Center for American Progress Making Contracting Work for the United States
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Making Contracting Work for the United States: Government Spending Must Lead to Good Jobs

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The federal government is failing to live up to its legal and moral obligations as a model employer. Through numerous laws and executive orders, Congress and the executive branch have expressed a clear and long-standing objective to set and enforce high standards for the treatment of contracted workers. The federal government, however, is falling far short of this goal. Instead of helping to create quality jobs, all too often the federal government contracts with companies that pay very low wages and treat their workers poorly.

For taxpayers, shortchanging federal contract workers is often penny wise but pound foolish. Without decent wages, benefits, and working conditions, work quality can sometimes suffer due to high turnover, inadequate training and experience, and low morale. And when contract workers are poorly compensated, taxpayers often bear additional costs, such as for Medicaid and food stamps, in effect subsidizing low-road companies. But when contracted workers have quality jobs, taxpayers often receive quality work and law-abiding companies are able to compete on a level playing field. Moreover, like the canary-in-the-coal-mine warning of problems, contracted workers being treated poorly can be a sign that taxpayers are being hurt as well.

Due to massive increases in federal contracting coupled with inadequate oversight, the twin problems of contractors treating their workers poorly and ripping off taxpayers have grown in importance. While people may be aware that some federal contractors are excessively compensated and waste taxpayers’ money, the problems of the contracted workforce, and how they are connected to taxpayers’ interests, have largely remained hidden from public view.

The government’s lack of knowledge about the contracted workforce is shocking and unacceptable. Information about contractors—and especially their subcontractors—is veiled behind layers of lax oversight, inadequate record keeping, and unnecessary secrecy.

This report attempts to pierce this veil by providing one of the first examinations of the federally contracted workforce. As the report makes clear, too many companies that receive federal contracts treat their workers poorly and fail to pay adequate wages or benefits. Among the report’s key findings:

  • Low quality jobs are a widespread problem. An estimated 80 percent of the 5.4 million federally contracted service workers are low-wage earners. Contracted workers are often excluded from prevailing-wage law protections and, for many jobs, the minimum prevailing wage allowed is below a living wage. And contractors often violate labor laws.
  • Poor treatment of workers and taxpayers are linked. Companies that violate laws designed to protect workers are among the most wasteful of taxpayer funds, and contracted workers are often paid far less than taxpayers are charged.
  • Workers and taxpayers are harmed by a lack of transparency and inadequate oversight. Inadequate oversight results in scofflaw employers being rewarded with new contracts, harming workers and taxpayers. Too little information is collected about contractors and their workers, and the information that is collected is not provided in a useful format to either contracting officers or the public, contributing to problems of poor oversight and lax enforcement.
  • President Bush exacerbated waste and poor treatment of contracted workers. The Bush administration doubled the amount the federal government spends on contracting while avoiding increased transparency and oversight. The outgoing administration also stymied efforts to systematically collect information on wages and benefits of contracted workers and actively weakened protections for contracted workers.

The findings in this report make clear that the contracting process needs significant reforms. The federal government needs to live up to the letter and spirit of existing laws to ensure that contracted workers have decent jobs and taxpayers get the best value for their money. This will require not only better enforcement of existing laws and regulations, but also a new focus on raising standards.