Although the federal government does not provide data on the frequency of performance problems across all federal contractors for comparison, the fact that one in four contractors with persistent or egregious workplace violations subsequently provided bad value for the government signals a serious cause for concern.
While this CAP Action analysis represents new evidence that companies who flout workplace laws also often show disregard for taxpayer value, our evaluation is not the first to find this link. Thirty years ago, the U.S. Department of Housing and Urban Development found a “direct correlation between labor law violations and poor quality construction” on HUD projects, and found that these quality defects contributed to excessive maintenance costs.
Similarly, a 2003 Fiscal Policy Institute survey of New York City construction contractors found that contractors with workplace law violations were more than five times more likely to receive a low performance rating than contractors with no workplace law violations. And a 2008 CAP Action report found a correlation between a contractor’s failure to adhere to basic labor standards and wasteful practices. Indeed, it is increasingly common for private-sector companies to factor in a bidder’s workplace safety record in contracting decisions.
The federal government could have prevented many of these performance problems by reviewing companies’ records of workplace violations before awarding a government contract and excluding those companies with persistent or egregious violations. This sort of examination is supposed to occur—federal regulations require that contractors have a satisfactory record of performance, integrity, and business ethics, in order to ensure that the government only does business with responsible companies with good performance records.
The existing tools to ensure that this actually happens, however, are woefully inadequate. The federal database tracking contractor responsibility—the Federal Awardee Performance and Integrity Information System, or FAPIIS—is largely dependent on self-reported data even though official records such as workplace and environmental violations are already collected by enforcement agencies and made publicly available in government enforcement databases.
The FAPIIS database includes only the legal violations committed by a company while working on federal contracts or grants, but not information on these contractors’ private-sector compliance history. What’s more, most workplace violations are excluded due to high thresholds for reimbursement, restitution, and damages. This means that federal contracting officers may miss more than half the story about a company’s record of compliance.
Moreover, enforcement agencies provide no analyses of contractors’ legal records, and contracting officers receive no guidance from existing regulations on how to evaluate bidders’ responsibility records. A contracting officer would have to sift through millions of compliance records—evaluating everything from companies’ tax and environmental violations to workplace safety and pay records—and use their own judgment about whether past violations are enough to find a contractor not responsible. As a result, the new database has not formed the basis of rigorous responsibility review.
We profile the performance problems of the contractors revealed by our analysis in the following section.
CAP Action has previously detailed a number of policy reforms that would help address these issues, but in order to maintain focus on the problems in the contracting system, we do not repeat our recommendations here.