President Barack Obama announced on March 4th that he plans to overhaul the federal contracting process. This much-needed modernization provides the federal government with a significant opportunity to generate good jobs and help rebuild the middle class.
The federal government creates millions of jobs each year through the large sums of money it spends on purchasing goods and services. Yet these jobs are often substandard. Many pay very low wages—often below the poverty level—and involve poor working conditions where labor law violations are all too common.
Reforming contracting to help create quality jobs will require the federal government to increase transparency in the procurement process, better enforce labor standards, perform rigorous responsibility screening on prospective bidders, reduce its use of outside contractors, and promote improved job standards. Each of these components is key, but this report focuses exclusively on one aspect of the agenda: how to promote higher job standards by evaluating proposals based in part on the pay and benefits that contractors provide their workers.
Many federal, state, and local government contracting processes already promote high standards by evaluating offers based on price as well as whether companies provide good jobs or meet other social objectives. For example:
- The federal government uses non-cost factors in its offer evaluation process, including a company’s past performance, whether the work will be performed in disadvantaged areas, and if prime contractors plan to meet small business subcontracting goals.
- California and Massachusetts utilize quantified point systems to evaluate and weigh a range of non-cost factors, including a company’s record of complying with labor, health and safety, and other laws.
- El Paso, Texas has implemented a scoring system that considers whether companies provide health insurance to their employees.
The federal government can adopt the best features of these bid evaluation systems and weigh, for example, whether companies provide health care and pay decent wages. Just as the bid evaluation process already helps promote small businesses, so too can it help promote good jobs.
Policies that value better workplace practices would be good for workers, taxpayers, and even many businesses. Taxpayers often bear additional hidden costs when workers under federal contract are poorly compensated—such as for Medicaid and food stamps—which in effect subsidizes low-road companies. But when these workers have good jobs, taxpayers receive quality work and companies with higher standards are able to compete on a level playing field.