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Contracting by federal government agencies to purchase goods and services totals more than $500 billion annually and finances millions of jobs across our economy. Following years of concern about unaccountable federal contractors wasting taxpayer dollars, President Barack Obama has launched a badly needed initiative to modernize the federal procurement system. But as the federal government works to improve oversight and performance by federal contractors, an equally pressing problem needs attention as well: the fact that federal contracting is financing millions of poverty wage jobs across our economy, and supporting employers that are significant or repeat violators of workplace, tax and other laws.

These employment practices—in addition to hurting families and communities—undermine the quality of services that government agencies receive, and impose substantial costs on the taxpayers as contractors’ employees turn to publicly funded safety net programs for support. Despite longstanding requirements that federal agencies contract only with “responsible” vendors, and growing awareness of the consequences of failing to do so, the past administration put the brakes on efforts to address this problem.

The Obama Administration’s contracting reform initiative provides an important opportunity to reverse the role that federal procurement is playing in creating bad jobs, and use it instead to address one of the most pressing needs facing the nation: rebuilding a base of middle-class jobs across our economy.

The experiences of cities and states over the past decade with a range of “responsible contracting” policies offer a roadmap for how the administration can ensure that federal contracting promotes the creation of good jobs by prioritizing businesses that engage in responsible employment practices. This report surveys responsible contracting policies developed and tested by states and cities across the country, and recommends the following key reforms in the federal contracting system:

  1. Institute more rigorous responsibility screening of prospective bidders to ensure that federal contracts are not awarded to employers that are significant or repeat violators of workplace, tax or other laws.
  2. Establish a preference for employers that provide good jobs in the contractor selection process, prioritizing firms that provide living wages, health benefits and paid sick days.
  3. Quickly bring on-line, expand and improve the newly authorized national contractor misconduct database mandated by the 2008 National Defense Authorization Act.
  4. Strengthen monitoring and enforcement of contractors’ compliance with existing and new workplace standards.

By incorporating these approaches into the federal contracting system, the government can ensure that contracting delivers the best value for the taxpayers by rewarding employers that invest in their workforces with quality jobs.

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