Potential New Federal Rules for Contractors Doing Business with the U.S. Government Spark Controversy

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According to a number of early February 2010 news reports, the Obama Administration is considering new wages and benefits rules that would affect contractors’ opportunities to receive federal contracts.

“Positive weight in the source selection process is given to bidders based on the labor standards of their entire workforce,” states an administration document.

The standards would be measured by “whether the bidder pays a livable wage and provides quality, affordable health insurance; an employer-funded retirement plan; and paid sick days.”

Some have named this the “High Road Contracting Policy,” and claim it “will improve the service that the government receives and save taxpayer dollars because better wages will lead to higher productivity and product quality.”

Contractors would be required to adhere to wage standards greater than the current law. Supporters state that American workers (approximately two million worked on federal contracts in 2006) will experience an increase in the quality of their jobs.

David Madland, director of the American Worker Project at the Center for American Progress, said that when so-called “low-road” contractors pay substandard wages and offer few benefits, employees require more government subsidies, such as for medical care and welfare benefits. According to Madland, the state of Maryland’s experience with a high-road policy has had only a negligible effect on business costs.

Those opposing the anticipated presidential executive order think it would raise employment costs and make federal contracting prohibitive for small businesses.

On a more political level, however, the opposition sees the proposal as a gift for organized labor’s support of President Obama and the Democrats. Specifically, the Republicans, who see the proposal as having a negative effect on business, contend that the Obama administration is helping organized labor because Congress didn’t pass the Employee Free Choice Act, which would have allowed workers to form unions by signing cards rather than by voting in a secret-ballot election.

Some industry experts and watchdog organizations think that similar regulations and legislation is coming from the Obama administration, and could change the way contractors do business—it seems that history will be the final arbiter.

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