal contracts with an estimated value exceeding $500,000.  At the point of application, there is nothing new—the potential contractor simply has to check a box to certify compliance with applicable labor laws.  Hardly burdensome, right?

Next, if the prospective bidder reaches the “responsibility” determination in the procurement process, the company must then disclose whether there have been any administrative merits determinations, civil judgments, or arbitration awards rendered against it within the past three years for labor law violations.  Companies bidding on contracts of this magnitude all have sophisticated legal advisors who should be well aware of any such determinations made against their clients, so gathering this information should be far from burdensome.

Finally, after a contract has been awarded, contractors must semi-annually update the information provided about their own labor law violations and obtain the same information for covered subcontracts.  If they are scrupulous about their actions, and subcontract to similarly trustworthy contractors, the semi-annual compliance process will be a piece of cake.

Far from “blacklisting” any companies from federal contracts, the executive order and proposed implementing regulations simply aim to ensure that, in its role as steward of taxpayer funds, the government is not underwriting lawbreaking.  Holding contractors that seek federal contracts to the modest standard that they obey the law and remedy legal violations is not a burden—it is the bare minimum that taxpayers have a right to expect.

And it’s only fair that the executive order will help honest, law-abiding businesses compete for contracts, since they otherwise face unfair competition from labor law violators who cheat and cut corners to gain unjust advantage.

It’s important to note that mere allegations of violations will not bar a company from receiving a contract, nor will the existence of violations per se act as a bar.  The executive order explicitly states, for example, that “in most cases a single violation of law may not necessarily give rise to a determination of lack of responsibility,” and the proposed Labor Department guidance likewise recognizes that labor law violations that “could be characterized as inadvertent or minimally impactful” are purposely excluded from consideration.

Consistent with these directives, affected bidders will be able to submit evidence of mitigating circumstances to procurement officials, including whether they are appealing the determination or have already corrected the issue.  Indeed, because of the extensive and appropriate reliance on mitigating circumstances, perhaps the most important impact of the executive order will be giving prospective and current contractors the tools and incentive they need to come into compliance with federal labor and employment laws.

The federal government has long been required to do business only with responsible contractors, but unfortunately, has fallen short far too often.  Obama’s Fair Pay and Safe Workplaces executive order and its proposed regulations and guidance will play the important role of rewarding high-road employers with taxpayer dollars and helping more contractors come into compliance with workplace laws.  Cynical attempts to mischaracterize the executive order as “blacklisting” companies from federal contracts should get the scant attention they deserve.

Read the original commentary at The Hill.