Top 5 Facts About the ‘Fair Pay and Safe Workplaces’ Executive Order

President Barack Obama signs the “Fair Pay and Safe Workplace” executive order, July 2014.

Today, two subcommittees of the U.S. House Education and the Workforce Committee will debate President Barack Obama’s “Fair Pay and Safe Workplaces” executive order that will help protect taxpayers, law-abiding businesses, and the more thanone in five Americans who are employed by companies that do business with the federal government.

Too often, law-breaking companies continue to receive federal contracts worth billions of dollars despite long records of violating laws that are meant to ensure their employees are safe, paid the wages they earn, and not discriminated against. When fully implemented, the order will help contracting agencies identify companies with egregious violations and remediate problems before those companies receive any future contracts.

Opponents of the executive order are claiming that it is unnecessary and will be ineffective. Yet numerous reportshave documented the cost to workers, taxpayers, and law-abiding businesses when law-breaking companies continue to receive government contracts. Just last month, for example, CorpWatch detailed the personal stories of three workers harmed by federal contractors.

Congress should reject the false claims of opponents and urge the Obama administration to continue its work to implement the “Fair Pay and Safe Workplaces” executive order. Here are five key reasons the executive order will create a fair and efficient system that helps workers, taxpayers, and responsible business owners alike.

1. The executive order will fix the broken contractor responsibility review system

The federal government—which contracts out hundreds of billions of dollars worth of goods and services every year—is required by law to only contract with responsible companies that have a satisfactory record of performance, integrity, and business ethics. But the contracting system does not effectively review the responsibility records of companies before awarding contracts, nor does it adequately impose conditions on violators that encourage them to reform their practices.

As a result, contractors that violate wage and workplace safety laws have little incentive to improve their practices. Even companies with the most egregious violations of workplace laws continue to receive federal contracts, as the government awarded $81 billion in federal contracts to these companies in fiscal year 2012 alone, according to a 2013 Senate report.

The executive order will create a fair and consistent process by which the federal government can help ensure all federal contractors are responsible and respect their workers.

Opponents have argued that the new system will create an undue burden on private companies that will increase compliance costs. However, the new system will simply require law-abiding companies to check a box to certify legal compliance, which is no different from how these firms currently report on a number of responsibility matters, including tax delinquency and contract fraud. An online database will ensure public accountability, and guidance from the Department of Labor will help guarantee consistency across all branches of government.

Only contractors that have shortchanged their workers and cut corners on workplace safety will be subject to a heightened review process and the potential costs associated with complying with workplace laws. The government can encourage these companies to clean up their acts and ensure an efficient contract award process by creating a way for companies to come forward in order to rectify ongoing problems before they bid on contracts.

2. Responsible bidder policies have a proven track record of protecting workers and improving the quality of contractors at all levels of government and in the private sector

The executive order is informed by best practices from state and local governments; private-sector companies; and, in limited instances, federal government agencies. These laws and policies—which, in some cases, have been on the books for more than a decade—have both improved contract performance and protected workers.

Many states—including California, Connecticut, Illinois, Massachusetts, Minnesota, and New York—as well as the District of Columbia and other major cities, such as Los Angeles and New York City have responsible bidder programs that have improved contractor quality by identifying companies with long track records of committing fraud, wasting taxpayer funds, and violating workplace laws.

Some federal contracting programs also use a thorough responsibility review process. The U.S. Department of Defense conducts a pre-award safety survey on all department ammunition and explosives contracts. The U.S. Chemical Safety Board—an independent federal watchdog agency—issued a recommendation in 2013 that the government establish similar safety review requirements for all federal contracts after an explosion killed five workers at a company contracted by the U.S. Department of the Treasury to dispose of fireworks.

Even in the private sector, it is becoming increasingly common for companies to take a bidder’s workplace safety record into account when making contracting decisions.

3. The executive order will reduce government costs by boosting competition and helping ensure that taxpayer dollars are not spent on poorly performing contracts

The executive order will help encourage law-abiding companies that respect their workers to bid for federal contracts by ensuring that they are not put at a competitive disadvantage in comparison to bad actors that reduce costs by paying wages lower than required by law and cutting corners on workplace safety. After Maryland implemented a contractor living standard, the average number of bids for state contracts increased by nearly 30 percent. Nearly half of contractors interviewed by the state government said that the new standards encouraged them to bid because they leveled the playing field.

Moreover, companies that have egregious workplace violations also frequently make poor contractors by wasting taxpayer dollars and delivering low-quality services to the government. According to a Center for American Progress Action Fund report, 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. These problems included “contractors submitting fraudulent billing statements to the federal government; to cost overruns, performance problems, and schedule delays during the development of major weapons systems that cost taxpayers billions of dollars; … to an oil rig explosion that spilled millions of barrels of oil into the Gulf of Mexico.”

In a 2014 McClatchy DC series, Sandie Domando—the executive vice president of Concrete Plus—explained how law-breaking federal contractors harmed businesses and taxpayers alike:

With those government jobs, it’s just not a fair playing field … And that means that the tax money that we’re paying in – that everybody’s paying in – the government isn’t spending it on the people that need it. … They’re giving it to companies that aren’t following the rules.

4. President Obama has the authority to sign the executive order

The purpose of a responsibility determination is not to penalize federal contractors but to promote an efficient procurement process by ensuring that the government only deals with companies that have a good track record of legal compliance. In order to do so, the Federal Property and Administrative Services Act of 1949 and the Armed Services Procurement Act of 1947 authorize President Obama to create processes to ensure that federal contractors are responsible.

In order to qualify as a potential bidder on a federal contract under current regulations, a contractor has to prove that it is “responsible,” which requires that a contractor have “a satisfactory record of integrity and business ethics.” The order simply makes clear that a contractor’s record of labor-law violations should be taken into account in determining if the contractor has “a satisfactory record of integrity and business ethics.”

Companies with serious records of violating workplace laws will not be automatically barred from being awarded new federal contracts. Rather, the order will create a process by which these companies can work with contracting agencies and the Department of Labor to come into compliance.

5. The executive order will not affect President Obama’s strides to increase small-business contracting

The Obama administration has taken strides to ensure that that government meets it commitment to contract with small and disadvantaged businesses. Small businesses won $83.1 billion in federal contracts in FY 2013, and the federal government exceeded its goal of awarding small businesses 23 percent of total prime contracts in FY 2013. The executive order will not alter this commitment.

Conclusion

The “Fair Pay and Safe Workplaces” executive order will help fix our broken contractor responsibility review system by building on effective practices from state and local governments; private-sector companies; and, in limited instances, federal government agencies. The House Education and the Workforce Committee can help protect taxpayers, law-abiding businesses, and the millions of Americans employed by federal contractors by urging the Obama administration to move forward with the implementation of the order.

Karla Walter is Associate Director of the American Worker Project at the Center for American Progress Action Fund. David Madland is Director of the American Worker Project.